CONTRACTS – Construction – Clauses in lease – Obligation of tenant to transfer gaming machine license to landlord – Where landlord's entitlement to purchase gaming machines is optional – Where right to purchase gaming machines exercised – Implied term for business efficacy requiring tenant to transfer to landlord gaming machine license
CONTRACTS – Construction – Clause in lease – Whether landlord could withdraw from purchase of gaming machines either at will or in response to conduct said to be in breach or repudiation of obligation to sell – Where clause had effect of binding agreement on conditions subsequent – Tenant obliged to confer possession and landlord obliged to pay sale price prescribed – No breach of contractual obligation or repudiation – No acceptance of breach of contractual obligation or repudiation – No right to terminate obligation to purchase gaming machines
CONTRACTS – Performance – Valuation of plant and equipment – Market value for sale of gaming machines as part of a business – Whether market value included or was referable to a government levy applicable to the issue of a gaming machine licence – Where none of the valuation evidence established that the market value included the issue of a gaming machine license – Market value for sale of gaming machines as part of a business not inclusive of any value calculated by reference to a government levy applicable to the issue of a gaming machine licence
CONTRACTS – Remedies – Damages – Whether landlord entitled to damages for breach of contract by tenant – Where landlord has failed to establish that the alleged breaches caused the alleged loss or damage – Claims for declarations and damages dismissed
[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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AGLC
McCasker v OMAD (NT) Pty Ltd (No 3) [2023] NTSC 68
Case
[2023] NTSC 68
Decision Date
CaseChat Overview and Summary
The case of McCasker v OMAD (NT) Pty Ltd (No 3) involved a dispute between the plaintiff, McCasker, and the defendant, OMAD, regarding the sale of plant and equipment, including 20 gaming machines, at the end of a lease. The primary issues were the source of the obligation to transfer the gaming machine licence, whether the landlord could withdraw from the purchase, the market value of the gaming machines, and the landlord's entitlement to damages for breach of contract. McCasker, the landlord, sought to enforce an alleged obligation under the lease for the tenant, OMAD, to transfer the gaming machine licence to him, and for damages due to OMAD's alleged breaches of the lease. OMAD argued that the lease did not impose such an obligation and that McCasker was not entitled to damages.
The court considered whether the lease contained an implied term for business efficacy requiring OMAD to transfer the gaming machine licence to McCasker. The court found that the lease did not contain such an implied term, as McCasker's entitlement to purchase the gaming machines was optional. Additionally, the court held that McCasker could not withdraw from the purchase of the gaming machines either at will or in response to OMAD's conduct. The court found that the lease bound the parties' agreement on conditions subsequent, obliging OMAD to confer possession and McCasker to pay the sale price prescribed, and there was no breach of contractual obligation or repudiation by either party.
Regarding the market value of the gaming machines, the court found that the valuation evidence did not establish that the market value included the cost of a government levy applicable to the issue of a gaming machine licence. The court held that the market value for the sale of gaming machines as part of a business was not inclusive of any value calculated by reference to this levy.
Lastly, the court held that McCasker was not entitled to damages for breach of contract by OMAD, as McCasker had failed to establish that the alleged breaches caused the alleged loss or damage. The court dismissed McCasker's claims for declarations and damages.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
The landlord of a tavern notified the tenant at the end of the lease that he intended to acquire the tenant’s plant and equipment in the premises, including 20 gaming machines. This case concerned the sale price the landlord should pay to the tenant for that plant and equipment, and the gaming machine licence that authorised the use of the 20 gaming machines at the premises. The primary issues were the source of the obligation under the lease to transfer the gaming machine licence to the landlord, whether the landlord could withdraw from the purchase of the gaming machines either at will or in response to conduct said to be in breach or repudiation of the obligation to sell, the market value of the gaming machines, whether that market value included or was referable to a government levy applicable to the issue of a gaming machine licence, and whether the landlord is entitled to damages for breach of contract by the tenant. Background The following facts were not in dispute. Until 28 July 2010, the plaintiff (‘McCasker’) and his wife were and, thereafter, McCasker was, the registered proprietor of certain land in Virginia (‘Land’). A hotel business known as the Virginia Tavern