Lend Lease Real Estate Investments Ltd v GPT RE Ltd - [2006] NSWCA 207

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: Lend Lease Real Estate Investments Ltd & Anor v GPT RE Ltd [2006] NSWCA 207

HEARING DATE(S): 1 June 2006

JUDGMENT DATE:
27 July 2006

JUDGMENT OF: Spigelman CJ at 1; McColl JA at 49; Basten JA at 50

DECISION: Appeal dismissed with costs

CATCHWORDS: CONTRACTS – Construction and Interpretation – “deal with” – application of copulatio verborum principle – whether “deal with” confined to alienation.

CASES CITED: Chan v Cresdon (1989) 168 CLR 242
Evans v Stevens (1791) 4 TR 224; 100 ER 986
Jonmenjoy Coondoo v Watson (1884) 9 App Cas 561
Letang v Cooper (1965) 1 QB 232

PARTIES: Lend Lease Real Estate Investments Ltd & Anor (Appellant)
GPT RE Ltd (Respondent)

FILE NUMBER(S): CA 40834/05

COUNSEL: T. Bathurst QC, K. Morgan & J. Emmett (Appellant)
M. Pembroke SC, T. Saunders (Respondent)

SOLICITORS: Kate Mills – Mallesons Stephen Jaques
Ross Drinnan – Allens Arthur Robinson

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): 4636 of 2005

LOWER COURT JUDICIAL OFFICER: White J

LOWER COURT DATE OF DECISION: 27 September 2006

LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 964

- 16 -

CA 40834/05

SPIGELMAN CJ
McCOLL JA
BASTEN JA
Thursday 27 July 2006

LEND LEASE REAL ESTATE INVESTMENTS LTD & ANOR v GPT RE LTD

Judgment

1 SPIGELMAN CJ: These proceedings concern the interpretation of a Joint Ownership Agreement (“the Ownership Agreement”) dated 25 June 1992 regulating the ownership of the Sunshine Plaza Shopping Centre in Queensland. The Appellants (“Lend Lease”) and the First Respondent (“GPT”) are successors in title to the original parties to the Ownership Agreement. The First Appellant and the First Respondent are each 50 per cent owners of the Shopping Centre. This dispute arose from the entry by the First and Second Respondents into a Put and Call Option Deed (“the Option”) with respect to the purchase of a 25 per cent interest in the Shopping Centre being half of the First Respondent’s existing interest

2 The Ownership Agreement contains pre-emptive rights provisions. Justice White held that circumstances that were alleged by the First Appellant to have given rise to a right to exercise its pre-emptive rights had not arisen.

3 Mr T Bathurst QC, who appeared for Lend Lease, identified three issues arising in the appeal:

(i) Did the entry into the Option constitute a dealing with its interests contrary to cl 9(a) of the Ownership Agreement?

(ii) Did the circumstances leading up to the Option, and the Option itself, satisfy the provision in cl 9(c) of the Ownership Agreement that GPT wished to deal with its interest. If so, did that require GPT to give a transfer notice pursuant to that clause?

The Contractual Provisions

4 The critical provisions that fall to be construed are cl 9(a) and cl 9(c) of the Ownership Agreement, which employ two defined terms: “interest” and “deal with”.

5 The former appears, in the plural, in cl 2:

“As at the date of this agreement, the Owners hold their interest, rights and benefits in the Property from time to time (‘Interests’) in the Property in the following Relevant Proportions:

(a) PTC [now GPT] – 50%;

(B) APPFC – 50%.”

6 The latter is defined in cl 19(k) as follows:

“ ‘deal with’ means any sale, assignment, transfer, disposition, declaration of trust assumption of obligations or other alienation (other than leasing, licensing or granting occupation rights) or granting other like rights and whether affecting legal or equitable interests and expressions cognate to ‘deal with’ will have a corresponding meaning.”

7 Clause 9 relevantly provides:

“9(a)(1) Unless otherwise agreed by the Owners, an Owner (‘Selling Owner’) may not deal with its Interest in whole or in part other than as provided in this clause 9 and unless the procedures set forth in this clause 9 have been followed strictly.

(b) …

(c) A Selling Owner wishing to deal with its Interest in whole or in part (‘Sale Interest’) must serve notice in writing to that effect to the other Owner(s) (‘Offeree’) and the AFM, such notice to contain the terms and conditions referred to in clause 9(d) (‘Transfer Notice’).

