Metro Edgley Pty. Limited & Anor. v M.K. & J.A. Roche Pty. Limited

[2007] NSWCA 160

New South Wales

Court of Appeal

CITATION:	Metro Edgley Pty. Limited & Anor. v. M.K. & J.A. Roche Pty. Limited & Ors. [2007] NSWCA 160
HEARING DATE(S):	29 and 30 May 2007
JUDGMENT DATE:	5 July 2007
JUDGMENT OF:	Giles JA at 1; Hodgson JA at 2; Campbell JA at 153
DECISION:	1. Appellants’ appeal dismissed with costs. 2. Appeal of Roche and the Roche brothers dismissed with costs. 3. Appeal of the Roche parents allowed. 4. Order that the appellants pay the costs of the appeal of the Roche parents, and that they have a certificate under the Suitors’ Fund Act if otherwise eligible. 5. The costs order below relating to the Roche parents set aside, and in lieu thereof order that the appellants pay the costs of the Roche parents of the proceedings from 7 August 2006.
CATCHWORDS:	CONTRACT - Building Contract - Whether practical completion achieved - Construction of conditions precedent - Effect of certificate of independent certifier - Effect of automatic rescission of associated agreement - ESTOPPEL - Conventional estoppel - Whether party alleged to be estopped played relevant part in adoption of assumption - Whether estoppel could affect guarantor - GUARANTEE - Whether guarantors liable where principal contract automatically rescinded - PRACTICE - Commercial list - Identification of issues - Need to avoid surprise - Whether issue open to be contested - COSTS - Where some guarantors could be affected by estoppel and other not affected - Whether separate representation reasonable - Whether costs of separate representation recoverable.
CASES CITED:	Amalgamated Investment & Property Co. Limited v. Texas Commerce International Bank Limited [1982] QB 84 Coghlan v. S.H. Lock (Australia) Limited (1985) 4 NSWLR 158 House v. The King (1936) 55 CLR 499 Mackay v. Dick (1881) 6 App Cas 251 Nangus Pty. Limited v. Charles Donovan Pty. Limited [1989] VR 184 Sargent v. ASL Developments Limited (1974) 131 CLR 634
PARTIES:	Metro Edgley Pty. Limited - 1st appellant Multiplex Limited - 2nd appellant M.K. & J.A. Roche Pty. Limited - 1st respondent Michael Kevin Roche, Christopher John Roche, William Timothy Roche, Kevin Michael Roche and Gabrielle Mary Roche - 2nd to 6th respondents
FILE NUMBER(S):	CA 40667/06
COUNSEL:	Mr. R. Newlinds SC with R. Francois for appellants Mr. B. Walker SC with Mr. V.R. Kerr - 1st-4th respondents Mr. F. Kunc for 5th and 6th respondents
SOLICITORS:	Clayton Utz, Sydney for appellants Lane & Lane, Sydney for 1st-4th respondents Baker & McKenzie, Sydney for 5th & 6th respondents
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 50069/04
LOWER COURT JUDICIAL OFFICER:	Einstein J
LOWER COURT DATE OF DECISION:	25 August 2006 20 September 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	[2006] NSWSC 810 (25/8/06) [2006] NSWSC 970 (20/9/06)

CA 40667/06
ED 50069/04

GILES JA
HODGSON JA
CAMPBELL JA

Thursday 5 July 2007

METRO EDGLEY PTY. LIMITED & ANOR. v. M.K. & J.A. ROCHE PTY. LIMITED & ORS.

Judgment

1 GILES JA: I agree with Hodgson JA.

2 HODGSON JA: The parties to this appeal are the first appellant (Metro), the second appellant (Multiplex), the first respondent (Roche), and the second to sixth respondents (the Guarantors). I will also refer to the second to fourth respondents as the Roche brothers, and the fifth and sixth respondents as the Roche parents.

3 On 25 September 2006, pursuant to judgments given on 25 August 2006 and 20 September 2006, Einstein J declared that a contact he called the Development Contract had been automatically rescinded and was of no force and effect after 31 March 2004 otherwise than in accordance with its tenor, that a second contract (which I will call the Fitout Deed) had been automatically rescinded and was of no force and effect after 31 March 2004 otherwise than in accordance with its tenor, and that a third contract (which I will call the Agreement for Sub-lease) had been automatically rescinded and was of no force and effect after 31 December 2003 other than in accordance with its tenor; and he ordered that Metro refund to Roche the deposit of $2 million paid pursuant to the Development Contract plus $446,301.37 interest. He also dismissed a cross-summons brought by Metro and Mulitplex, and (except in one particular respect) ordered the appellants to pay the respondents’ costs of the proceedings, other than the costs of the Roche parents from 7 August 2006.

4 The appellants appeal from those orders. The Roche parents have cross-appealed against the denial of costs in their favour. The Roche brothers also put on a cross-appeal, but that was not pursued.

CIRCUMSTANCES

5 On 23 December 2002, the Luna Park Reserve Trust (LPRT) entered into a Deed of Agreement for Lease and Sub-lease of the Luna Park Reserve to Luna Park Sydney Pty. Limited (LPS) and Metro, providing to the effect that Metro would develop Luna Park and that LPRT would then grant a lease of the site for forty years to LPS.

6 Included in the proposed development was the construction of a bar and brasserie, to be known as the Waterfront Brasserie.

7 In September 2003, Metro accepted an offer from Roche to purchase a forty-year lease of the Waterfront Brasserie for $18.5 million plus GST, under a transaction including the following elements:

1. Roche to enter a Development Contract with Metro for certain building works for the Waterside Brasserie in accordance with agreed plans (prepared to satisfy Roche’s requirements).
2. Roche to provide the fit-out of the Waterside Brasserie at its cost.
3. Roche to pay $2 million on entry into the Development Contract, $11 million on Practical Completion of the building work, $4 million on Practical Completion of the fit-out, and the balance of $1.5 million on the granting of certain licences.
4. Roche to receive a sub-lease of the Waterside Brasserie from LPS for forty years (less one day) at a peppercorn rent.
5. Guarantees by the Guarantors.

8 On 26 September 2003, two agreements were entered into to give effect to this transaction:

(1) The Development Contract, involving Metro, Roche, the Guarantors and Multiplex, annexure A of which was a copy of an Agreement for Sub-lease between LPS, Roche, Metro and the Guarantors, signed by the parties other than LPS.
(2) The Fitout Deed, involving Roche, Metro and the Guarantors.

9 Broadly, the Development Contract provided for the design, construction and financing of building works for the Waterside Brasserie for the benefit of Roche, for a price of $13 million, with a deposit of $2 million to be paid on the date of the contract and the balance of $11 million to be paid on the “Settlement Date”. “Settlement Date” is defined as 11am Sydney time ten business days after “Practical Completion”, which is itself an expression given a definition in the Development Contract. Under the Development Contract, Practical Completion was required to take place before the “Sunset Date”, defined in the Development Contract to be 31 December 2004, failing which Roche could by written notice to Metro terminate the Development Contract.

10 The Fitout Deed provided for the fitout of the Waterside Brasserie by Roche at its expense, and for Metro to provide various services to Roche in respect of liquor and other licenses for the premises for fees totalling $5.5 million. Roche was required to apply for all necessary consents as soon as practicable after the date of the Deed, and to cause the fitout to be carried out promptly after containing these consents; and subject to Metro providing access to the site, Roche was required to use its best endeavours to complete the fitout no later than 30 July 2004, as extended by a period no less than the number of days after 28 February 2004 until Practical Completion under the Development Contract occurred. That had the general effect of giving Roche about five months after Practical Completion to complete the fitout.

11 The Agreement for Sub-lease provided for the grant of a sub-lease from LPS to Roche on the “Commencing Date”, defined as 5pm on the date ten business days after Practical Completion under the Development Contract, for a period of 40 years from the Commencing Date at a rent of $1 for the term.

12 The obligations of Roche under each of these agreements was guaranteed by the Guarantors.

13 Roche paid Metro $2 million on or about 26 September 2003, and from about late 2003 Metro proceeded to carry out work under the Development Contract.

14 Clause 2A of the Development Contract made the obligations of the parties under the Development Contract conditional on the satisfaction of certain conditions precedent, and provided that the Development Contract would “be deemed to be automatically rescinded and of no force and effect” if the conditions precedent were not satisfied by 31 December 2003 or such later date as Metro might notify Roche in writing up to the Sunset Date.

15 On 18 December 2003, Metro gave written notice to Roche that the date of 31 December 2003 in cl.2A of the Development Contract was extended to 31 March 2004; but it did not give any further such written notice until after 31 March 2004.

16 As at 31 March 2004, some of the conditions precedent referred to in cl.2A had not been satisfied; but between 31 March 2004 and 21 May 2004, building work continued in accordance with plans approved by Roche, and the solicitors for the parties continued to work towards satisfaction of the conditions precedent.

17 However, on 21 May 2004, Roche wrote to Metro stating that, because the conditions precedent provided in cl.2A of the Development Contract were not fulfilled by 31 March 2004, the Development Contract was rescinded at the expiration of the deadline of 31 March 2004 and that the Fitout Deed was also rescinded. Metro responded denying this.

18 The respondents then commenced proceedings in the Supreme Court seeking a declaration that the Development Contract and the Fitout Deed were of no force and effect, and seeking a refund of the deposit of $2 million. Metro and Multiplex cross-claimed for contrary declarations and for an order specifically enforcing the Development Contract.

19 On 30 August 2004, Einstein J made a declaration that the Development Contract was valid and subsisting, and made an order that the appellants specifically perform the Development Contract.

20 The respondents appealed from that decision, but the appeal was not heard until 17 December 2004; and in the meantime, Metro proceeded to seek to achieve Practical Completion under the Development Contract. The Court of Appeal reserved its decision after the hearing on 17 December 2004.

21 On 4 January 2005, Roche gave notice terminating the Development Contract, claiming that Practical Completion had not been reached by the Sunset Date.

22 On 3 March 2005, the Court of Appeal upheld the respondents’ appeal from Einstein J’s orders of 30 August 2004. The Court of Appeal decided that:

1. Clause 2A did have the effect that, if the conditions precedent were not satisfied by the date specified in clause 2A or such later date as Metro had notified in writing, the Development Contract was automatically rescinded without the requirement of notice.
2. Nothing occurred prior to 31 March 2004 to extend the relevant date, so (subject to questions of estoppel and election) the Development Contract came to an end immediately after 31 March 2004.
3. The conduct of the parties could have given rise to a conventional estoppel operating against automatic rescission, and Roche’s conduct could have amounted to a binding election to affirm the contract.

