MK and JA Roche Pty Limited v Metro Edgley Pty Limited - [2004] NSWSC 744

No judgment structure available for this case.

CITATION: MK and JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2004] NSWSC 744 revised - 27/08/2004

HEARING DATE(S): 9/08/04, 10/08/04, 11/08/04, 12/08/04

JUDGMENT DATE:
18 August 2004

JURISDICTION:
Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Parties to bring in short minutes of order.

CATCHWORDS: Contract - Construction - Proper construction of automatic rescission clause in Contract - Avoidance/Affirmation of Contract - Notification of avoidance of Contract - Waiver of rights to avoid Contract - Notification of extension of time for satisfaction of conditions precedent to Contract

LEGISLATION CITED: Crown Lands Act 1989 (NSW)

CASES CITED: Borda v Burgess [2003] NSWSC 1171
Gange v Sullivan (1966) 116 CLR 418
New Zealand Shipping Co Ltd v Societe` des Ateliers et Chantiers de France [1919] AC 1
Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568
Sargent v ASL Developments Limited [1974] 131 CLR 634
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153
Suttor v Gundowda (1950) 81 CLR 418
Tri-Continental Corporation Limited v HDFI Limited (1990) 21 NSWLR 689

PARTIES :
MK & JA Roche Pty Limited (ABN 25 076 529 952) (First Plaintiff)
Michael Kevin Roche, Christopher John Roche, William Timothy Roche, Kevin Michael Roche, Gabrielle Mary Roche (Second Plaintiff)
Metro Edgley Pty Limited (ABN 37 082 440 042) (First Defendant)
Multiplex Limited (formerly Multiplex Constructions Pty Limited (ACN 008 687 063) (Second Defendant)

FILE NUMBER(S): SC 50069/04

COUNSEL: Mr DJ Hammerschlag SC, Mr VF Kerr (Plaintiffs)
Mr CR Newlinds SC, Ms RS Francois (Defendants)

SOLICITORS: Lane & Lane (Plaintiffs)
Clayton Utz (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 18 August 2004

50069/04 MK and JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor

JUDGMENT

The proceedings

1 These proceedings concern a suite of inter related contracts including two contracts dated 26 September 2003 namely:

· a contract entitled "Waterfront Brasserie Development Contract, Luna Park" ["the Development Contract"];

· a contract entitled "Liquor Licence and Fitout works deed of agreement Waterfront Brasserie Luna Park" ["the Fitout Deed"].

2 The first plaintiff MK and JA Roche Pty Ltd ["Roche"] [which is in the business of establishing and managing hospitality facilities in Sydney] and the second defendants, Messrs MK Roche, CJ Roche, WT Roche, KM Roche and Ms G M Roche ["the Guarantors"] entered into the Development Contract with the first defendant, Metro Edgley Pty Ltd ["Metro Edgley" or “the Developer”] and the second defendant Multiplex Ltd [formerly Multiplex Constructions Pty Ltd] ["Multiplex"].

3 The parties to the Fitout Deed were Roche, the Guarantors and Metro Edgley.

The Waterfront Brasserie

4 The Waterfront Brasserie was a 3 storey building to be constructed immediately inside the entrance to the Luna Park complex, on the south east side facing out to the Harbour Bridge and the Opera House, alongside the public boardwalk.

The background

5 The commercial and proposed contractual background was as follows:

· The Luna Park Reserve Trust [“LPRT”] [established under S.92 of the Crown Lands Act 1989 (NSW)] had [in December 2002] entered into a Deed of Agreement for Lease and Sublease of the Luna Park Reserve with Luna Park Sydney Pty Limited [“LPS”] and Metro Edgley;

· The Multiplex group had a 50 per cent shareholding in LPS, Multiplex Limited being the ultimate holding company of Metro Edgley;

· The Deed of Agreement for Lease and Sublease was to provide that Metro Edgley would develop, and subsequently manage, Luna Park and that at the completion of the development, LPRT will grant a lease of the site to LPS for a forty year term;