(d) …

(e) Upon service of the Transfer Notice, AFM must within 14 days take steps to arrange for the Sale Interest to be valued in accordance with the provisions of clause 8(g). The value so determined will be the price at which the Sale Interest is offered to the Offerees under this clause 9.

(f) Subject to 9(g), unless the Selling Owner has decided (and so notifies the Offerees within 7 days of receiving the valuation of the Sale Interest) that it does not wish to proceed with the sale, a Transfer Notice:

(1) is deemed to be a formal offer to sell the Sale Interest on the terms and conditions contained in or deemed to be contained in the Transfer Notice; and

(2) …

…

(g) A Selling Owner will not be entitled to exercise the right on its part contemplated by the opening paragraph of clause 9(f) in circumstances where the relevant sale is required to take place under clause 4, clause 9(n) or clause 10.

…

(p) No Owner may mortgage or charge or otherwise encumber its Interest in the Property without the consent of the other Owners, which must not be unreasonably withheld if:

(1) the relevant mortgagee, chargee or encumbrancee (‘mortgagee’) (as the case may be) is reasonably acceptable to the other Owners;

(2) the mortgagee agrees in writing (in a form reasonably acceptable to all Owners) first that it will enjoy no rights greater than those enjoyed by its mortgagor Owner and secondly that it will be bound by the terms and conditions of this agreement.”

8 Clause 10 makes provision for default, relevantly, as follows:

“10(a) If an Event of Default occurs with respect to any Owner, then that Owner will be allowed a reasonable opportunity to remedy or, in the case of a default not capable of remedy, to pay reasonable compensation to the non-defaulting Owners.

(b) …

(c) If an Event of Default is not remedied or waived or compensation is not paid within a reasonable time (but in no case exceeding 20 business days), then the non-defaulting Owners will be entitled:

(1) to acquire the defaulting Owner’s Interest at valuation determined in accordance with clause 8(g) and the defaulting Owner will be deemed to have served a Transfer Notice on the non-defaulting Owners for the purpose of clause 9(c) and the provisions of clause 9 will apply, mutatis mutandis.”

9 The Put and Call Option Deed, which was the subject of a Deed of Variation, contained a number of relevant provisions. It is first, however, pertinent to note the manner in which the parties to that arrangement sought to accommodate the pre-emptive rights of the First Appellant, referred to in the Option as LLREI. The Option was expressed to be subject to a condition precedent expressed in the following manner:

“2.1 The grants of the Call Option and the Put Option are subject to and conditional upon LLREI waiving its pre-emptive rights under the Sunshine Plaza JOA …

…

(b) LLREI not exercising its pre-emptive rights under the Sunshine Plaza JOA in respect of the Property.”

10 Provision was also made for the termination of the Option in the event that the First Appellant failed to agree to waive its pre-emptive rights.

11 Other relevant provisions in the Option, as varied, in which the First Respondent is referred to as GPTREL, are:

“2.2(a) GPTREL will fully comply with its obligations under the Sunshine Plaza JOA.

(b) GPTREL will, if requested by WML in writing before the Termination Date, but not otherwise, give notice to LLREI instigating the procedures in clause 9 of the Sunshine Plaza JOA applicable to a Selling Owner (as defined in the Sunshine Plaza JOA) in respect of its interest and will not without the consent of WML notify the other co-owner that it does not wish to proceed with the sale of its interest or otherwise withdraw its interest from sale unless LLREI notifies GPTREL that it wishes to accept the offer in the Transfer Notice (as defined in the Sunshine Plaza JOA):

(c) GPTREL:

(i) is not required to instigate the procedures in clause 9 of the Sunshine Plaza JOA applicable to a Selling Owner (as defined in the Sunshine Plaza JOA) in respect of its interest unless requested by WML in accordance with clause 2.2(b); and

(ii) may terminate the Deed and notify the other Owner (as defined in the Sunshine Plaza JOA) that it does not wish to proceed with the sale of its interest or otherwise withdraw its interest from sale if LLREI notifies GPTREL that it wishes to accept the offer in the Transfer Notice.

(d) GPTREL will consent to and will use its best endeavours to procure the consent of any other party to the Sunshine Plaza JOA to the appointment of a Related Body Corporate of WML as the sole manager and developer of Sunshine Plaza upon terms substantially in conformity with the Management Agreement and Development Agreement and will execute all necessary documents for that purpose.

…

(g) From the date of this Deed until -

(i) the later of Completion and the date the Existing Management Agreement is terminated, or

(ii) this Deed is terminated.