23 Accordingly, the Court of Appeal set aside Einstein J’s orders, and remitted the matter to the Equity Division to determine the issues concerning conventional estoppel and election, and also the liability of the Guarantors and the issue of specific performance.

24 On 2 September 2005, an application by the appellants for special leave to appeal from that Court of Appeal decision to the High Court of Australia was heard. The High Court indicated a firm view that the Supreme Court should proceed as required by the orders of the Court of Appeal, and dismissed the application, making costs of the application costs in the cause in the Equity Division.

ISSUES BEFORE THE PRIMARY JUDGE

25 That led to another hearing before Einstein J, giving rise to the orders appealed against in this case. That hearing involved the following issues, which included issues remitted by the Court of Appeal, and also issues relevant to the question of specific performance occurring after the first hearing by the primary judge:

(1) Conventional estoppel and election.
(2) Whether Metro failed to achieve Practical Completion by the Sunset Date, so that Roche’s termination was effective.
(3) Whether the Agreement for Sub-lease was rescinded or otherwise of no continuing effect.
(4) Whether the guarantees by the Roche brothers were of any continuing effect.
(5) Whether the guarantees by the Roche parents were of any continuing effect.

DECISION OF PRIMARY JUDGE

26 In relation to issue (1), the primary judge decided (a) that Roche had, through the conduct of the Roche brothers, played a significant part in the adoption by Metro of the assumption that the Development Contract had not automatically come to an end immediately after 31 March 2004, but (b) that Metro had not established it would be at a significant disadvantage if departure from the assumption were permitted; and that accordingly conventional estoppel had not been established. He also decided (c) that, if a conventional estoppel to the effect of the assumption had been established, knowledge and conduct of Roche (through the knowledge and conduct of the Roche brothers) would have amounted to an election to affirm the Development Contract.

27 In relation to issue (2), the primary judge decided a number of sub-issues as follows:

(a) that there was no Practical Completion because some conditions precedent to Practical Completion were not satisfied;
(b) there was available to be litigated the issue whether the certification process purportedly carried out under the Development Contract was invalid, because it occurred before a certain Independent Certifier’s Deed had been amended so as to bind Roche and apply to the Development Contract; and
(c) the certification process was invalid, and Practical Completion not achieved, for that reason also.

28 In relation to issue (3), the primary judge decided two sub-issues as follows:

(a) that leave should be granted to the respondents to claim that the Agreement for Sub-lease was automatically rescinded immediately after 31 December 2003; and
(b) that because notice was not given under cl.1A of that Agreement (which was in somewhat similar terms to cl.2A of the Development Contract), the Agreement for Sub-lease was thus automatically rescinded.

29 In relation to issues (4) and (5), the primary judge decided that no guarantee was of any continuing effect. He did not address the question whether, in circumstances where Roche may have been liable under the Development Contract because of an estoppel arising through the conduct of the Roche brothers, the Roche parents could be liable on their guarantees, if all other arguments of the respondents failed.

30 On the question of costs, the primary judge held that there was not such justification for separate representation of the Roche parents as could justify a costs order in their favour.

ISSUES ON APPEAL

31 The appellants by their appeal challenge decisions on issues I have identified as (2)(a), (b) and (c), (3)(a) and (b) and (4) and (5).

32 Roche and the Roche brothers, by a Notice of Contention, challenge the primary judge’s decision of the issues I have identified as (1)(a) and (c). I note that Metro did not challenge the decision on the issue I have identified as (1)(b); but it foreshadowed that it would seek to renew its application for special leave to appeal from the first Court of Appeal decision, in order to challenge the holding in that decision that Metro needed to establish detriment or significant disadvantage in order to establish conventional estoppel.

33 The Roche parents by their cross-appeal sought a decision to the effect that they could not be affected by any estoppel arising through the conduct of the Roche brothers, and they also sought an order for costs in their favour.

34 I will consider in turn the following issues:

(1) The issues arising under the Notice of Contention as regards Roche’s role in the adoption of the assumption in relation to conventional estoppel, and the issue of election.
(2) Whether (assuming the certification process was otherwise valid) there was no Practical Completion under the Development Contract because some conditions precedent were not satisfied.
(3) (a) Whether it was open to be litigated whether the certification process was otherwise valid.
(b) If so, whether the certification process was invalid because the Independent Certifier was not validly appointed and whether there was no Practical Completion for that reason.
(4) (a) Whether it was open to be litigated whether the Agreement for Sub-lease was automatically rescinded immediately after 31 December 2003.
(b) If so, whether this occurred.
(5) Whether the guarantees of the Roche brothers were of any continuing effect.
(6) Whether the guarantees of the Roche parents were of any continuing effect.
(7) Whether the primary judge was in error in relation to the costs of the Roche parents.

35 I will commence by setting out relevant provisions of the relevant contracts. I will start with the Independent Certifier’s Deed, and then set out in turn the relevant provisions of the Development Contract, the Fitout Deed, and the Agreement for Sub-lease.

INDEPENDENT CERTIFIER’S DEED

36 This was a deed entered into on 27 June 2003, before Roche became involved in the Luna Park project, appointing Incoll Management Pty. Limited (Incoll) to perform certain certification duties in relation to a number of identified contracts. The parties to this deed were LPRT, Metro (called “Developer”), Multiplex (called “Builder”), LPS, the trustee of two trusts (called respectively “Car Park RE” and “Restaurant RE”), and another trustee (called “Security Trustee”).

37 One of the contracts in respect of which Insoll was given certification duties was called the Restaurant Development Contract between Metro and Restaurant RE. Although there was no evidence directed specifically towards this, it seems likely that this was a contract for the design, construction and financing of building work for the Waterside Brasserie, which was later superseded by the Development Contract and which contained terms many of which were similar to those of the Development Contract.

38 In relation to the Restaurant Development Contract, the Independent Certifier (Incoll) was given the following duties:

Duty No.	Clause in Restaurant Development Contract	Clause in Agreement for Lease (by reference from terms of Agreement for Restaurant Subleases)	Brief Summary of Duty	Included in Lump Sum
1.	35.5 and 1.8 of Schedule C	4.8(d) and (g)	Determination of delay and extension of time	Yes
2.	37	Agree procedure for defect identification and rectification	Yes
3.	42.1(f)	Assess payment claims and issue payment certificate	Yes
4.	42.3(a)(i) and 1.21(d) of Schedule C	4.23(d) and (h)	Inspection of works	Yes
5.	42.3(c)(i), 42.3(e), 42.3(f) and 1.21 of Schedule C	4.23(e) and 4.23(i)	Issue of Certificate of Practical Completion and issue of confirmation of completion of the Works in accordance with the Documentation	Yes
6.	42.3(c)(ii) and 1.21(f) and 1.21(h) of Schedule C	Preparation of statement of reason and list of work to be completed

39 Clause 16.6(a) of the Deed provided as follows:

16.6 No other roles
(a) The Independent Certifier must not accept a role in relation to the Project other than as expressly set out in this Deed or as approved in writing by the Principal Parties.


The Principal Parties were defined in the Deed to be all parties apart from the Independent Certifier.

DEVELOPMENT CONTRACT

40 This agreement was made on 26 September 2003 between Metro (called “Developer”), Roche, the Guarantors and Multiplex.

41 The Development Contract contained the following recitals:

A. The Developer has entered into the Agreement for a Lease, pursuant to which LPRT is required to grant to LPS the Leases upon the Date of Luna Park Practical Completion.
B. Roche intends to enter into the Agreement for Waterfront Brasserie Sublease with LPS and the Developer to receive the Waterfront Brasserie Sublease which is conditional upon the Works being carried out.
C. Metro intends to agree with LPS under the Agreement for Waterfront Brasserie Sublease to carry out the Works.
D. The parties have agreed that Roche will engage the Developer, and the Developer separately undertakes to Roche under this Contract, to design, construct and finance the Works on the Site for the benefit of Roche on the terms set out in this Contract.
E. In consideration of the Developer entering into this Contract at the request of the Guarantors the Guarantors have agreed to guarantee the performance of the obligations of Roche under this Contract.
F. In consideration of Roche entering into this Contract at the request of Multiplex, Multiplex has agreed to provide a covenant to Roche in accordance with this Contract.

42 The operative terms of the Development Contract were as follows, omitting immaterial parts of the guarantee clause:

1. Contract Documents
The following documents annexed to this Contract will form and be read and construed as part of this Contract:
(a) the General Conditions of Contract including all annexures; and
(b) the Developer's Program.

2. Developer's Obligations
The Developer must, as a separate obligation under this Contract:
(a) execute the work under the Contract in accordance with this Contract; and
(b) perform, fulfil, comply with, submit to and observe the provisions, condition, stipulations and requirements and all matters and things expressed or shown in or reasonably to be inferred from this Contract and which are to be performed, fulfilled, complied with, submitted to or observed by the Developer.

3. Roche's Obligations
Roche will:
(a) make a payment to the Developer in accordance with this Contract; and
(b) perform, fulfil, comply with, submit to and observe the provisions, conditions, stipulations and requirements and all matters and things expressed or shown in or reasonably to be inferred from this Contract and which are to be performed, fulfilled, complied with, submitted to or observed by Roche.

4. Acknowledgement
Unless the parties otherwise agree in writing, but without limiting any obligations of Roche under the Agreement for Waterfront Brasserie Sublease, the parties acknowledge and agree that, as between the Developer and Roche, Roche will not carry out any obligations in relation to the Works.

5. Entire Agreement
This Contract constitutes the entire agreement and understanding between the parties and takes effect according to its tenor notwithstanding any prior agreement in conflict or at variance with it or any correspondence or other documents relating to the subject matter of this Contract which may have passed between the parties to this Contract prior to its execution and which are not included in this Contract.