· Included within Metro Edgley's proposed development was the construction of a bar and brasserie, to be known as the Waterfront Brasserie, on part of the Luna Park site;

· Metro Edgley was to design, construct and finance the erection of the Waterfront Brasserie and was to obtain a liquor licence in accordance with Roche’s requirements;

· Once the works were completed Roche was to fitout the Waterfront Brasserie;

· Metro Edgley was to obtain a Place of Public Entertainment Licence [which is a permit for the maximum capacity and use of the premises] for the Waterfront Brasserie with the assistance of Roche;

· Once these matters had been completed Metro Edgley was to direct LPS to grant a forty-year lease of the Waterfront Brasserie to Roche.

The material documents

6 Since 21 August 2002 the material documents being prepared and/or executed have relevantly included:

· The Deed of Agreement for Lease and Sublease entered into on 23 December 2002 between Luna Park Sydney Pty Limited ("LPS"), Luna Park Reserve Trust ("LPRT") and the Developer;

· The Deed of Agreement for Waterfront Brasserie Sublease entered into on 26 September 2003 between Roche, the Developer and the Guarantor ["Agreement to Sublease"].

· The Development Contract;

· The Fitout Deed;

· The Deed of Consent to the Waterfront Brasserie Sublease to be entered into by LPRT;

· An Independent Certifier's Deed, a Deed amending the Independent Certifier's Deed and a Deed of Assignment and Variation of the Independent Certifier's Deed. [Affidavit of Ms Bailey 9 July 2004]

Relevant provisions of the Development Contract

7 Clause 1 (PX148) provides that “…the General Conditions of Contract including all annexures” will form and be read and construed as part of this Contract.

8 The General Conditions of Contract which are annexed embody a construction contract under which the Developer will build the works of which Roche would ultimately be the sublessee.

The conditions precedent

9 It was a term of the Development Contract that the obligations of the parties under the Development Contract (other than clause 2A itself) were conditional on satisfaction of certain conditions precedent, including the execution of the following instruments:

· Luna Park Reserve Trust (LPRT) executing the Deed of Consent to Waterfront Brasserie Sublease (clause 2A(a)(i));

· BOS International Australia limited (Financier) either granting its consent to, or waiving the need for its consent to, certain transaction documents (clause 2A(a)(ii));

· Luna Park Sydney Pty Limited (LPS), Metro Edgley, Roche and the Guarantors executing the Agreement for Waterfront Brasserie Sublease (clause 2A(a)(iii));

· the rescission of the Development Agreement between Metro Edgley and Multiplex Investments Limited dated on or about 26 June 2003 (clause 2A(a)(iv));

· the parties to the Independent Certifier’s Deed (as defined) and Roche entering into a deed amending the Independent Certifier’s Deed whereby Roche agreed to be bound by the Independent Certifier’s Deed (clause 2A(a)(v));

· LPRT and LPS providing a waiver in respect of their rights to the Roche Fitout (as defined) during the term of the Second Mortgage (as defined) and a consent (if necessary) to the Second Mortgage, on terms satisfactory to Metro Edgley (clause 2A(a)(vi)).

The automatic rescission provision

10 Clause 2A(b) of the General Conditions of Contract provided as follows:

Roche’s obligation to provide information

11 Clause 2A(c) was in the following terms:

Waiver of conditions

12 Clause 48 provides:

Except as provided at law or in equity or elsewhere in the Contract, none of the terms of the Contract shall be varied, waived, discharged or released, except with the prior consent in writing of Roche in each instance.

The deposit term

13 It was a term of the Development Contract that the deposit would be refunded to Roche “if Roche lawfully rescinds or terminates the Contract pursuant to a right of rescission or termination due to a default of the Developer, under the Contract” [clause 5(d)].

14 On or about 26 September 2003 Roche paid $2 million to Metro Edgley by way of deposit pursuant to clause 5 of the Development Contract.

Interest

15 It was a term of the Development Contract that interest at 4% above the bank bill rate of the Financier shall be payable on any moneys due by a party from, but excluding, the date upon which the moneys should have been paid to, and including, the date on which the moneys are paid, compounded at monthly intervals (clause 42.7).

