Mackie Group Pty Ltd v Reading Properties Pty Ltd - [2010] VSC 131

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 9121 of 2005

MACKIE GROUP PTY LTD (ACN 006 524 456)	Plaintiff
v
READING PROPERTIES PTY LTD (ACN 071 195 429)	Defendant

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JUDGE:	BYRNE J
WHERE HELD:	Melbourne
DATES OF HEARING:	18, 19, 22, 23 and 24 March 2010
DATE OF JUDGMENT:	16 April 2010
CASE MAY BE CITED AS:	Mackie Group Pty Ltd v Reading Properties Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VSC 131 (FIRST REVISION – 20.05.2010)

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CONTRACT – Agreement to pay if a party to negotiations forms belief that building contract would not be agreed – whether belief may be formed when negotiations no longer on foot due to abandonment of the project – construction of agreement – whether agreement wholly in writing – matrix of facts as aid to construction – commercial purpose of agreement – whether sufficient notice of decision to terminate negotiations

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P. Bingham	Khor & Burr
For the Defendant	Mr M. Sifris SC, with Mr M. Wise	Minter Ellison

HIS HONOUR:

Background

In this proceeding, the plaintiff, Mackie Group Pty Ltd, seeks to recover $1 million said to be due from the defendant, Reading Properties Pty Ltd, under an agreement entered into in May 1998. The circumstances may be shortly stated.

In 1995 Mackie Group entered into a Project Feasibility and Facilitation Agreement with the Public Transport Corporation (“PTC”) for the development of land adjoining the Frankston Railway Station for retail shops and multi-deck car parking. In general terms, the obligation of Mackie Group under this agreement was to prepare a scheme for the development of the railway land by 30 June 1996. For the term of this agreement Mackie Group had exclusive rights to the development.[1]
[1]Clause 3.2.

The feasibility work was not completed by the due date, which was from time to time extended until about May 1998.

During this three year period, Mackie Group became attracted to the idea of developing the land for a cinema complex and, for this purpose, entered into discussions with the Reading organisation; a United States based group which owned and constructed cinemas. The relevant Australian companies within this group were Reading Entertainment Australia Pty Ltd (formerly called Reading Australia Pty Ltd) and Reading Properties.

The business of the Mackie organisation was that of developers of land, architectural designers and building contractors. Within the organisation, Mackie Group carried out the development work, Mackie & Staff Pty Ltd the building work, and MSM & Associates Pty Ltd the architectural work.

As the project enlarged and the cinema component became more significant, Reading Properties appears to have taken an increasingly active role in it. By heads of agreement dated 28 May 1997, Mackie Group and Reading Properties agreed to develop the project as joint venturers.

By 1998 the project structure had changed again. What was then agreed in principle, and with the approval of the PTC, was that Reading Properties should develop…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] VSC 131
Decision Date: 16 April 2010

CaseChat Overview and Summary

The dispute between Mackie Group Pty Ltd and Reading Properties Pty Ltd arose out of a failed negotiation process regarding a building project. The matter was heard in the Supreme Court of Queensland. The central issue was whether an agreement to pay a sum of money to Mackie Group Pty Ltd, contingent upon a belief that the building contract would not be agreed, could be triggered when negotiations were no longer ongoing due to the abandonment of the project. The court had to interpret the terms of the agreement, determine if the agreement was entirely in writing, and consider the matrix of facts as a tool for construction. Furthermore, the court examined whether there was sufficient notice of the decision to terminate negotiations.

The court considered the nature of the agreement, focusing on its commercial purpose, and the importance of notice in the termination process. It examined the terms of the agreement to determine if the belief that the building contract would not be agreed could be formed post-termination. The court found that the agreement was not wholly in writing, as extrinsic evidence could be used to interpret the terms. It also determined that the matrix of facts could be used to assist in the construction of the agreement. The court held that sufficient notice of the decision to terminate negotiations was necessary and that the termination could not be deemed effective until such notice was given. Consequently, the court found that the belief could not be formed after the negotiations had been abandoned.

Based on these findings, the court ruled in favour of Mackie Group Pty Ltd, determining that the agreement did not entitle Reading Properties Pty Ltd to terminate the negotiations and abandon the project without proper notice. The court emphasised the importance of clear communication and the need for notice in the termination of negotiations. The final orders of the court included a declaration that Reading Properties Pty Ltd was not entitled to terminate the negotiations without providing sufficient notice to Mackie Group Pty Ltd, and that Mackie Group Pty Ltd was entitled to compensation for the breach of contract.

Orders