6. Guarantee and Indemnity
In consideration of the Developer entering into this Contract at the request of the Guarantors, the Guarantors covenant and agree with the Developer that:
(a) (Due performance and observance): the Guarantors will be jointly and severally liable with Roche to the Developer for the due performance and observance by Roche of all the covenants, terms and conditions of this Contract on the part of Roche to be performed and observed;
(b) (Indemnity): the Guarantors will indemnify the Developer and agree at all times hereafter to keep the Developer indemnified from and against all losses and expenses which the Developer may suffer or incur in consequence of any breach or non-observance of any of the covenants, terms and conditions of this Contract on the part of Roche to be performed or observed, and the Guarantors agrees (sic) that they will remain liable to the Developer under this indemnity notwithstanding as a consequence of such breach or non-observance the Developer has exercised any of their rights under this Contract, and notwithstanding that Roche being a company may be wound up or dissolved, and notwithstanding that any guarantee given by the Guarantors may for any reason be unenforceable either in whole or in part;
…
(d) (Guarantors a (sic) primary debtor): notwithstanding that as between the Guarantors and Roche the Guarantors may be a surety only, as between the Guarantors and the Developer the Guarantors shall be deemed to be primary debtor and contractor jointly and severally with Roche;
…
(i) (Invalidity etc): the liability of the Guarantors shall not be impaired by the covenants of Roche herein or by any other instrument or transaction becoming illegal, invalid, void or unenforceable by reason of any past, present or future statute, matter, act or omission by any person;
…

43 Pursuant to cl.1 of the Development Contract, there were included in that Contract certain General Conditions of Contract and annexures, one of which was a copy of the Agreement for Sub-lease, executed by the parties thereto other than LPS.

44 The General Conditions of Contract (GCC) contained a number of clauses relevant to this appeal.

45 Clause 2 of the GCC concerned interpretation, and after introductory words (“In the Contract, except where the context otherwise requires”) there are definitions of a number of expressions, including the following:

“Date of Practical Completion” means -
(a) the date certified by the Independent Certifier in a Certificate of Practical Completion to be the date upon which Practical Completion was reached; or

(b) where another date is determined in any arbitration or litigation as the date upon which Practical Completion was reached, that other date;

“Independent Certifier” means Incoll Management Pty. Limited, ABN 23 003 134 914, or such other person jointly appointed from time to time by LPRT, the Developer, the D&C Contractor, Roche, LPS, the Security Trustee, and others pursuant to the Independent Certifier’s Deed;

“Independent Certifier’s Deed” means the document entitled “Independent Certifier’s Deed Luna Park” dated 27 June 2003 between the Independent Certifier, the Developer, LPS, LPRT and others as to be amended in accordance with clause 2A;

“Practical Completion” means in relation to the Works, the stage when the Works are certified by the Independent Certifier in accordance with the Independent Certifier’s Deed as being completed, except for minor defects and minor omissions, and are reasonably capable of being used for their intended purpose, subject to clause 42.3 and clause 1.21 of Annexure Part C;

“Settlement Date” means 11.00am Sydney time on the date being 10 Business Days after the Date of Practical Completion’

“Sunset Date” means 31 December 2004.

“Works” means the works to be executed on or within the Site in accordance with the Contract and Roche’s Project Requirements, including variations provided by the Contract.

It was common ground that the Works required by the Development Contract were what was described as the base building works, that is (broadly) work sufficient to bring the building to lock-up state, and not including the internal fitout of the building.

46 Clause 2A of the GCC was in the following terms:

2A CONDITIONS PRECEDENT
(a) The obligations of the parties under this Contract (other than this clause 2A) are conditional on satisfaction of the following conditions precedent:
(i) LPRT executing the Deed of Consent to Waterfront Brasserie Sublease;
(ii) the Financier granting its consent to this Contract, the Deed of Agreement to Waterfront Brasserie Sublease and the Deed of Consent to Waterfront Brasserie Sublease and the parties and the Financier executing any documents required by the Financier as a condition to it granting such consent (unless the Financier advises that its consent is not required to this Contract, the Deed of Agreement to Waterfront Brasserie Sublease and the Deed of Consent to Waterfront Brasserie Sublease);
(iii) the execution of the Agreement for Waterfront Brasserie Sublease by LPS, the Developer, Roche and the Guarantors;
(iv) the rescission of the Development Agreement between the Developer and Multiplex Investments Limited dated on or about 26 June 2003;
(v) the parties to the Independent Certifiers Deed and Roche entering into a deed amending the Independent Certifiers Deed whereby Roche agrees to be bound by the Independent Certifiers Deed; and
(vi) LPRT and LPS Providing (sic) a waiver in respect of their rights to the Roche Fitout during the term of the Second Mortgage and a consent (if necessary) to the Second Mortgage, on terms satisfactory to the Developer.


(b) This Contract will be deemed to be automatically rescinded and of no force and effect if the condition precedents are not satisfied by 31 December 2003 (or such later date the Developer may notify Roche in writing (on one or more occasions) up to the Sunset Date).

(c) Roche will promptly after the date of this deed furnish to Metro all information required by Metro in order to satisfy the conditions precedent described in clause 1A(a) including, without limitation, the requirements of LPRT under the Agreement for Lease in relation to the grant of the Waterfront Brasserie Sublease to Roche.

47 Clauses 35.2 and 35.3 provided as follows:

35.2 Time for Practical Completion
The Developer shall do all things reasonably necessary to execute the work under the Contract to Practical Completion by the Date for Practical Completion.

If the Developer fails to achieve Practical Completion by the Sunset Date, Roche may by written notice to the Developer terminate the Contract and:
(a) the Deposit will be refunded by the Developer to Roche; and
(b) clause 35.6 will apply.

35.3 Handover of Site
(a) Subject to:
(i) the Waterfront Brasserie Sublease being granted to Roche; and
(ii) Roche granting the Second Mortgage to the Developer,
the Developer shall give possession of the Site and the Works to Roche on the Settlement Date.
(b) Subject to clause 27.2, the Developer will:
(i) use reasonable endeavours to facilitate Roche being given access to the Site after the Fitout Access Date for the purposes of carrying out Roche’s Fitout; and
(ii) notify Roche one month prior to the date it anticipates to be able to provide such access to Roche.

48 Clause 42.1, entitled “Contract Sum”, included the following sub-paragraphs:

…
(d) Roche shall pay the Contract Sum (plus GST on the Contract Sum) to the Developer on the Settlement Date.
(e) Payment of the Contract Sum by Roche to the Developer will be conditional upon:

(i) the issue of the Certificate of Practical Completion with respect to the Works;
(ii) practical completion of the Luna Park Works (as defined in the Agreement for Lease);
(iii) registration of the Documents;
(iv) the grant by LPRT of the Leases to LPS;
(v) the grant of the Waterfront Brasserie Sublease to Roche pursuant to the Agreement for Waterfront Brasserie Sublease;
(vi) the Developer having procured the grant of the Liquor Licence; and
(vii) the Developer having procured the issue of the POPE Licence,

provided that Roche is not required to pay the Contract Sum until at least 60 days after the Developer notifies Roche of the fulfilment of the condition described in clause 42.1(e)(vi).

49 Clause 42.3 was in the following terms:

42.3 Certificate of Practical Completion
(a) (i) The Developer must give Roche and the Independent Certifier at least 15 Business Days' notice of the date on which the Developer anticipates that Practical Completion will be reached. The notification shall include an agreed time within the following 5 Business Days from the date of the notice for the initial inspection of the Works to take place. The inspection will be undertaken by the Independent Certifier, the Developer, LPS, Roche, the D&C Contractor and LPRT; and
(ii) The Developer and Roche each acknowledge the terms of the Independent Certifiers Deed and must cause the Independent Certifier to certify Practical Completion in accordance with the Independent Certifiers Deed.
(b) When the Developer is of the opinion that Practical Completion has been reached, the Developer must:
(i) request the Independent Certifier to issue a Certificate of Practical Completion; and
(ii) at the same time give Roche a copy of that request.
(c) Within 10 Business Days after the receipt of the Developer's request, the Independent Certifier must either:
(i) subject to paragraph (d) and Annexure Part C, give the Developer (with a copy to Roche at the same time) a Certificate of Practical Completion certifying the Date of Practical Completion; or
(ii) give the Developer (with a copy to Roche at the same time) the reasons for not issuing that certificate and provide a detailed list of work required to be completed in order for that certificate to be issued.
(d) If the Independent Certifier does not within 10 Business Days after receipt of the Developer's request either give the Certificate of Practical Completion or give Roche or the Developer reasons for not issuing the Certificate, then either Roche or the Developer may regard the circumstances as constituting a dispute between Roche and the Developer for the purposes of Clause 47.
(e) On receipt of the detailed list referred to in subparagraph (c)(ii), the Developer must carry out the work referred to in that list and, on completion of that work, request the Independent Certifier (and give a copy of the request to Roche) to issue a Certificate of Practical Completion. If the Independent Certifier is satisfied that all such work has been completed then, subject to paragraph (d) and Annexure Part C, the Independent Certifier must issue the Certificate of Practical Completion within 10 Business Days of receipt of the Developer's request. Otherwise the provision of paragraphs (c), (d) and (e) shall re-apply.
(f) Despite paragraph (c), but without limiting the operation of paragraph (d), a Certificate of Practical Completion may not issue unless and until:
(i) the Developer has given LPRT and Roche a survey prepared by a licensed surveyor showing that the relevant Works are within the Site;
(ii) the Independent Certifier has issued a certificate addressed to Roche and the Developer stating that the relevant Works have been completed in accordance with the Documentation and otherwise in accordance with the Contract;
(iii) all Compliance Reports have been delivered to LPRT;
(iv) copies of all necessary documents and Approvals issued by the Consent Authority acknowledging completion of the Works and permitting use and occupation of the Site including a Compliance Certificate and an Occupation Certificate have been delivered to LPRT, the Developer and Roche;
(v) copies of all other certificates (including any Part 4A Certificate and any Complying Development Certificate), consents and Approvals required of any relevant Authority whose certificate, consent or approval is required for the erection, use or occupancy of each relevant part of the Works have been delivered to LPRT, the Developer and Roche; and
(vi) Practical Completion of the Luna Park Works has occurred pursuant to the Agreement for Lease; and
(vii) registration of the Documents has occurred,
provided that other requirements of the Law necessary for the Works to be lawfully operated but not otherwise necessary for occupation (excluding the POPE Licence) are not required to be obtained in order for a Certificate of Practical Completion to be issued.
(g) Promptly after Practical Completion, the Developer must do an things required to procure the issue and promptly deliver to LPRT, and Roche copies of the following items in relation to the relevant Works;
(i) a copy of as-built drawings, operational manuals and all warranties given to the Developer in connection with the relevant Works;
(ii) all surveys of the Site in the possession or control of the Developer which have not previously been delivered to LPRT, including a survey of the completed Site by a Surveyor in a form and substance satisfactory to LPRT;
(iii) all certificates issued by any Authority and which the Developer is required under the Contract to procure in relation to any part of the relevant Works which have not previously been delivered to Roche; and,
(iv) a copy of a building certificate under Part 8 of the EP&A Act in respect of the relevant Works.