GPTREL will not without the prior consent of the Purchaser (which will not be unreasonably withheld or delayed) do any of the following (or agree that another person may do any of the following) except to the extent that any of such actions is consistent with the way in which the Property has been managed to the date of this Deed or authorised under an existing budget:

…

(iii) negotiate or enter into any Lease;

(iv) vary the terms or any Lease of extend the term of a Lease;

(v) negotiate or carry out a rent review under any Lease;

(vi) grant any relief, incentive or any concession to any tenant under a Lease or otherwise release any tenant from any obligation under a Lease that the tenant would otherwise have been required to perform after Completion;

(vii) enter into or commit to any material item of capital expenditure in respect of the Property or the Units, any part of which is required to be expended after Completion;

(viii) enter into any new material contract or vary any existing material contract (including without limitation any agreement with contractors or consultants) in respect of the Property or the Units.”

…

8.2 GPTREL must not during the term of this Deed (and, if the Option is exercised, during the term of the Contract) give any security or enter into any agreement or arrangement which would or might adversely affect GPTREL’s ability to comply with the obligations imposed on GPTREL under this Deed or under the Contract.

…

23.1(a) GPTREL shall use its best endeavours to obtain a waiver from the other parties to the Sunshine Plaza JOA of their pre-emptive rights in respect of the sale of GPTREL’s Relevant Interest to WML. For the avoidance of doubt, nothing in this clause 23.1 will oblige GPTREL to enter into any transaction or agree to any proposal which is not in its commercial interests or to extend the timeframes in this agreement.

Pre-emptive Owner

(i) GPTREL will not do anything to hinder WML and will take all steps reasonably available to it to assist WML in securing an agreement with the Pre-emptive Owner whereby that interest is transferred to WML;

(ii) If the Pre-emptive Owner and WML agree to the transfer of that interest to WML, GPTREL will waive its pre-emptive rights under the Sunshine Plaza JOA in respect of this particular transfer of that interest.”

12 Furthermore, reliance was placed on cl 23.1(c), which was deleted by the Deed of Variation:

“23.1(c) GPTML will fully comply with its obligations under the Sunshine Plaza JOA (including without limitation clause 9 of the Sunshine Plaza JOA in relation to the transactions contemplated by this Deed) and following the issue by it of a Transfer Notice (as defined in the Sunshine Plaza JOA) in respect of its interest will not without the consent of WML notify the other co-owner that it does not wish to proceed with the sale of its interest or otherwise withdraw its interest from sale.”

13 Finally, reliance was placed on the original form of cl 2.3(g) of the Option Deed, then cl 2.3(e), which provided:

“2.3(e) From the date of this Deed until the later of Completion and the date the Existing Management Agreement is terminated, GPTML will not without the prior consent of the Purchaser (which will not be unreasonably withheld or delayed) do any of the following (or agree that another person may do any of the following) except to the extent that any of such actions is authorised under an existing budget:

(i) negotiate or enter into any Lease;

(ii) consent to any assignment of any Lease or any sub-lease;

(iii) enforce any Lease, terminate any Lease because of the Lessee’s default and/or call upon any Lease Security;

(iv) vary the terms of any Lease or extend the term of a Lease;

(v) negotiate or carry out a rent review under any Lease;

(vi) grant any rent relief, incentive or any concession to any tenant under a Lease or otherwise release any tenant from any obligation under a Lease that the tenant would otherwise have been required to perform after Completion;

(vii) enter into or commit to any material item of capital expenditure in respect of the Property or the Units, any part of which is required to be expended after Completion;

(viii) enter into or commit to any other item of expenditure in respect of the Property or the Units (other than expenditure that it is necessary to incur in the ordinary course of business); or

(ix) enter into any new material contract or vary any existing material contract (including without limitation any agreements with contractors or consultants) in respect of the Property or the Units.

However, GPTML may do (or agree that another person may do) any of the above actions if:

(x) that action is authorised under a budget for the Property or the Units as agreed between GPTML and WML from time to time;

(xi) the Manager is authorised to do so under the Existing Management Agreement and GPTML is not contractually entitled to restrain the Manager from exercising such authority; or

(xii) not to do so would result in GPTML being in default under the Existing Management Agreement or the Sunshine Plaza JOA.

and provided that GPTML will use its best endeavours to advise and consult with WML before any such action occurs.