was carried out from premises erected on the Land (‘Premises’). On 4 May 2006, the McCaskers leased the Premises to a company (‘Solloc’) for a term of four years (with three options to renew for further terms of four years) to carry on the business of hotel keeper from the Virginia Tavern (‘Solloc Lease’). On 16 August 2006, Solloc was granted a gaming machine licence (‘GM230’) in respect of the Premises pursuant to s 25 of the Gaming Machines Act 1995 (NT) (‘GM Act’). GM230 permitted no more than 10 gaming machines to be operated at the Premises. On 8 April 2008, the defendant (‘OMAD’) purchased from Solloc the business Solloc carried on at the Premises (including plant and equipment, the 10 gaming machines, a liquor licence, Solloc’s interest under the Solloc Lease and stock in trade) for the sum of $975,000, pursuant to an agreement for sale and purchase dated 8 February 2008 (‘Solloc Contract’). The purchase was conditional on the Northern Territory Licensing Commission approving the transfer of the liquor licence in respect of the Premises to OMAD, the grant of a gaming machine licence to OMAD in respect of the Premises and the assignment of the Solloc Lease to OMAD. On 22 January 2008, OMAD applied for a gaming machine licence in respect of the Premises to operate the 10 gaming machines. On 31 March 2008, OMAD was granted a gaming machine licence (‘GML244’) in respect of the Premises pursuant to s 25 of the GM Act. GML244 permitted no more than 10 gaming machines to be operated at the Premises. On around 18 March 2008, the liquor licence was transferred from Solloc to OMAD. On 8 April 2008, the assignment of the Solloc Lease to OMAD was registered (‘Lease’). Following completion of the Solloc Contract around this time, OMAD commenced operating the Virginia Tavern business at the Premises. OMAD renewed the Lease every four years in 2010, 2014 and 2018. The Lease expired on 3 May 2022.
Evidence
Evidence Before The Court
Mr McClure was not a professional valuer, and had never ‘put his name’ to a professional valuation of gaming machines.[26] However, he had been consulted many times by professional valuers undertaking valuations of businesses, in relation to their valuation of gaming machines.[27] He said that in making his assessment of the value of the 20 gaming machines the subject of this proceeding, he had assumed that both the seller and the buyer would be licensed to own and operate the gaming machines, and he did not include in his valuation any amount relating to the cost of obtaining a gaming machine licence.[28] Valuation evidence of McCasker – Mr Heath McCasker relied on various evidence from Alex Heath, a professional valuer of Heath Valuation & Advisory Services. The evidence comprised: (a) Mr Heath’s oral evidence; (b) a statement of evidence including Mr Heath’s opinions, along with various extracts from three valuation reports prepared by Mr Heath in 2020, 2021 and 2022 valuing the Business; and (c) a letter sent by Mr Heath to McCasker’s solicitors responding to various questions about his reasons for and assumptions made in his opinions. Mr Heath’s statement of evidence included his opinions that: (i) the market value of the 20 gaming machines for sale as part of a business would not include or be the amount of the Levy, but would be calculated by reference to their depreciated value and their remaining life; and (ii) gaming machines are becoming outdated and lower in value sooner than previously. Mr Heath’s letter included his opinion that:…the valuation of the leasehold interest includes the value of the business including any goodwill, and the value of plant and equipment including the gaming machines on any approach. The gaming machines are to be valued as part of the business. The levy is a government charge and is an administrative cost unrelated to the operation of the business, the earnings the hotel generates and thus its value. In his valuations done in 2020, 2021 and 2022, Mr Heath had valued the Business as follows, depending on the unexpired term of the Lease at the date of valuation:[29](a)0.6 years unexpired: $125,000(b)1.55 years unexpired: $210,000(c)16 years unexpired: $860,000 in 2020 and $1.25 million in 2022. He also expressed the opinion that the value of the gaming machine licence is a function of the profit or earnings the gaming machines are able to generate for the hotel operation and not an arbitrary amount linked to the cost of applying for a gaming licence.[30] In cross-examination, Mr Heath said that underlying his valuation of the gaming machines was the assumption of what he referred to as ‘tenure’, which he explained to mean the legal tenure over the premises in respect of which the gaming machine licence for the gaming machines subsisted.[31] It was his assumption that the gaming machine licence would, at the end of the Lease, transfer to the landlord free of charge, or be forfeited to the government.[32] He agreed that the valuation of a gaming machine as part of a business required it to be valued on the basis that it was lawfully to be used in the business, but considered the proposition that that valuation would have to bring to account the cost of getting a gaming machine licence as ‘ambiguous’, which I understood to mean difficult to comprehend.[33]