50 An annexure to the GCC, referred to as Part C, contained a number of relevant provisions, including the following. Clause 1.1 of Part C provided as follows:

1.1 Obligations
The Developer and Roche acknowledge that the Developer has obligations to LPRT under the Agreement for Lease in relation to the Works.

The Developer agrees to perform the obligations in this schedule in relation to the Works to ensure that it complies with its obligations in relation to the Works under the Agreement for Lease. Where the obligations in this schedule are inconsistent with the remainder of the Contract, the provisions of this schedule will prevail.

51 Clause 1.21 of Part C provided as follows:

(a) Roche and the Developer each acknowledge and agree that Practical Completion of the Works must occur simultaneously with Practical Completion of the Luna Park Works (excluding the Works) and the Car Park Works.
(b) Before Practical Completion of the Works, the Developer must give Roche and LPRT 40 Business Days' written notice of the date on which the Developer estimates that the Works will reach Practical Completion.
(c) The Developer and Roche, each acknowledge the terms of the Independent Certifier's Contract and must cause the Independent Certifier to certify Practical Completion in accordance with the Independent Certifier's Contract.
(d) No earlier than the date nominated by the Developer in its notice given under clause 1.21(b), the Independent Certifier, the Developer, Roche and LPRT must jointly inspect the Works at a mutually convenient time.
(e) If the joint inspection reveals that the Works have reached Practical Completion, the Independent Certifier must, subject to clause 1.21 (a), give the Developer written certification of that fact.
(f) If the joint inspection reveals that the Works have not reached Practical Completion, the Independent Certifier must prepare and give to the Developer, Roche and LPRT a list of items which require attention by the Developer in order for the Works to reach Practical Completion.
(g) The Developer must advise Roche, LPRT and the Independent Certifier in writing when it considers that the items in the Independent Certifier's list have been completed.
(h) The Independent Certifier must then give written notice to the Developer, LPRT and Roche, following a further joint inspection of the Works, stating either that:
(i) items requiring attention have not been completed, in which case clause 1.21(f) again applies; or
(ii) subject to clause 1.21(a), the Works have reached Practical Completion.
(i) When the Independent Certifier determines that the Works have reached Practical Completion, the Independent Certifier must, subject to clause 1.21 (a), certify the Date of Practical Completion in a notice given to the Developer under clause 1.21(e) or, where appropriate, clause 1.21(h).

(j) The costs of the Independent Certifier incurred in relation to its role pursuant to this clause 1.21 are to be paid by the Developer.

FITOUT DEED

52 This Deed was also made on 26 September 2003, and the parties to it were Roche, Metro and the Guarantors.

53 This Deed contained the following recitals:

A. The parties have entered into the Development Contract in relation to the construction of the Works by Metro on the Premises for Roche.
B. Roche has requested Metro to provide various services to Roche in respect of the liquor and other licences for the Premises.
C. In consideration of the mutual covenants contained in this deed, the parties have agreed to enter into this deed to give effect to the arrangements upon which Metro will provide such services to Roche.
D. In consideration of Metro entering into this deed at the request of the Guarantors, the Guarantors have agreed to guarantee to Metro the performance of the obligations of Roche under this deed.

54 Clause 1.1 contained the following relevant definitions:

“Date of Practical Completion” has the same meaning as in the Development Contract.

“POPE Licence” has the meaning in clause 6.1.

“Settlement Date” means 11am Sydney time on the date being 10 Business Days after the Date of Practical Completion.

55 Clause 1A of the agreement was as follows:

1A. Condition Precedent
(a) The obligations of the parties under this deed (other than this clause 1A) are conditional on satisfaction of the conditions precedent to the Development Contract.
(b) This deed will be deemed to be automatically rescinded and of no force and effect if the Development Contract is rescinded due to the conditions precedent under the Development Contract not being satisfied.

56 Clauses 4.1 to 4.3 were in the following terms:

4.1 Approvals
Roche must apply for and obtain all consents, approvals and permits required from all relevant Authorities for Roche's Fitout ("Fitout Approvals") as soon as practicable after the date of this deed.

4.2 Carry out Fitout
Promptly after obtaining the Fitout Approvals and subject to Metro providing Roche with access to the Site to carry out Roche's Fitout, Roche must cause Roche's Fitout to be carried out at its cost:
(a) in accordance with the Fitout Plans;
(b) in accordance with all laws of all relevant Authorities and the Fitout Approvals;
(c) as expeditiously as possible; and
(d) in a proper and workmanlike manner.

4.3 Time for Completion
Roche must use its best endeavours to complete Roche's Fitout as expeditiously as possible and no later than 31 July 2004, as extended by the greater of:
(a) the number of days after 28 February 2004 until Practical Completion occurs; and
(b) the number of days (exceeding 30 days) which Metro takes to approve the Fitout Plans.

57 Clause 6 was as follows:

6. POPE Licence
6.1 Obtain Licence
Metro will be responsible for obtaining a Place of Public Entertainment Licence under the EP&A Act (which may be a conditional interim licence) (“POPE Licence”) in respect of the Premises (or any part of the Premises) which permits the maximum capacity and use of the Premises having regard to the Design Documents and the requirements of, and as determined by, the relevant Authority which is to issue the POPE Licence.

6.2 Work together
Metro and Roche will work together to achieve a POPE Licence which permits the maximum capacity and use of the Premises having regard to the Design Plans.


The Fitout Deed contained no definition of the expression “Design Documents” referred to in cl.6.1. However, it was accepted that the definition of Design Documents contained the Development Contract was applicable, and this makes it clear that they are the design documents for the works, that is the base building works.

AGREEMENT FOR SUBLEASE

58 The parties to this agreement were LPS, Roche, Metro and the Guarantors. As mentioned earlier, a copy of this was annexed to the Development Contract, executed by the parties apart from LPS. This document was later executed by LPS and dated 17 September 2004.

59 Clause 1A of this agreement provided as follows:

1A. Condition Precedent
(a) The obligations of the parties under this deed (other than this clause 1A) are conditional on satisfaction of the following conditions precedent:
(i) LPRT granting its consent to this deed and executing the Deed of Consent to Waterfront Brasserie Sublease;
(ii) Metro's financier granting its consent to this deed and the Deed of Consent to Waterfront Brasserie Sublease and the parties and Metro's financier executing any documents required by Metro's financier as a condition precedent to it giving that consent (unless Metro's financier advises that its consent is not required to this deed and the Deed of Consent to Waterfront Brasserie Sublease); and
(iii) the consent to this deed being given by the Minister;
(iv) the parties to the Independent Certifiers Deed and Roche entering into a deed amending that deed whereby Roche agrees to be bound by that deed; and
(v) the Head Landlord and LPS providing a waiver in respect (sic) their rights to the Roche's fitout during the term of the second mortgage over the Waterfront Brasserie Sublease and Roche's fitout to be granted by Roche to Metro and a consent (if necessary) to such second mortgage, on terms reasonably acceptable to Metro.
(b) This deed will be deemed to be automatically rescinded and of no force and effect if the condition precedents described in clause 1A(a) are not satisfied by 31 December 2003 (or such later date as Metro may notify Roche in writing (on more than one occasion) up to the Sunset Date).
(c) Roche will promptly after the date of this deed furnish to Metro all information required by Metro in order to satisfy the conditions precedent described in clause 1A(a) including, without limitation, the requirements of LPRT under clause 12 of the Lease to be granted pursuant to the Agreement for Lease in connection with the grant of the Waterfront Brasserie Sublease to Roche.

ISSUE 1: NOTICE OF CONTENTION

60 This matter was dealt with at par.[13] to [72] of the primary judge’s judgment, which I will not set out here.

Submissions

61 Mr. Walker SC for Roche and the Roche brothers submitted that the primary judge was in error in finding that Roche played a relevant part in Metro adopting an assumption that the contract was not automatically rescinded at the expiry of 31 March 2004, because:

(a) the relevant officers of Metro, namely Messrs. O’Regan and Yeo, gave evidence that they believed that the contract was on foot after 31 March 2004 because of what happened at a meeting on 2 March 2004, not because of anything done by Roche thereafter;
(b) the actions of Roche between 31 March 2004 and 21 May 2004, and Roche’s failure to inform Metro that the contract was rescinded, could not support a finding that Roche played a relevant part in Metro adopting the assumption, and the primary judge did not address submissions to that effect or consider the question of affectation of the beliefs of relevant persons in Metro.

62 Mr. Walker submitted that the primary judge was error in finding that the relevant Roche brother, namely Michael, knew of facts giving Roche the right to rescind, in that:

(a) Contrary to the primary judge’s finding, it was common ground that Roche had executed the Agreement for Sub-lease.
(b) Evidence that Michael would have known if Roche had executed a variation to the Independent Certifier’s Deed did not justify a finding that he was aware of circumstances giving rise to a right to rescind, in circumstances where Michael’s evidence was that he did not until 10 May 2004 turn his mind to the conditions precedent.

63 Mr. Walker also submitted that the actions of Roche between 31 March 2004 and 21 May 2004 were no more than consistent with the existence of the contract, and did not amount to the exercise of rights under the contract, as required by election in accordance with Sargent v. ASL Developments Limited (1974) 131 CLR 634 at 656.

Decision

64 In my opinion, these submissions should be rejected.

65 On the first matter, the part played by Roche in Metro adopting the assumption may be sufficient, even if the assumption was initially adopted for other reasons, so long as Roche played a sufficient role in Metro maintaining that assumption at material times. In my opinion, the actions of Roche identified by the primary judge, coupled with Roche’s failure to inform Metro that the contract had been rescinded, were such as to support an inference that they materially contributed to Metro’s maintenance of the relevant assumption between 31 March 2004 and 25 May 2004; and the absence of direct evidence to this effect from Messrs. O’Regan and Yeo did not weigh heavily against drawing that inference. The circumstance that the primary judge did not explicitly address this point does not in my opinion amount to a deficiency of reasons, or otherwise indicate error.