If GPTML is required to seek WML’s consent under this clause, GPTML must give to WML written notice of the action for which consent is sought including all relevant information reasonably necessary for WML to give its consent. WML will be deemed to have given its consent to an action under this clause if WML does not respond to GPTML’s written request for consent within 3 Business Days of WML receiving GPTML’s written request for consent.

Notice to Remedy

14 The third issue set out in par [3] above, involves the steps taken by the First Appellant pursuant to cl 10(a) of the Ownership Agreement to afford the First Respondent a reasonable opportunity to remedy any default.

15 After receiving notice of the arrangement between the Respondents, but not a copy of the Option Deed, by letter of 1 June 2005, the Appellants responded by letter of 29 June 2005 in which they asserted their position, solely by reference to cl 9(c), as follows:

“By entering into the put and call arrangements, the terms of which are set out in your Notice of Meeting and Explanatory Memorandum dated 2 May 2005, GPT has evidenced a ‘wish to deal’ with part of its interest in the asset.

As set out in our letter of 22 June 2005, GPT became obliged to serve a Transfer Notice in accordance with clause 9(c) of the Sunshine Plaza Joint Ownership Agreement (JOA).

Your failure to serve the Transfer Notice constitutes an event of default for the purposes of clause 19(k)(1)(B) of the JOA.

GPT must remedy this default, for the purposes of clause 19(a) of the JOA, by issuing a Transfer Notice within 20 business days of the date of this letter.”

16 In response the First Respondent asserted on 1 July 2005:

“GPT does not intend to ‘deal with’ its ‘Interest’ (as those terms are defined in JOA) unless and until LLREI, in its capacity as responsible entity of APPF, waives its pre-emptive rights under the JOA. In the absence of such a waiver, GPT does not wish to deal with its Interest.

Accordingly, GPT is not a ‘Selling Owner wishing to deal with its Interest’ for the purposes of clause 9(c) of the JOA and there is no requirement or utility in GPT serving the notice referred to in that clause. Similarly, there is no basis to suggest that an event of default (as that term is defined in clause 19(k)(1)) has occurred. For the avoidance of doubt, GPT has no intention or obligation to sell part of its Interest in Sunshine Plaza other than in accordance with the provisions of the JOA and, in particular, the pre-emptive rights contained in clause 9. In the circumstances, GPT has no present intention to issue a Transfer Notice.

On 17 February 2005, GPT granted put and call options over its Interest in Sunshine Plaza to Westfield Management Limited, the exercise of which options was (and remains) expressly conditional upon LLREI waiving its pre-emptive rights. It was to ascertain whether LLREI was prepared to grant such a waiver that GPT approached LLREI. That conduct does not support your interpretation of the JOA nor evidence an intention that GPT wishes to deal with its Interest that would oblige it to issue a Transfer Notice under the JOA. Further, serving such a notice and the subsequent conduct of a valuation would serve no practical purpose because, as is set out above, GPT does not wish to, and is not obligated to, sell its Interest unless LLREI waives its pre-emptive rights. Requiring the valuation would simply result in unnecessary expense for GPT unitholders.”

17 The First Appellant responded on 18 July 2005 as follows:

“Thank you for your letter of 1 July 2005. We note your comments and in particular the suggestion that there is no present intention on the part of GPT to issue a Transfer Notice because GPT is not a ‘Selling Owner wishing to deal with its Interest’ for the purposes of clause 9(c) of the Joint Ownership Agreement. We do not agree. Clearly the entering into of put and call options evidences a wish to deal, and this has been affirmed by your repeated public statements in this regard. The fact that the options may be conditional on the decisions of others is irrelevant.

Accordingly, as previously notified, you are in default as a consequence of your failure to comply with clause 9(c) of the Joint Ownership Agreement, by serving a Transfer Notice.

As earlier requested, please remedy this default by providing us with a Transfer Notice by no later than 5pm on Wednesday 27 July 2005, being the day which is 20 business days after our earlier notice.

Given their importance, we also urgently require copies of the Put and Call Option Agreements between GPT and Westfield, and any other documents/agreements evidencing that transaction.”

18 On 10 August 2005, the First Appellant asserted that a Transfer Notice was deemed to have been served under cl 10(c) and proposed to pursue the implementation of this clause including by means of a valuation being conducted, in accordance with the Agreement, by the Second Appellant.