Relevant provision of the Fitout Deed

16 The Fitout Deed provided inter alia;

“(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.”

17 It was a term of the Fitout Deed that if the Development Contract is rescinded then the Fitout Deed will be deemed to be rescinded (clause 13 of the Fitout Deed). The proposition put by Roche is that it follows that if the Development Contract has come to an end because of non-fulfilment of the conditions precedent thereto, the Fitout Deed suffers the same fate.

The partly executed Deed of Agreement for Waterfront Brasserie Sublease

18 The proposed Deed of Agreement for Waterfront Brasserie Sublease to Roche has its own conditions precedent in Clause 1A and a provision in the same terms as Clause 2A (b) of the Development Contract. The Agreement in which they are contained has not yet been executed by LPS.

19 This partly executed Deed of Agreement for Sublease also includes a number of conditions precedent reading as follows:

“Condition 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

(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 Drive).

The 18 December 2003 notified time extension

20 By notice in writing dated 18 December 2003 Metro Edgley notified Roche and the Guarantors that the date of 31 December 2003 referred to in clause 2A(b) of the Development Contract was extended to 31 March 2004.

Conditions precedent unfulfilled as at 31 March 2004

21 It is common ground that at 31 March 2004 the conditions precedent provided for in Clause 2A of the Development Contract were not fulfilled by the extended date namely 31 March 2004. In short:

· LPRT had not executed the Deed of Consent to Waterfront Brasserie Sublease;

· the Financier had neither granted its consent to, nor waived the need for its consent to, the relevant transaction documents;

· LPS had not executed the Agreement for Waterfront Brasserie Sublease;

· the Development Agreement between Metro Edgley and Multiplex Investments Limited dated on or about 26 June 2003 had not been rescinded;

· the parties to the Independent Certifier’s Deed and Roche had not entered into a deed amending the Independent Certifier’s Deed whereby Roche agreed to be bound by the Independent Certifier’s Deed;

· LPRT and LPS had not provided a waiver in respect of their rights to the Roche Fitout during the term of the Second Mortgage and had not provided a consent (if necessary) to the Second Mortgage, on terms satisfactory to Metro Edgley.

The issues

22 The proceedings concern the legal rights of the parties in terms of the proper construction of the Development Contract and in terms of what occurred after 31 March 2004.

23 In terms of a written communications between the parties concerning the status of the Development Contract the short position is as follows:

Letters of 21 May 2004 – Roche to Multiplex/Metro Edgley

· by letters generally in the same terms dated 21 May 2004 Roche wrote to Multiplex and to Metro Edgley referring to the terms of clause 2A of the Development Contract and to the terms of clause 1A of the Fitout Deed, and continuing:

“By letter dated 18 December 2003 Metro notified Roche and the guarantors that the date of 31 December 2003 referred to in clause 2A (b) of the Development Contract was extended to 31 March 2004. No further notice of extension of time was received prior to 31 March 2004 (or in fact to date).

Conditions 2A(a)(i), (iii) and (v) have not been fulfilled and, nor as far as Roche is aware, have conditions 2A(a) (ii), (iv) and (vi).

As the conditions precedent provided in clause 2A of the Development Contract were not fulfilled by the extended date, namely 31 March 2004, the Development Contract was rescinded at expiry of the deadline of 31 March 2004. Accordingly the Fitout Deed was also rescinded on that day. The Deed of Consent to Waterfront Brasserie Sublease and the annexed Deed of Agreement for Waterfront Brasserie Sublease have not yet been executed by Luna Park Reserve Trust or Luna Park Sydney and therefore have not come into existence. Even if this view is incorrect the provisions of clause 1A of the Deed of Agreement for Waterfront Brasserie Sublease, which are in similar terms to the terms of clause 2A of the Development Contract, also rescind the Deed of Agreement for Waterfront Brasserie Sublease.