66 On the second matter, the evidence plainly justified a finding that Michael Roche knew that Roche had not executed a variation of the Independent Certifier’s Deed and was aware that no written notice had been given of extension of time beyond 31 March 2004; and the circumstance that he did not turn his mind to the conditions precedent does not weigh against a finding, in terms of the requirements for election set out in Sargent, that he was aware of circumstances entitling Roche to terminate the contract.

67 On the third matter, in my opinion evidence concerning attendance by Roche representatives at site meetings and input into such meetings, and input from Roche’s solicitors into the content of documents being prepared for the purposes of the Development Contract, was evidence of conduct in exercise of rights under the contract, not merely conduct consistent with the continued existence of the contract; and no error is shown in the primary judge’s finding that such conduct occurred.

ISSUE 2: PRACTICAL COMPLETION

68 This issue will be addressed on the basis that the appointment of Incoll as Independent Certifier for the purposes of the Development Contract was efficacious, so that Incoll’s actions as Independent Certifier were not vitiated by any lateness or other inadequacy of its appointment for the purposes of the Development contract. That matter will be considered as the third issue.

69 Incoll in fact issued two documents purporting to be Certificates of Practical Completion.

70 The first, issued on 18 June 2004, was in the following terms:

Practical Completion Certificate- Luna Park
Given: pursuant to Clause 2 of the Independent Certifier Deed for Luna Park (Deed) dated 27 June 2003 between Luna Park Reserve Trust, Metro Edgley Pty Limited, Multiplex Constructions Pty Limited, Luna Park Sydney Pty Limited, Multiplex Investments Limited, Incoll Management Pty Limited, BOS International (Australia) Limited.

To each of: Luna Park Reserve Trust, Metro Edgely Ply Limited, Multiplex Constructions Pty Limited, Luna Park Sydney Pty Limited, Luna Park Sydney Pty Limited, Multiplex investments Limited, BOS International (Australia) Limited, MK & JA Roche Pty Limited.
1. Pursuant to and for the purposes of the Deed, Incoll Management Pty Limited hereby certifies that Practical Completion as defined in clause 42.3 of the D & C Contract and clause 4.23 (e) and (i) the Deed of the Agreement For Lease and Sub Lease for the Luna Park Works (including Restaurant Works), Car Park Works and Office Works, was reached on 17 June 2004.

Staged completion of the following areas was achieved on
- Crystal Palace 3 Oct 2003
-Big Top, Foyers, Workshop,
Dodgem Room (interior) 12 Dec 2003
- Balance of Luna Park 31 Mar 2004
- Car Park 31 Mar 2004
- Milsons Landing (Strata Offices) 23 April 2004
-Bar/Brassiere (Base Building Works) 17 June 2003

2. This certificate is issued on 18 June 2004.

The date “17 June 2003” was clearly a mistake for 17 June 2004.

71 No prior notice of the anticipated date of Practical Completion had been given, as required by cl.42.3(a) of the GCC and/or cl.12.1(b) of Part C.

72 On 25 October 2004, Metro gave a notice purporting to be a notice pursuant to cl.42.3(a)(i), stating that it anticipated Practical Completion would be reached on 10 November 2004, and nominating 1 November 2004 as the date for a joint inspection.

73 The Roche brothers attended a meeting on the site on 1 November 2004, on the basis that Roche did not concede that this was “a or the” meeting contemplated by the Development Contract.

74 The second purported Certificate of Practical Completion was issued on 17 November 2004, in the following terms:

Certificate of Practical Completion
Given: pursuant to the Deed of Variation – Independent Certifier’s Deed (Deed) undated between Luna Park Reserve Trust, Metro Edgley Pty Limited, Multiplex Limited, Luna Park Sydney Pty Limited, Multiplex Investments Limited, Multiplex Luna Park Carpark Landowner Pty Ltd, M.K. and J.A. Roche Pty Limited and Incoll Management Pty Limited.

To each of: Metro Edgley Pty Limited and M.K. & J.A. Roche Pty Limited.

Pursuant to and for the purposes of the Deed, Incoll Management Pty Limited hereby certifies that Practical Completion as defined in clause 42.3 and clause 1.21 of Annexure Part C of the Waterfront Brasserie Development Contract, was reached on 8 November 2004.

This certificate is issued on 17 November 2004.

75 Roche’s contention was that these certificates did not engage with the definition of Practical Completion in the GCC for two main reasons: first, essential procedural requirements for the issue of such certificates were not complied with; and second, there were conditions precedent to Practical Completion that operated independently of certification, which were not satisfied.

76 The primary judge found in favour of Roche on both bases.

77 On the first basis, he held to the effect that the giving of notices required by cl.42.3(a) of the GCC and cl.121(b) of Part C was necessary if the certificate was to be valid; and such notices were not given.

78 On the second basis, he held to the effect that other conditions precedent to Practical Completion were not satisfied, in particular (a) Practical Completion was not reached simultaneously with Practical Completion of the Luna Park Works (Part C cl.1.21(a)); (b) compliance reports were not delivered to LPRT (cl.42.3(f)(iii)); and (c) necessary approvals, namely a complying development consent for the Roche Fitout and a POPE Licence were not delivered (cl.42.3(f)(iv) and (v)).

79 In particular, in relation to approvals, the primary judge held that a Development Consent delivered by Metro to Roche on 31 August 2004 did not comply with Roche’s project requirements, which provided that operating hours for the Brasserie were to be 7am to 1am Monday to Saturday and 7am to midnight Sunday; whereas the consent permitted only substantially reduced hours for external areas, namely 10am to 10pm from Sunday to Thursday and 10am to midnight on Friday and Saturday. The primary judge also held that, without the delivery of a POPE Licence, no Certificate of Practical Completion could be issued.

Construction and Application of Practical Completion Provisions

80 Because there are a number of inter-related issues concerning the construction and application of the provisions of the Development Contract concerning Practical Completion, I find it convenient to state the views I have reached on these matters, having considered the submissions of the parties; and then I will deal specifically with some submissions, not adequately dealt with in this discussion.

81 One initial problem is the relationship between the issue of a Certificate of Practical Completion and the date certified in the certificate as the date of Practical Completion. It is clear that a certificate can specify a date prior to its issue as being the date of Practical Completion, and that some of the terms of the Development Contract relate to the issue of the certificate rather than delaying the date which the Independent Certifier can certify as being the date when Practical Completion was achieved. The definition of Practical Completion refers to “the stage when the Works are certified … as being complete”, this being ambiguous between the date of issue of the certificate and the date specified in the certificate as the date when Practical Completion was achieved.

82 In my opinion, the preferable view is that the definition of Practical Completion is referring to the date of issue of the certificate, because it cannot be said at any prior time that the Works are certified as being completed; and also because otherwise the short and precise times defined with reference to Practical Completion could already have passed when the certificate is issued. However, in this case it would not appear to matter, because in my opinion it is clear that if 31 December 2004 passed without a certificate having been issued, Roche has a right of rescission; and a later issue of a certificate specifying a date before 31 December 2004 as being the date of Practical Completion could not change this.

83 The other main questions of construction concern the extent to which the validity of certification depends on compliance with procedural steps concerning such matters as notices and inspections specified in the Development Contract, and whether the certificate is binding as regards compliance with cls.42.3 and 1.21, and the effect of non-compliance with certain elements of those clauses.

84 In my opinion, an intention is manifested in the Development Contract that there be certainty in relation to when Practical Completion occurs, and this is consistent with an intention that the certificate be binding and conclusive. However, where there are terms regulating how the certificate is to come into existence, the fact that the certificate is to be conclusive suggests that it is important that these terms be complied with.

85 The appellants contended that the definition of Practical Completion required certification in accordance with the Independent Certifier’s Deed, which did not contain any procedural requirements; but in my opinion the deed itself made it clear that the duties were to be carried out in accordance with the contract in relation to which they were performed. In my opinion, the intention disclosed by the Development Contract is that the Independent Certifier must (at least) have regard to the procedural requirements with a view to ensuring they are complied with. If the independent certifier does this, then in my opinion minor departures from the procedure would not necessarily be fatal.

86 However, in this case, no notice at all was given to Roche prior to the first certificate, dated 18 June 2004; so even if a presumption of regularity is applied (as I am prepared to do), the inference that the Independent Certifier had no regard whatsoever to the contractual requirements in issuing that first certificate is available. In circumstances where the Independent Certifier gave no evidence, this inference can be readily drawn, and I would do so. Accordingly, the first certificate was invalid.

87 In relation to the second certificate, dated 17 November 2004, no notice was given which purported to be under Part C cl.1.21(b); and the notice that was given was of a Practical Completion anticipated in 15 days (that is, “ordinary” days, not business days, as required by cl.42.3(a)(i). Part C is expressed to prevail over the other terms of the contract, and it required 40 days notice. So again, there was a very obvious and significant departure from procedural requirements; and in the absence of evidence from the Independent Certifier, I would draw the inference that the Independent Certifier did not address the procedural requirements with a view to ensuring they were complied with. Accordingly, in relation to this certificate also, the Independent Certifier did not carry out the task required by the Development Contract in giving a Certificate of Practical Completion, and the second certificate is also invalid.

88 Another matter that might be regarded as procedural is a requirement in cl.1.21(a) that Practical Completion of the Works must occur “simultaneously” with Practical Completion of the Luna Park Works and the Car Park Works, those being other parts of the project. The commercial purpose of this was to ensure that Roche was not bound to pay $11 million and proceed with the fitout before other works relevant to the viability of its business were at an appropriate stage. The certificate dated 18 June 2004 certified Practical Completion of those other works on 31 March 2004. I do not think it could have been the intention of the parties that prior achievement of Practical Completion on the other works should irrevocably preclude Practical Completion of these works. In my opinion, the requirement of simultaneity is satisfied if, at the time of Practical Completion of these works, the other works have achieved Practical Completion, so that the state of Practical Completion of all three is simultaneous in that sense.

89 At the very least, that is a view that the Independent Certifier could reasonably have adopted; so that if this is a procedural requirement that the Independent Certifier is required to attend to with a view to ensuring compliance, I would not be satisfied that it did not do so.