19 In written submissions filed in the proceedings below, the Appellants purported to rely on breaches of cl 9(a) and cl 9(c) in the alternative. Counsel then appearing for the Second Respondent noted that the correspondence referred only to an obligation arising under cl 9(c). He said in the course of argument before White J:

“As far as I am aware there hasn’t been a case put, certainly not in the cl 10 notice, to the effect that the mere entries into the put-and-call option deeds was itself a dealing, thereby triggering the preemption provisions. The case until it was expressed for the senior counsel for lend lease was limited to the proposition that there was a wish to deal, evidenced by the put-and-call option deeds, that is the only matter that has been the subject of a cl 10 notice.”

20 Subsequently, the following transpired between White J and counsel then appearing for the Appellants:

HIS HONOUR: The question is whether in relation to the 9A breach there has been a clause 10A notice given.

WALKER: Yes. I said Yes to what your Honour just said.

HIS HONOUR: So what do you want to say about Mr Jackman’s point about the notice.

WALKER: It seems a good one. I can’t make my cl 10 notice do what it doesn’t.

HIS HONOUR: It depends what you mean by default. If the default is failing to comply.

WALKER: The default we referred to, see the two letters at tab 6 and 7, was not having served the notice, there being a wish – my friend is right on that, with respect, and it is not possible to argue the contrary.”

Did the Respondent Deal with Its Interest?

21 His Honour held, on the proper interpretation of the Agreement, that the entry into the call option component of the Put and Call Option Deed was not a dealing with an interest within the meaning of cl 9(a).

22 His Honour upheld the Respondents’ submission that only transactions which amounted to an alienation fell within the definition of dealing within the Agreement. His Honour said:

deal with’

[50] I accept that the phrase, ‘assumption of obligations’, refers to an assumption of obligations by the Owner amounting to a parting with a proprietary interest in the Property. The phrase ‘assumption of obligations’ is apt to refer to an owner making a contract in respect of its Interest and thereby assuming an obligation to a third party as to how it will deal with its interest. However, the definition assumes that the ‘assumption of obligations’ will form part of the genus of transactions which amount to an alienation. Not all contracts with respect to land amount to a disposal, or parting with, of interest in the land, although some may. In my view, a contractual dealing only amounts to a dealing in the defined sense if it is a disposition of, or a parting with, an interest in the Property. Such a dealing is an alienation.”

23 His Honour referred to authorities which establish that Westfield acquired an equitable interest in the property and noted the difficulties posed by this line of authority with respect to the issue of whether or not a contingent equitable interest was such that GPT could be said to have disposed of, or part of, an interest in the property. He noted:

deal with’

24 His Honour concluded that the contractual promise, enforceable by injunction, whereby the First Respondent had agreed not to deal with this property in a way inconsistent with the Option, did not mean that it had disposed of or alienated a part of its interest. Nor did it mean that it had given up any part of its beneficial interest. (See [60].) His Honour concluded:

DKLR Holding Co. (No. 2) Pty Ltd v Commissioner of Stamp Duties

Re Transphere Pty Ltd

[63] In my view, GPT has not parted with an interest in the Property. That is, it has not disposed of or parted with part of its Interest. Whilst GPT assumed obligations to Westfield in respect of its Interest by entering into the Put and Call Option Deed, it did not thereby alienate or dispose of the whole or part of its Interest. Accordingly, I do not consider that it has breached clause 9(a).”

25 His Honour rejected one aspect of the Respondents’ submissions which is raised by the Respondents by way of Notice of Contention when his Honour said:

Re Stayte

26 His Honour considered an alternative submission that a number of GPT’s “interest, rights and benefits”, as owner of the property were dealt with in the Option in a way not dependent on Lend Lease waiving its pre-emptive rights. Those provisions were identified as cl 2.3(e), cl 8.2, cl 23.1(b) and cl 23.1(c), together with cl 2.2(b) of the Deed of Variation. His Honour concluded in this respect:

“[65] For the reasons I have given, an assumption of obligations to Westfield, not amounting to an alienation, does not constitute a ‘dealing’ for the purposes of clause 9(a). I do not consider that the obligations GPT assumed to Westfield amounted to the alienation of its rights under the Joint Ownership Agreement. Assuming that its rights under the Joint Ownership Agreement are part of its Interest, GPT did not assign its rights, or any of them, to Westfield, by making a contract as to how it would exercise those rights.