Please return the deposit of $2million to Roche in accordance with clause 5(d) of the Development Contract within a reasonable time and, in any event, by 5.00pm on Friday, 4 June 2004.

Letter of 24 May 2004 – Metro Edgley to Roche

· By letter dated 24 May 2004 Metro Edgley wrote to Roche in the following terms:

“I refer to your letter dated 21 May 2004.

On 2 March 2004, well before 31 March 2004, you, Chris Roche, Bill Roche and your architect, attended a meeting at our offices with me, Raymond Yeo and Paul Boonzaaier, at which your architect tabled your fitout working plans for the Brasserie building.

At that meeting, prior to the consideration of your plans, we notified you orally that we were, by that oral notification, further extending the date in clause 2A(b) of the Development Contract until 30 June 2004. You, Chris Roche and Bill Roche in your personal capacities, as guarantors and representing MK & JA Roche Pty Ltd accepted that oral notification and agreed to it.

Accordingly, by your acceptance of and agreement to the oral notice that you were given and by your conduct you agreed to the extension and to waive the requirement that the notice be given in writing.

That agreement regarding the extension and waiver has been further confirmed by your conduct following the meeting. Since the meeting and after 31 March 2004 until as recently as the past week you have actively participated in the development of the Brasserie building. In this regard you have attended meetings and participated in regular telephone discussions about matters such as the application for development consent for your fitout, the Place of Public Entertainment Licence, your fitout design and the design of the building. You have also provided us with information in relation to the liquor licence application for the building. Your conduct clearly evidences your acceptance and agreement of the valid extension of the date in clause 2!(b) of the Development Contract and your agreement that it has been properly extended. On the basis of and in reliance on your conduct we have actively pursued the fulfilment of our obligations under the Development Contract and incurred considerable expense.

To the extent that it is necessary to give you written confirmation of the agreed extension (which I understand is not the case), this letter is written confirmation of the notice that was given to you on 2 March 2004 extending the date in clause 2A(b) of the Development Contract (as amended) to 30 June 2004.

For the reasons I have stated, the Development Contract and the Fit-Out Deed are both still on foot and we have every intention of complying with our obligations under them. We expect you to comply your obligations. Any endeavours on your part to avoid those agreements will be vigorously opposed.

Letter 25 May 2004 - Roche’s solicitor to Metro Edgley

· By letter dated 25 May 2004 Lane and Lanes the solicitors for Roche wrote to Metro Edgley in the following terms:

“I am instructed to reply to your letter of 24 May 2004.

My client maintains its position, set out in Roche’s letter of 21 May 2004, that the Development Contract and Fitout Deed have been automatically rescinded.

My client disputes the assertions of fact and law contained in your letter of 24 May 2004. In particular, my client denies that any conversation or discussion which might have constituted notification of an extension, or acceptance of such notification, took place as alleged or at all.

Nothing which my client has done or failed to do has had the consequence that the conditions precedent have been satisfied (or may be taken to have been) when, as a matter of fact, they clearly have not. None of its rights have been waived.

So far as the notice (you purport to give by way of your letter of 24 May 2003) is concerned, it is ineffective on the proper construction of the Development Contract and the Fitout Deed.

This letter is not to be taken as exhaustive and my client reserves its right to deal with all matters in the appropriate forum and at the appropriate time.

Letter of 1 June 2004 – Metro Edgley to Roche

· By letter dated 1 June 2004 Metro Edgley wrote to Roche as follows:

“WATERFRONT BRASSERIE DEVELOPMENT CONTRACT – EXTENSION OF CONDITIONS PRECEDENT SATISFACTION DATE

We refer to the Waterfront Brasserie Development Contract, Luna Park between Metro, Roche, the Guarantors and Multiplex dated 28 September 2003 (“Development Contract”).

We hereby notify Roche and the Guarantors that the date in clause 2A(b) of the Development Contract, which by a notice dated 18 December 2004 and by agreement on 2 March 2004 has been cumulatively extended from 31 December 2004 to 30 June 2004, is further extended to 30 September 2004.