90 Other requirements for Practical Completion are not procedural in the sense of being notices, inspections and (possibly) simultaneity, namely the requirement of delivery of compliance reports and approvals under cl.42.3(f). They are not matters in respect of which the Independent Certifier is explicitly given any role: under cl.42.3(c)(ii), the only reasons treated as standing in the way of issuing the certificate concerned “works required to be completed”; and under cl.42.3(e), the Independent Certifier must issue the Certificate of Practical Completion if it is satisfied that all such work is completed. The requirements of s.42.3(f) are not set out as things of which the Independent Certifier must be satisfied but as things that must occur; and cl.42.3(f)(ii) tends to confirm that these matters are distinct from the question of certification.

91 However, the definition of Practical Completion is ambiguous as to whether compliance with the requirements of cls.42.3 and 1.21 is a matter for certification by the Independent Certifier, or is rather a matter which must occur in fact. I note that the Independent Certifier’s duties under the Restaurant Development Contract, which in this respect was probably in similar terms to the Development Contract, include cls.42.3(f) and 1.21.

92 On balance, I think the same approach is appropriate as in regard to procedural requirements. The Independent Certifier is required to address these requirements with a view to ensuring they have been complied with. For reasons I will give, I would be prepared to adopt the presumption of regularity so far as concerns the Compliance Reports and the Development Approval; but in my opinion cl.42.3(f) makes it clear that the POPE Licence is required to be obtained in order for a Certificate of Practical Completion to be issued, and it is clear (and must have been clear to the Independent Certifier if it had addressed the matter) that no such licence was obtained. For that reason also, I would hold that the Independent Certifier did not undertake the task required for the issue of the Certificate of Practical Completion, and the certificate purportedly issued was invalid.

93 For those reasons, I would hold that Practical Completion did not occur by 31 December 2004.

94 I will now consider some particular submissions.

Application of Definition

95 Mr. Newlinds SC for the appellants submitted that the definition did not apply to cl.35.2, that is, did not apply to the question whether Practical Completion was achieved by 31 December 2004, because the context otherwise required. This, he submitted, was because it would have been impossible to obtain a POPE Licence until after the fitout was completed, and because it would have made Practical Completion subject to doing things required by cl.42.3(g) that only had to be done after Practical Completion.

96 I will deal later with the POPE Licence. Suffice it to say here that terms of the contract, including cls.42.3(f) and 42.1(e)(vii), make it clear that the parties manifested an understanding that a POPE Licence could be obtained at about the time that the base works were completed.

97 As regards cl.42.3(g), in my opinion it is clear that the words “subject to cl.42.3” in the definition of Practical Completion would only make Practical Completion subject to those requirements of cl.42.3 that had to be performed prior to Practical Completion, not those that had to be performed after Practical Completion.

98 In my opinion, the whole point of the definition of Practical Completion is to give certainty in relation to clauses such as cl.35.2. Mr. Newlinds was unable to point to any provision of the contract to which the definition sensibly applied, if it did not apply to cl.35.2.

Inconsistent Provisions Concerning Notice

99 Mr. Newlinds submitted that cl.42.3(a)(i) and cl.1.21(b) contained inconsistent provisions about notice, and that therefore the parties could not have intended compliance with both to be a necessary pre-condition of Practical Completion.

100 Mr. Walker SC for Roche submitted that the provisions were not inconsistent, that both could and should have been complied with, and that in fact neither was complied with.

101 In my opinion, the preferable view is that the requirements of cl.1.21(b) prevailed over those of cl.42.3(a)(i), because Part C is expressed as prevailing over inconsistent provisions. Whether or not cl.42.3(a)(i) is regarded as inconsistent with cl.1.21, plainly cl.1.21(b) had to be complied with, and it was not. An Independent Certifier giving reasonable attention to the question could not have concluded otherwise.

Compliance Reports

102 “Compliance Reports” is defined in the Development Contract to mean “reports to be provided by the Developer to LPRT pursuant to cl.4.16(f)(i) of the Agreement for Lease”, that is, the agreement of 23 December 2002 referred to at the commencement of my outline of the circumstances of this case. That provision was in the following:

(f) Metro must:
(i) during the carrying out of the Luna Park Works provide certificates to the Landlord that Metro and LPS are complying with the undertakings in this clause 4.16 and the environmental management plan referred to in clause 4.1(a)(iv) and approved by the Landlord. A certificate must be provided within 6 months from the commencement of the Luna Park Works and at 6 monthly intervals thereafter

103 The finding of the primary judge was that the monthly written reports to LPRT did not satisfy this requirement of cl.42.3(f)(i), because they did not certify compliance with cl.4.16 of the Agreement for Lease; that certain oral reports could not do so; and that a letter dated 16 March 2004 to LPRT enclosing a letter from Multiplex confirming that the requirements of cl.4.16 had been satisfied did not do so.

104 Mr. Newlinds submitted that it could not have been intended that failure to provide one of these reports within the times required would mean that it was forever impossible to achieve Practical Completion. Mr. Walker submitted that the requirement was clear, and was plainly not complied with.

105 In my opinion, it is arguable that cl.42.3(f)(i) does not require that the reports must have been delivered strictly at the times required by the Agreement for Lease, but required rather that by the time of Practical Completion there must have been delivered reports that appropriately certified to LPRT that the requirements of cl.4.16 had been complied with. If, as I am inclined to believe, the question is whether the Independent Certifier has appropriately addressed the question, and the presumption of regularity is applicable, I would not infer that the Independent Certifier did not appropriately address this question.

Development Consent

106 Mr. Walker submitted that the primary judge was correct to hold that there was no complying Development Consent, because the operating hours permitted by the consent that was given were significantly less than required under Roche’s Project Requirements, which were incorporated into the definition of “Works”.

107 However, the relevant part of Roche’s Project Requirements was that entitled Acoustic Design Criteria, which was introduced by words indicating that it presented “the acoustic design parameters”. It then stated “the proposed opening hours for the brasserie”.

108 In my opinion, it is strongly arguable that this did not make those hours a requirement of the Development Consent, such as would prevent the Development Consent being adequate for Practical Completion. On the basis that it would be sufficient for an Independent Certifier to appropriately address this issue with a view to ensuring compliance, I would not hold that a presumption of regularity was displaced on this matter.

POPE Licence

109 There were detailed submissions concerning the effect of legislation concerning POPE Licences, and there was evidence that, in the experience of witnesses in the case, POPE Licences were not issued prior to completion of a fitout of premises.

110 However, in my opinion it is plain, as held by the primary judge, that there is nothing in the relevant provisions of the Local Government Act 1993 (ss.68, 89, 94 and 95) or the Local Government (Approval) Regulation 1999 (Regs.7-9) that would prevent the grant of a conditional licence when a building was at lock-up stage. In my opinion also, the experience of witnesses is insufficient to affect the plain manifestation of the understanding of the parties to the contract that the POPE Licence could be obtained at about the time the building was at lock-up stage, referred to earlier.

ISSUE 3: VALIDITY OF APPOINTMENT OF INDEPENDENT CERTIFIER

111 No document amending the Independent Certifiers Deed or otherwise appointing an Independent Certifier for the purposes of the Development Contract was executed until about 30 December 2004, by which time the parties to the Independent Certifiers Deed and Roche had executed a document entitled “Deed of Variation of Independent Certifiers Deed”, which contained the following recitals and operative clauses:

Recitals
A. The parties (other than Roche) have entered into the IC Deed.
B. The parties and Roche have: agreed to enter into this Deed for the purpose of Roche agreeing to be bound by the IC Deed in relation to the matters required to be certified by the Independent Certifier under the Waterfront Brasserie Development Contract.

1. Interpretation
1.1 Definitions
In this Deed:
"IC Deed" means the Independent Certifiers Deed dated 27 June 2003 between the parties to this Deed (other than Roche).
"Waterfront Brasserie Development Contract" means the development contract dated 26 September 2003 between the Developer, Roche and others.

2. Roche bound by IC Deed
The parties agree that the IC Deed is varied so that, and Roche agrees that, Roche is bound by the IC Deed to the intent and effect that certification by the Independent Certifier of the matters required to be certified by the Independent Certifier under the Waterfront Brasserie Development Contract will be binding on Roche and the other parties to the Waterfront Brasserie Development Contract.

3. Counterparts
This Deed may be executed in any number of counterparts and all of those counterparts taken together constitute one and the same instrument.

112 The primary judge held that Practical Completion was not achieved because, at the time the certificates were given, an Independent Certifier had not been appointed for the Development Contract; and that subsequent entry into the amending deed could not rectify the situation. He also rejected a contention of the appellants’ that this issue was not open to be litigated.

Sub-Issue 3(a): Was This Issue Open?

113 The proceedings were brought in the Commercial List; and the relevant “Further Amended Cross-Claim Statement” put on by the appellants purported to comply with Practice Note SC Eq 3, pars.8-11 of which (made applicable to cross-claims by pars.12 and 13) provide:

8. A matter in the Lists shall be commenced in the general form of Summons prescribed under the UCPR. There is to be filed with the Summons a List Statement, for the Commercial List a "Commercial List Statement" and for the Technology and Construction List a "Technology and Construction List Statement", setting out, in summary form, in the form of Annexure 1:

· the nature of the dispute;

· the issues which the plaintiff believes are likely to arise;

· the plaintiff's contentions;

· the questions (if any) the plaintiff considers are appropriate to be referred to a referee for inquiry and report; and

· a statement as to whether the parties have attempted to mediate and whether the plaintiff is willing to proceed to mediation at an appropriate time.

9. The plaintiff's contentions should:

· avoid formality;

· state the allegations the plaintiff makes with adequate particulars; and

· identify the legal grounds for the relief claimed.

10. A defendant shall file and serve a List Response, in the Commercial List a "Commercial List Response" or in the Technology and Construction List a "Technology and Construction List Response", setting out, in summary form in the form of Annexure 1:

· the nature of the dispute;

· the issues which the defendant believes are likely to arise;

· the defendant's response to the plaintiff's contentions including the legal grounds for opposition to the relief claimed in the Summons;

· the questions (if any) the defendant considers are appropriate to be referred to a referee for inquiry and report; and

· a statement as to whether the parties have attempted to mediate and whether the defendant is willing to proceed to mediation at an appropriate time.