Interests’

interest, rights and benefits in the Property’

Property

[67] Nor are GPT’s or Lend Lease’s rights under clause 9 an interest or rights ‘in’ the Property. The pre-emptive rights exist in relation to the Property. …”

27 As Mr M Pembroke SC, who appeared for GPT, submitted, the commercial purposes of cl 9(a) was to preserve the pre-emptive rights of the co-owner. The clause commences with the words: “Unless otherwise agreed”, the very redundancy of which serves to emphasise the commercial purpose identified. Furthermore, cl 9(a) does not impose a dual obligation: first, a prohibition against dealing and, secondly, provision for a mechanism for doing so. Clause 9(a) has a singular purport: no dealing “other than as provided in this clause 9”, with an additional obligation of strict compliance.

28 In the light of this commercial purpose, I agree with White J that the definition of “deal with” in cl 19(k) is intended to apply only to transactions which constitute an alienation. To repeat the operative part of the definition:

“ ‘deal’ with means any sale, assignment, transfer, disposition, declaration of trust assumption of obligations or other alienation … or granting other like rights.”

29 The drafter has manifested a concern to comprehensively cover a wide field by employing a range of words that frequently overlap – “sale, assignment, transfer, disposition, declaration of trust” – to which was added the catch-all “other like rights”. In between appear the words “assumption of obligations or other alienation”, upon which primary reliance is placed. In their context, in my opinion, the drafter intended to ensure that the words of potentially broad application – “assumption of obligations” – are to be read down by the immediate qualificatory words – “or other alienation” – to cover the same kind of dealing identified in each of the other, overlapping, words. The concern was, as White J found, “alienation”, in whatever manner that may occur.

30 The general principle of the law of interpretation that the meaning of a word can be gathered from its associated words – noscitur a sociis – has a number of specific sub-principles with respect to the immediate textual context. The most frequently cited such sub-principle is the ejusdem generis rule. The relevant sub-principle for the present case is the maxim propounded by Lord Bacon: copulatio verborum indicat acceptationem in eodem sensu – the linking of words indicates that they should be understood in the same sense. As Lord Kenyon CJ once put it, where a word “stands with” other words it “must mean something analogous to them”. (Evans v Stevens (1791) 4 TR 224; 100 ER 986 at 987. See also W J Byrne (ed) Broomes Legal Maxim (9th ed) Sweet and Maxwell, London (1924) pp373-374.)

31 However, as Lord Diplock put it in Letang v Cooper [1965] 1 QB 232 at 247:

“The maxim noscitur a sociis is always a treacherous one unless you know the sosietas to which the socii belong.”

32 There is no such difficulty here. Unless the expression “assumption of obligations” is confined to “alienation”, most of the adjoining words would be otiose. The reading down of general words is one of the most common mechanisms applied in the course of legal interpretation. The Court should not give one word in an interrelated, overlapping list of expressions a meaning that is so broad as to be inconsistent with adjoining words or that renders those words irrelevant.

33 The closest case to the present is Jonmenjoy Coondoo v Watson (1884) 9 App Cas 561, where the Privy Council had to determine whether a pledge of promissory notes fell within the scope of dealing permitted under a power of attorney which extended to a power to negotiate, sell, indorse, dispose of, assign or transfer. After referring expressly to the copulatio verborum principle at 569, their Lordships concluded at 570:

“The appellant’s counsel relied mainly upon the word ‘negotiate’, and also upon ‘dispose of’. In order to see what was intended by these words, they must be looked at in connection with the context, as well as with the general object of the power. This appears to their Lordships to have been to sell or purchase for Watson government promissory notes and other securities, not to borrow or lend money upon them. If the word ‘negotiate’ had stood alone, its meaning might have been doubtful, though, when applied to a bill of exchange or ordinary promissory note, it would probably be generally understood to mean to sell or discount, and not to pledge it. Here it does not stand alone, and, looking at the words with which it is coupled, their Lordships are of opinion that it cannot have the effect which the appellant gives to it, and, for the same reason, ‘dispose of’ cannot have that effect.”

34 The same analysis should be applied to the words “assumption of obligations” which is the broadest term used in the definition under consideration.

35 The Option created an equitable interest enforceable by specific performance, at the very least, to prevent any other dealing. (See Chan v Cresdon (1989) 168 CLR 242 at 252-253.) I agree with White J that the creation of such an interest, the fulfillment of which is subject to a condition precedent of a waiver by Lend Lease of its pre-emptive right, is not an “alienation” and, accordingly, is not a ‘dealing’ within cl 9(a). For the same reasons, the specific restrictions in the Option Deed – against giving a security (cl 8.2) and against assignment or variation of any lease on the property (cl 2.3) – do not involve anything in the nature of an alienation.