Roche's submissions

24 Roche has submitted that:

· Clause 2A(b) provides that if the conditions are not satisfied by the relevant deadline the contract is deemed to be automatically rescinded.

· No notice to that effect is required for the rescission to be effective;

· A condition precedent is either performed or it is not. There is no doctrine of substantial performance of a condition precedent: Tri-Continental Corporation Limited v HDFI Limited (1990) 21 NSWLR 689 especially at 705D;

· It follows that if any one of the conditions precedent is not fully satisfied by the deadline, the agreement is at an end;

· Upon the proper construction of the Development Contract and the Fitout deed, Metro Edgley could not give notice extending the period for fulfilment of the conditions precedent after the expiry of the deadline;

· As at 18 December 2003 that deadline was 31 March 2004 and it was still the deadline at the end of the day on 31 March 2004 when the conditions precedent remained unsatisfied. That being the only deadline and the conditions not being satisfied, and the agreement providing for automatic termination, it came to an end.

· The competing construction would allow the Developer to give a subsequent notice extending the deadline after the applicable deadline had come and gone. It would have to be based on the argument that because the provision gives the Developer the right to notify on more than one occasion up to the Sunset Date, it can give such notice at any time up to the Sunset Date, irrespective of whether an earlier nominated deadline had passed without satisfaction of the conditions;

· That construction is untenable because the parties would be left in a state of uncertainty in effect giving the Developer an option to re-enliven an agreement which had terminated and would also make the earlier deadline notification meaningless. Put another way, it could nominate a deadline which would not be met and then later nominate another deadline after expiry of the first which means that its first nomination had no effect;

· Moreover the purpose of enabling more than one notice of extension was to allow such notices to be given so as to keep on extending the deadline whilst the provision (that is Clause 2A) was on foot.

The issues concerning the deposit

25 The defendants contend that even if the plaintiffs be successful the deposit is not repayable.

26 The plaintiffs have contended that the submission is untenable because:

· there has been a failure of consideration or condition;

· if there is no express term [which is the contention], then there is clearly an implied term that entitles a refund;

· retention of the deposit would be unconscionable and the defendants would be unjustly enriched if permitted to retain it.

Discharge of the guarantees

27 The plaintiffs contend that the principal obligation has been purportedly varied without the consent of the Guarantors so that they are not bound and their guarantees are discharged.

The central issues of fact

28 The central issues of fact concern whether or not Metro Edgley gave any and if so which notifications to the plaintiffs that the Clause 2A (b) date was further extended to 30 June 2004

29 The defendants/cross claimants contend for a series of alternatives. The convenient course is to recite a non-exhaustive overview of those alternatives in an Appendix “A” to the Judgment.

Dealing with the threshold question - The proper construction of clause 2A (b) of the Development Contract - Automatic rescission?

30 The threshold point taken by the defendants raises only issues of principle, the proposition being that notwithstanding the words "deemed to be automatically rescinded" appearing within clause 2A (b) of the Development Contract, upon the proper construction of that clause, Roche had an election to terminate or not to terminate the contract in the event that the conditions precedent be not fulfilled by the relevant date, or the relevant date as extended, and that no such election was never communicated by Roche to the developer.

31 Both parties addressed closely on the proper construction of this clause. The convenient course is to deal with this issue directly.

32 There is of course no doubt but that the meaning and effect of a contractual provision will depend on the particular words of the contract.

33 The area which falls for consideration presently has been the subject of consideration both in the United Kingdom and in Australia over a reasonably extended period.

34 In New Zealand Shipping Co Ltd v Societe` des Ateliers et Chantiers de France [1919] AC 1 Lord Atkinson [at 9] put the matter as follows:

35 Lord Finlay LC (at 6) said:

36 Lord Shaw (at 12) first of all emphasised that:

“??the conduct or situation of the party treating the contract as void shall not have been the means whereby the event which gives rise to the G condition has been brought about. What I have ventured last to express appears to me to be sound in principle and to be a better and broader expression of the principle than a reference to either party's own wrong or a party's own default, for without either definite wrong or default the action, or even the situation, of one of the parties may be sufficient to produce the condition.””