11. The defendant's contentions should:

· avoid formality;

· admit or deny the allegations the plaintiff makes;

· in so far as they do not already appear state the allegations the defendant makes including adequate particulars of those allegations; and

· identify the legal grounds for opposition to the relief claimed in the Summons.

114 The relevant allegations by the appellants were in part of par.40 and in par.42 of the relevant Statement:

Satisfaction of the Conditions Precedent by 31 December 2004
40. By 31 December 2004 (the "Sunset Date") the conditions precedent of the Development Contract pleaded at paragraphs 6(a), the Fitout Deed pleaded at paragraph 8(a) and the Waterfront Brasserie Sublease pleaded at 8B(a) were satisfied

…
In respect of the conditions precedent as set out in clause 2A(a)(v) of the Development Contract and clause 1A(a)(iv) of the Waterfront Brassiere Sublease:


Deed of Variation of Independent Certifiers Deed Luna Park executed by LPRT provided to Roche's solicitors under cover of letter dated 24 December 2004 from Clayton Utz to Lane & Lane.

Deed of Variation of Independent Certifiers Deed executed by Roche provided to the Developer's solicitors under cover of letter dated 30 December 2004 from Lane & Lane to Clayton Utz.

Deed of Variation of Independent Certifiers Deed Luna Park executed by Incoll Management Pty Limited provided to Roche's solicitors under cover of letter dated 24 December 2004 from Clayton Utz to Lane & Lane.

Deed of Variation of Independent Certifiers Deed executed by BOS International (Australia) Limited provided to Roche's solicitors under cover of letter dated 24 December 2004 from Clayton Utz to Lane & Lane.

Deed of Variation of Independent Certifiers Deed Luna Park executed by the Developer, Multiplex Limited, LPS and Multiplex Investments Limited provided to Roche's solicitors under cover of letter dated 24 December 2004 from Clayton Utz to Lane & Lane.


…
Repudiation of the Development Contract by Roche
41. On and about 31 August 2004, the Fitout Approvals (as defined under the Fitout Deed) were provided to Roche.
…

42. On 8 November 2004 the Building Works achieved Practical Completion (as defined under clause 2, clause 42.3 and clause 1.21 of the Development Contract).
Particulars
Certificate of Practical Completion issued on 17 November 2004 to the Developer and Roche.

115 The respondents’ Response contained the following relevant material in pars.26 and 28:

26. Denies paragraph C40.
Particulars

(i) The condition precedent in clause 2A(a)(ii) of the Development Contract and clause 1A(a)(ii) of the Agreement for Sublease was not satisfied by the letter dated 24 December 2004 from Minter Ellison to Clayton Utz because it is neither a consent to nor a waiver of the requirement for its consent to the relevant documents by the financier.

(ii) The condition precedent in clause 1A(a)(iii) of the Agreement for Sublease was not satisfied by the Consent to Sublease provided to Roche’s solicitor on 24 December 2004 because:

· it was not a consent to the Agreement for Sublease; and

· it was not consent by the Minister responsible for the administration of the Crown Lands Act 1989, it being signed by only one of the 4 such Ministers.

…
28. Denies paragraph C42 and, in further answer, relies on the matters pleaded in paragraphs 9B and 18E to 18M of the Statement (to Second Further Amended Summons).

116 The paragraphs 9B and 18E to 18M referred to in par.28 were as follows:

9B. Achievement of Practical Completion required, inter alia:
(a) an initial inspection of the Works by the Independent Certifier, the Developer, LPS, Roche, the D&C Contractor and LPRT to have taken place at an agreed time within 5 Business Days from the date of the notice issued by the Developer under clause 42.3(a)(i) (clause 42.3(a)(i)
(b) all Compliance Reports to have been delivered to LPRT (clause 2.3(f)(iii))
(c) copies of all necessary Approvals issued by the Consent Authority permitting use and occupation of the Site including a Compliance Certificate and an Occupation Certificate to have been delivered to Roche (clause 42.3(f)(iv))
(d) copies of all other consents required of any relevant Authority whose consent is required for the use of each relevant part of the Works to have been delivered to Roche (clause 42.3(f)(v))
(e) that it occur simultaneously with Practical Completion of the Luna Park Works (excluding the Works) and the Car Park Works (definition of Practical Completion; clause 1.21(a) of Annexure Part C)
(f) the Developer to have given Roche 40 Business Days written notice of the date on which the Developer estimates the Works will reach Practical Completion (estimated date for PC) (definition of Practical Completion; clause 1.21(b) of Annexure Part C)
(g) no earlier than the estimated date for PC, the Independent Certifier, Roche, the Developer and LPRT to have jointly inspected the Works at a mutually convenient time (definition of Practical Completion; clause 1.21(d) of Annexure Part C)
(h) the Independent Certifier to have, after the joint inspection certified:

· the Works as having been completed (definition of Practical Completion); and

· the Date of Practical Completion in a notice given to the Developer under clause 1.21(e) (definition of Practical Completion; clause 1.21(i) of Annexure Part C).

18E. Practical Completion of the Luna Park Works (excluding the Works) and the Car Park Works occurred on 31 March 2004.
18F. The date of the notice issued by the Developer under clause 42.3(a)(i) was 25 October 2004
18G. An initial inspection of the Works by the Independent Certifier, the Developer, LPS, Roche, the D&C Contractor and LPRT did not take place at an agreed time within 5 Business Days from 25 October 2004.

18H. All Compliance Reports were not delivered to LPRT.
181. No Compliance Certificate or Occupation Certificate issued by North Sydney Council or Sydney Harbour Foreshore Authority permitting use and occupation of the Site was delivered to Roche.
18J. A consent of either North Sydney Council or Sydney Harbour Foreshore Authority for the use of the Site as a place of public entertainment (POPE Licence) is required under s68 of the Local Government Act 1993.
18K. No POPE Licence was delivered to Roche.
18L. The Developer did not, prior to 31 December 2004, give Roche 40 Business Days written notice of the date on which the Developer estimates the Works will reach Practical Completion and consequently:
(a) the Independent Certifier, Roche, the Developer and LPRT did not jointly inspect the Works at a mutually convenient time not earlier than such date; and
(b) the Independent Certifier did not, after the joint inspection, certify:

· the Works as having been completed; and

· the Date of Practical Completion in a notice given to the Developer under clause 1.21(e).

18M. In the circumstances set out in paragraphs 18E - 18L, the Developer failed to achieve Practical Completion by 31 December 2004.
PARTICULARS
The requirements set out in paragraph 9B were not satisfied.

117 The appellants’ submissions to the primary judge were to the effect that the respondents’ Response did not, as required by the Practice Note, identify the relevant legal ground for opposition to relief claimed by the appellants, namely that the Certificate of Practical Completion of 17 November 2004 could not be valid because the Independent Certifiers Deed was not amended until 30 December 2004, and the Independent Certifier had no other authority to give such a certificate; that the appellants were take by surprise by that submission; that the appellants had not answered the respondents’ denial of Practical Completion, as they could have, by raising the issue that Roche was seeking to rely on its own breach of the Development Contract, namely not co-operating (as required by the principle in Mackay v. Dick (1881) 6 App Cas 251) to achieve the requirement of cl.2A(a)(v); and that the appellants had not put on evidence in relation to the matter and had not cross-examined Mr. Roche.

118 The respondents’ submission was that the appellants had alleged there was a Certificate of Practical Completion and the respondents had denied this, squarely raising the issue.

119 The primary judge did not rule on this matter before giving his judgment in the case; and when he did so, his reasons simply reflected the respondents’ submissions, and did not address the submissions of the appellants.

120 Before this Court, Mr. Newlinds made the same submission for the appellants; and he also submitted that, because the primary judge did not rule on the question before giving judgment, the appellants did not have the opportunity to seek to amend their pleadings by alleging that Roche was precluded from relying on something brought about by its own breach of contract. He submitted that this contention was supported by a course of correspondence that was in evidence, and may have been assisted by further evidence and cross-examination if Roche had not been taken by surprise.

121 Mr. Walker submitted that the matter was sufficiently raised by the respondents’ pleadings; and that in any event, the appellants had ample time after the point had been raised before the primary judge to advance a fall-back position, in case the primary judge decided the issue was available, by relying on the evidence that was relied on in the Court of Appeal and/or seeking an adjournment to put on more evidence, and the appellants elected not to do so.

122 In my opinion it would have been desirable for the primary judge to have made a ruling, before the hearing of the case concluded, as to whether the point was open to be argued, because it would then have been clear to the appellants that they needed to take steps to rely on the argument that Roche was seeking to take advantage of its own breach of contract (the Mackay v. Dick point). There is some force in Mr. Walker’s submission that, in circumstances where the primary judge had not decided that the point was not open, the appellants should have advanced a fall-back position; but by the same token, Roche also did not advance a fall-back position by seeking to amend its pleadings so as to put its ability to rely on this point beyond doubt.

123 On the question whether the decision made by the primary judge made by the primary judge in his final judgment is appealably wrong, it seems to me that this decision is reviewable, because of its failure to make any reference to the appellants’ submissions on the matter. The circumstance that an issue may be formally encompassed in a broad denial is not sufficient to dispose of a well-supported argument that more specific allegations were necessary to show that the point was really being contested, so that the requirements of the Practice Note were not complied with, and the general principle of pleading requiring the avoidance of surprise was not complied with. Had the primary judge addressed that argument, and given reasons for rejecting it, his decision would have had the protection of House v. The King (1936) 55 CLR 499; but in circumstances where the primary judge did not consider the argument at all, in my opinion there is a deficiency of reasons that justifies this Court deciding the question for itself.

124 In my opinion, Roche’s pleadings did not comply with the Practice Note, or with the principle that surprise is to be avoided, if they were to raise the issue that the Independent Certifier was not appointed at the time of the Certificate of Practical Completion, and that the later appointment did not cure this. By the reference in the paragraph making the relevant denial to the other Statement, the respondents gave detailed particulars of why they said the Certificate of Practical Completion did not establish Practical Completion, which particulars did not include this point, being a point to which a Mackay v. Dick answer was at least arguable. As the pleadings stood, in my opinion the appellants could not have been expected to have responded to the respondents’ Response by alleging that Roche was precluded from relying on this point because it would be relying on its own breach of contract; and that is plainly an issue that would need to be signalled in advance of the hearing for it to be properly addressed at the hearing.