36 In this respect, the appeal should be dismissed.

The Obligation to Give a Notice

37 The second issue set out in [3], involves an allegation of breach of cl 9(c), arising from the failure of the First Respondent to give a Transfer Notice after it had become clear that it did “wish to deal” with its interest in the Shopping Centre. His Honour held that the condition in cl 9(c) was made out in the sense that GPT did “wish to deal” with its interest by wanting to sell half of its interest to Westfield. However, his Honour concluded that cl 9(c) was facultative only and that, accordingly, there was no contravention by the failure to give a Transfer Notice arising from the fact that it did “wish to deal” with its interest.

38 His ultimate conclusion was expressed in the following terms:

“[98] In summary, I am of the view that GPT did ‘wish to deal’ with its Interest within the meaning of clause 9(c). It wishes to sell half its Interest. It wishes to sell that part of its Interest to Westfield if the pre-emptive provisions of the Joint Ownership Agreement are not waived. It also has the wish that Lend Lease waive its pre-emptive rights to allow the transfer to Westfield to occur. The condition in clause 9(c) for the service of a Transfer Notice is satisfied. However, GPT has not failed to comply with, observe or perform any of its obligations or undertakings in clause 9(c) by not serving a Transfer Notice. It simply has not taken advantage of the facility which that clause provides if it wishes to deal with its Interest. GPT Management and GPT RE did not commit an Event of Default. Accordingly, they are not deemed to have served a Transfer Notice in accordance with clause 10(c).”

39 In reaching this conclusion, His Honour’s reasons were:

“[90] Clause 9(a) contains the general prohibition on an Owner dealing with its Interest. Clause 9(c) and the following sub-clauses describe the procedures to be followed if an Owner wishes to deal with its Interest. In my view, clause 9(c) is facultative. That is, it sets out what an Owner must do if it wishes to deal with its Interest in the way permitted by clause 9. The first step is to serve a Transfer Notice. The steps which follow the service of a Transfer Notice are then provided for. In my view, a Selling Owner does not breach clause 9(c) if it forms a wish to deal with its Interest and does not serve a Transfer Notice. Rather, unless it has served a Transfer Notice and then acts in conformity with the procedures provided for in clause 9, it may not deal with its Interest. It will breach clause 9 if it contravenes clause 9(a), but it will not breach clause 9 merely by not serving a Transfer Notice within a reasonable time of forming a wish to deal with its Interest.

[91] This is consistent with the opening words of clause 9(c) and their reference back to clause 9(a). Clause 9(c) does not apply to an “Owner” wishing to deal with its Interest, but to a ‘Selling Owner’ wishing to deal with its Interest. The term ‘Selling Owner’ is not defined as such. It appears in clause 9(a) as being an Owner who is prohibited from dealing with its Interest other than as provided in clause 9. An Owner does not become a ‘Selling Owner’ unless it has dealt with its Interest or has instigated the procedures in clause 9 for it to do so. An Owner who wishes to sell, but has not at that time dealt with its Interest, does not become a Selling Owner until it serves notice in accordance with clause 9(c).

[92] Lend Lease submitted that the use of the word ‘must’ in clause 9(c) showed that the clause is promissory and not merely facultative. That is, the clause contained a promise by each party that if it formed a wish to deal with its Interest it would serve the notice, so that the failure to serve the notice was an Event of Default. However, ‘must’ does not always refer to an obligation. The Macquarie Dictionary (3rd ed) defines it in its primary sense as indicating obligation or necessity. In this case, in clause 9(c), ‘must’ indicates the necessary step which an Owner must take if it wishes to deal with its Interest.

[93] The contrary interpretation would leave little work for clause 9(a). It would be impossible for an Owner to deal with its Interest, without having first formed a wish to deal with its Interest. In other words, there would always be a breach of clause 9(c), and an Event of Default, before there was a dealing in contravention of clause 9(a). That is not how the clause is structured.

[94] Reading clause 9 as a whole, it contains a prohibition on dealing in clause 9(a), a qualification, in clause 9(b), on what dealings may be permitted under the following sub-clauses, and the procedures for permitted dealings in clause 9(c) and following. So understood, there is no need to read down the words of clause 9(c) to avoid what is said to be the unbusinesslike consequences of giving the word “wishing” its natural meaning.”