37 His Lordship then went on to observe (at 12-13) that:

38 Lord Wrenbury (at 15) summed up his view in this way:

39 In Suttor v Gundowda (1950) 81 CLR 418 Latham CJ, Williams and Fullagar JJ [at 441 having cited the above passage from the speech of Lord Atkinson put the matter as follows:

New Zealand Shipping

40 The conditions precedent provided for in clause 2A (a) of the Development Contract include events which may be brought about by failure on the part of either party to take particular steps or which may be brought about without any default on the part of either party.

41 Subject then to the overriding principle that every case must depend upon the particular words of the contract used it would appear that the reasoning adopted by Latham CJ, Williams and Fullagar JJ in Suttor would require to presently be applied in which event the so-called "automatic rescission" provision presently under examination would require to be construed as making the contract not void but voidable.

42 Concerning the overriding principle it should be noted that in Sandra Investments v Booth (1983) 153 CLR 153:

· Gibbs J made the point that it was trite that all cases of the type there before the court required to depend upon the particular words of the contract in question.

· Wilson J said:

Suttor v Gundowda

Gange v Sullivan”.

43 There has been made particular focus by both parties on the decision of the New South Wales Court of Appeal in Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568. Samuels JA with whose reasons Priestley and McHugh JJA agreed, expressed the view that in Suttor, Latham CJ, Williams and Fullagar JJ and had taken the principles enunciated or affirmed in New Zealand Shipping Company a step further:

New Zealand Shipping Co

Suttor

44 Samuels JA went on to distinguish the case there before the court:

“The Vendor shall apply for the consents referred to in cl 5 and shall C diligently pursue such applications and shall pay all costs and fees other than those of the Purchaser and its solicitor in respect thereof. The Purchaser and its nominee shall promptly join in any such application and all parties shall do all such acts and things sign such documents and furnish all such information and materials as shall be necessary to obtain such consents.”

Hence, in the present case the parties have stipulated details ignored in Suttor , and failure by the vendor to apply or the purchaser to co-operate might render the contract voidable. Here therefore there is express provision by which the contract might be avoided, not because the consents were not forthcoming, but because the parties, or one of them, had not fulfilled the contractual obligation to apply, or support an application, for them. The agreement in my view contemplates the refusal of any consent only as an event occurring after the parties had done what they were required to do to obtain it; or, possibly, following breach and waiver by the party not in default. Thus the agreement having expressly provided for the making of the applications for consent, by that means exhausted the parties' intervention in the process. The language of the deed strongly suggests that the parties intended refusal of consent to work automatic termination. In cl 6 the stipulation is that the deed “shall be null and void” in the contemplated event.

There are provisions elsewhere in the deed enabling a party to “rescind this Deed” so that there is a deliberate terminological distinction between F rescission, which obviously requires the act of a party, and the passive “null and void”. Clause 35 contains even more explicit language, namely: “This Deed shall be null and void and of no effect.” It goes on to provide what is then to happen, and to invoke certain other provisions of the deed; and to require the parties “promptly and diligently” to do everything that may be necessary to restore them respectively to the positions they were in prior to entering into the instrument.

Suttor

45 My own view is that the provisions of the Development Contract presently under consideration may again be distinguished from the particular provisions of the Deed of Sale under consideration in Rudi’s Enterprises. Clause 2a (c) imposes only an obligation upon Roche to furnish particular information to Metro Edgley. However in Rudi’s Enterprises the relevant provision in clause 7 expressly provided details by which both parties were obliged to carry out the acts necessary on each of their behalf in the endeavour to procure the subject consents. This is no minor matter as it seems to me because the reasoning in Rudi’s Enterprises rested upon the express provisions of the Deed having exhausted the parties intervention in the particular process. As explained in the reasons given by Samuels JA, "the agreement contemplated the refusal of any consent only as an event occurring after each of the parties had done what they were required to do to obtain it; or, possibly, following breach and waiver by the party not in default".