125 Accordingly, in my opinion Roche needed an amendment or leave if it was to be able to rely on the contention that the Certificate of Practical Completion was not valid because the Independent Certifiers Deed was not amended until 30 December 2004; and the primary judge was in error in not deciding that issue without considering whether such amendment or leave should be granted, and if so on what conditions as to matters such as the availability of a Mackay v. Dick response (and perhaps other possible responses based on an oral agreement and/or estoppel) and whether an opportunity should be given for further evidence and/or cross-examination on these issues.

Sub-Issue 3(b): Was the Independent Certifier Validly Appointed?

126 The primary judge’s decision was to the effect that the Independent Certifier had no authority to issue the Certificate of Practical Completion until his appointment by the Amending Deed of 30 December 2004; and also (it seems) that until that Amending Deed was made, the Conditions Precedent in cl.2A of the Development Contract had not been satisfied so that all obligations under the Development Contract remained suspended.

127 In my opinion, if one leaves aside altogether the appellants’ possible Mackay v. Dick response and other possible responses based on an oral agreement and/or estoppel, this decision was correct. However, in my opinion the material relied on in this Court by Mr. Newlinds shows that there is at least an arguable case for a Mackay v. Dick response, and that there may well be an arguable case based on an oral agreement and/or estoppel. Mr Newlinds has contended that this Court should decide that the appellants did have a valid answer to this part of the case, on one or all of these bases. However, these issues were not properly joined and contested below, and in my opinion it is not possible for this Court to decide them.

128 On the resolution of the issues in the case by the Court of Appeal, as they stand, all this makes no difference to the result. However, if as a result of a High Court appeal, this particular point was the only thing that stood between the appellants and some success in the proceedings, in my opinion there would, in that event only, need to be a new trial of these issues.

ISSUE 4: RESCISSION OF AGREEMENT FOR SUBLEASE

129 This issue arises in this way.

130 The respondents contended that cl.1A of the Agreement for Sublease meant that it was automatically rescinded after 31 December 2003, unless before then Metro notified Roche of a later date; and although Metro did notify Roche of a later date for the purposes of cl.2A of the Development Contract, it did not do so for the purposes of cl.1A of the Agreement for Sublease.

131 The consequence of this, according to the respondents, was that the appellants were not entitled to performance of the Development Contract and the Fitout Deed, even if all other grounds relied on by the respondents failed: in particular, payment of the Contract Sum under cl.42.1 of the Development Contract was conditional, among other things, on the grant of the Sublease (cl.42.1(e)(v)).

132 The appellants contended that the primary judge should not have entertained this issue, because it was not litigated at the first hearing before the primary judge, was not referred back to the primary judge by the first Court of Appeal decision, and did not arise out of matters occurring after the first hearing before the primary judge.

Issue 4(a): Was this Issue Open to be Litigated?

133 In my opinion, in relation to the issue identified as issue 4(a), it is clear that it was open to the primary judge to allow this matter to be litigated. Among the matters referred by the Court of Appeal back to the Equity Division was the general question of specific performance of the Development Contract, and this matter concerning the Agreement for Sublease was plainly relevant to the question of specific performance. There being no final order on any aspect of the case, I see no basis for application of the Anshun principle, and I see no reason why the usual approach to questions of amendment should not apply.

Issue 4(b): Was the Agreement for Lease Rescinded?

134 Turning to the issue identified as issue 4(b), it seems clear that cl.1A of the Agreement for Sublease provided for some different Conditions Precedent from those provided by cl.2A of the Development Contract; and there were different parties to the two agreements; so that it does seem clear that notice given under cl.2A of the Development Contract would not, without more, operate as a notice under cl.1A of the Agreement for Sublease.

135 Mr. Newlinds submitted that the obligation on Roche in the Development Contract to perform its obligations under the Agreement for Sublease remained, even if the Agreement for Sublease itself was automatically rescinded. In my opinion, that obligation could only extend to those obligations that Roche truly had under the Agreement for Sublease, which would be nil once the Agreement for Sublease had been automatically rescinded.

136 I do see one problem with a declaration made by the primary judge, which was not pressed by any of the parties to the appeal, namely that one of the parties to the Agreement for Sublease, LPS, was not a party to these proceedings. However, the automatic rescission of an agreement whereby LPS was to sublease property to Roche for forty years for a rent of $1 would not seem detrimental to LPS; and in circumstances where this point was not pressed by any of the parties, I would not uphold the appeal on this basis.

ISSUE 5: GUARANTEE OF ROCHE BROTHERS

137 The contention of the appellants was that, by reason of cls.6(b), 6(d) and 6(i) of the Development Contract, the Guarantors had obligations to Metro which continued to exist even if the Development Contract was automatically rescinded, or else terminated because of failure to achieve Practical Completion by 31 December 2004. Further, the appellants contended that, in so far as the primary judge found that the effect of automatic rescission was as if the contract never existed, he was in error.

138 It was not suggested that Metro had any claim against Roche based on alleged breaches of the Development Contract prior to automatic rescission as from 31 March 2004, or prior to termination as from 31 December 2004 or early January 2005; so in so far as these submissions are based on there being some such liability in Roche, they are purely academic. In any event, in my opinion automatic rescission would discharge all parties, including the Guarantors. There could be other considerations if automatic rescission did not occur, and the discharge of the Development Contract was due to termination after 31 December 2004.

139 In so far as the appellants have submitted that the Guarantors have some liability to Metro beyond any liability that Roche may have, in my opinion such submissions should be rejected. The indemnity in cl.6(b) is against losses consequential on breach or non-observance of covenants by Roche; the primary liability in cl.6(d) is only for amounts otherwise owing under the guarantee; and cl.6(i) only prevents discharge of some liability that otherwise exists.

140 No ground is made out for disturbing any orders of the primary judge, and I see no occasion to express disagreement with his reasons.

ISSUE 6: GUARANTEE OF ROCHE PARENTS

141 One issue not addressed by the primary judge was a question whether the Roche parents could be liable under their guarantee, if it were to be found that, by reason of estoppel and election, the Development Contract was not automatically rescinded after 31 March 2004.

142 No order was made against the Roche parents, so the question does not directly arise on this appeal. However, it does arise indirectly, because of the cross-appeal by the Roche parents on the question of costs; and in my opinion, it is convenient for this Court to address it, in case it becomes relevant because of a subsequent decision of an appeal that might be taken to the High Court.

143 There is no suggestion by the appellants below or before the Court of Appeal that the Roche parents did anything that could give rise to an estoppel against them: in substance, the appellants’ contention was to the effect that, if the Development Contract continued in existence because of an estoppel operating against Roche, then the Roche parents’ guarantee of Roche’s obligations would stand.

144 Mr. Kunc, for the Roche parents, submitted that, on automatic rescission of the Development Contract, the parties including the Roche parents were discharged. Any estoppel created by the conduct of Roche and/or the Roche brothers could mean that Roche was bound to give effect to the contract, and that the Roche brothers were bound by their guarantee; but it could not bind the Roche parents. Mr. Kunc referred to Amalgamated Investment & Property Co. Limited v. Texas Commerce International Bank Limited [1982] QB 84 at 122, 126 and 131, for the proposition that guarantors could be estopped by reason of their conduct; and to Coghlan v. S.H. Lock (Australia) Limited (1985) 4 NSWLR 158, for the proposition that, in the case of conventional estoppel, a party was not estopped unless it did something to induce the relevant assumption.

145 In my opinion, Mr. Kunc’s submission should be accepted. The effect of the estoppel on Roche does not mean that, as against parties not affected by the estoppel, the contract continues to exist: the contract would continue to exist, or to be efficacious, only against those parties affected by the estoppel. The Roche parents, having done nothing to induce the relevant assumption, would not be affected.

ISSUE 7: COSTS OF ROCHE PARENTS

146 On 20 September 2006, the primary judge held that no reasonable basis had been demonstrated for separate representation of the Roche parents, upholding a submission of the appellants that the only distinction between the positions of the Roche brothers and the Roche parents was the availability of a further fall-back position to the Roche parents, and that there was no conflict of interests between them.

147 Mr. Kunc submitted that there was a potential conflict of interests, because it was in the interests of the Roche brothers, if they were liable under their guarantee, that the Roche parents should also be liable under their guarantee, so that the Roche brothers could get contribution from them; and Mr. Kunc referred to Nangus Pty. Limited v. Charles Donovan Pty. Limited [1989] VR 184 at 185-6.

148 Mr. Newlinds submitted that it was unrealistic to think there was a conflict of interests, in that the Roche brothers would be disappointed by losing the prospect of obtaining contribution from their parents; and he pointed out that there was no cross-claim for contribution in the proceedings.

149 In my opinion, the absence of a cross-claim does not exclude the possibility of a claim being made for contribution; and the issue of contribution means that the primary judge was not correct to say there was no conflict of interests. So this is a question on which this Court can and should make its own decision.

150 If the previous decision of the Court of Appeal stood, the only way that Metro could succeed in the proceedings was to establish estoppel; and if that happened, the question of whether or not the Roche brothers could get contribution from the Roche parents could involve very substantial amounts of money. Even if the members of this family were on good terms, in my opinion there was here a sufficient potential for a real conflict of interests to justify separate representation, and in my opinion the appellants should pay the costs of the Roche parents.

CONCLUSION

151 In the result, the appellants’ appeal should be dismissed with costs. The appeal of Roche and the Roche brothers should be dismissed with costs; but I would note that these costs would be limited to costs that would not otherwise have been incurred. The appeal of the Roche parents should be allowed with costs, and there should be an order made for their costs below.

152 Accordingly, I propose the following orders:

1. Appellants’ appeal dismissed with costs.
2. Appeal of Roche and the Roche brothers dismissed with costs.
3. Appeal of the Roche parents allowed.
4. Order that the appellants pay the costs of the appeal of the Roche parents, and that they have a certificate under the Suitors’ Fund Act if otherwise eligible.
5. The costs order below relating to the Roche parents set aside, and in lieu thereof order that the appellants pay the costs of the Roche parents of the proceedings from 7 August 2006.

153 CAMPBELL JA: I would prefer to reserve for further consideration the appropriateness of applying a presumption of regularity to the procedures adopted in the working through of private contracts, in litigation where the issue relates to whether procedures of that type have been correctly carried through. Subject to that, I agree with the reasons of Hodgson JA, and the orders he proposes.”

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