40 I agree with White J and with his Honour’s reasons. I would emphasise the facultative implication of cl 9(a) which establishes an exception to the prohibition in the opening words by the reference “other than as provided in this clause 9”. The word “must” in cl 9(c) is not promissory, but a confirmation, at the outset of the process, of the concluding clause in cl 9(a) that “the procedures set forth in this clause 9” are to be “followed strictly”. Unless a complying Transfer Notice has been served, the prohibition against dealing in cl 9(a) continues to have effect.

41 The appeal in this respect should be dismissed.

Scope of the Notice to Remedy

42 It is not strictly necessary to deal with the third issue set out in [3] above. However, it is appropriate to do so in case this matter, which involves a commercial interest of considerable magnitude, should go further.

43 His Honour referred to the absence of any reference to contravention of cl 9(a) in the demands made by the Appellant prior to the institution of proceedings. Referring to the cl 9(a) breaches as the “first issue”, his Honour held:

“[75] If I am wrong on the first issue, it was common ground that no notice had been given under clause 10(a) of the Joint Ownership Agreement allowing Lend Lease Management a reasonable opportunity to remedy the defaults. Accordingly, at this stage, Lend Lease would not be entitled to acquire GPT RE’s interest at valuation, and GPT would not be deemed to have served a Transfer Notice for the purposes of clause 9(c).”

44 I have set out the correspondence and the exchange with counsel for the Appellants above. The Appellants contend that his Honour erred in characterizing the exchange as establishing “common ground” with respect to the scope of the notice.

45 Mr T Bathurst QC, submitted that the concession made by counsel then appearing for the Appellants does not affect the proposition upon which the Appellants rely in this Court. He submitted that the real issue was whether a contravention of cl 9(a) or cl 9(c) was capable of remedy. He submitted that the issue of a transfer notice would remedy either contravention and that was what the correspondence called for.

46 I have set out the relevant correspondence above. Lend Lease relied, and relied only, on an alleged contravention of s9(c). At no stage did it assert a contravention of cl 9(a), i.e. an assertion that the Option constituted a prohibited dealing. In my opinion, it could not be said that this correspondence afforded GPT an opportunity to remedy any such alleged breach. It does not appear to me to be determinative that one way of remedying such a breach could be the issue of a Transfer Notice. Nothing in cl 10(a) suggests that one party can specify that only one of a number of possible remedial steps must be taken. The concession made by counsel at trial was correctly made.

47 At the time of the correspondence, Lend Lease did not have a copy of the Option Deed. That may explain the absence of an assertion that the Option itself constituted a prohibited dealing. However, that does not have the result that the notice to remedy actually given can be rewritten inferentially. Lend Lease did not satisfy the obligation to afford GPT an opportunity to remedy the alleged breach under cl 9(a).

Conclusion

48 The appeal should be dismissed with costs.

49 McCOLL JA: I agree with Spigelman CJ.

50 BASTEN JA: I agree with the orders proposed by the Chief Justice and with his Honour's reasons.

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Citations

Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207

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CITATION:	Lend Lease Real Estate Investments Ltd & Anor v GPT RE Ltd [2006] NSWCA 207
HEARING DATE(S):	1 June 2006
JUDGMENT DATE:	27 July 2006
JUDGMENT OF:	Spigelman CJ at 1; McColl JA at 49; Basten JA at 50
DECISION:	Appeal dismissed with costs
CATCHWORDS:	CONTRACTS – Construction and Interpretation – “deal with” – application of copulatio verborum principle – whether “deal with” confined to alienation.
CASES CITED:	Chan v Cresdon (1989) 168 CLR 242 Evans v Stevens (1791) 4 TR 224; 100 ER 986 Jonmenjoy Coondoo v Watson (1884) 9 App Cas 561 Letang v Cooper (1965) 1 QB 232
PARTIES:	Lend Lease Real Estate Investments Ltd & Anor (Appellant) GPT RE Ltd (Respondent)
FILE NUMBER(S):	CA 40834/05
COUNSEL:	T. Bathurst QC, K. Morgan & J. Emmett (Appellant) M. Pembroke SC, T. Saunders (Respondent)
SOLICITORS:	Kate Mills – Mallesons Stephen Jaques Ross Drinnan – Allens Arthur Robinson
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	4636 of 2005
LOWER COURT JUDICIAL OFFICER:	White J
LOWER COURT DATE OF DECISION:	27 September 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	[2005] NSWSC 964