46 The absence of an express provision assigning a detailed role to the Developer in terms of what it had to do [in relation to playing such part as may be appropriate in acting or co-operating in some particular way so as to ensure that certain of the conditions precedent were likely to be fulfilled or would be fulfilled] means that one would have to be forced back to questions of implied terms of cooperation. However the field of discourse opened by the reasoning taken in Rudi’s Enterprises appears to be concerned with the express provisions of the instrument under consideration.

47 In those circumstances it seems to me that one falls back to the reasoning applied in Suttor. And notwithstanding:

(i) the fact that the Development Contract does include references [as in the Deposit clause 5 (d)] reflecting that the draftsperson was able to draw a distinction between rescission pursuant to a right of rescission and automatic rescission;

(ii) the use of the words " and of no force and effect" to be found in clause 2A (b);

48 For those reasons notification of the avoidance was necessary.

The 21 May 2004 Letter

49 In my view the 21 May 2004 letter from Roche to Metro Edgley was clearly written on the view that the so-called automatic rescission clause had, as at 31 March 2004, effected an automatic cancellation of the Development Contract. The letter seems to be on all fours with the letter written in Suttor by the defendant's solicitors to the plaintiff's solicitors on 15 January 1948 [described at 81 CLR page 442]. That letter apparently advised that "the consent of the Treasurer was not obtained within the period of two months of the date of the contract and therefore the contract is no longer effective after 20 December 1947". Latham CJ, Williams and Fullagar JJ found that the letter was obviously written on the view that the particular clause had effected an automatic cancellation of the contract when the Treasurer had not consented by 20 December 1947. The second of the defendant's solicitors letters purporting to cancel the contract was only written after the consent in writing of the Treasurer to the transfer had been obtained. Even had it been written earlier, it would not have effected the cancellation.*[see Note at end of Judgment]

50 For those reasons the 21 May letter cannot be taken to have effected an avoidance of the Development Contract [nor as pleaded, an election to rescind the Development Contract].

Waiver: the use of the term

51 This is not an occasion where it is necessary for a detailed jurisprudential analysis of the concept of 'waiver' which "has often been regarded as a flexible term used with different or shifting meanings and has been criticised as a vague": Carter on Contract, LexisNexis Butterworths 2002 [07-180] [cases cited in footnotes 2,3,4,5 and 6]. One is dealing with waiver regarded as a species of election in terms of conduct waiving the right to avoid the Development Contract [or electing against exercise of that right]. The affirmation was by reason of Roche conducting itself in a fashion which was justifiable only on the footing that an election had been made to affirm the contract. That conduct was adverse to the Developer and is appropriately regarded as having been unequivocal in its effect. By that conduct Roche induced the Developer to believe that performance of the contract was insisted upon: cf Sargent v ASL Developments Limited [1974] 131 CLR 634 at 658 per Mason J.

52 It is of course quite plain that:

"[w]here election is in question between contracting parties and … the contract itself confers the inconsistent rights there can be no question whether a party had knowledge of his choice of rights. He is deemed to know the terms of his own contract and the rights it confers, at all events he cannot take advantage of his own ignorance…; moreover he must take his contract as bearing whatever meaning the court will assign to it when it is called upon to interpret it, he is bound 'by the interpretation which a court of law may put upon the language of the instrument'.."

Sargent

Borda v Burgess

53 Of course the concept of waiver of a right is sufficiently wide to embrace not only the giving up of one right in favour of another, but also conduct which makes it unfair, inequitable and unconscionable for the party to insist on a right previously held. The proven facts presently before the court equally justify a finding in favour of the Developer reached under the rubric of waiver meaning ‘estoppel’.

54 There is absolutely no doubt but that both parties continued between 31 March 2004 and 21 May 2004 to conduct themselves as if the contract was still on foot. So much was conceded by Mr Michael Roche [transcript 279, 280, 321] and by Mr William Roche. The precise concession by Mr William Roche was an agreement that:

55 It is unnecessary to chronicle the other evidence before the court establishing this conduct by both parties. It suffices to note that the evidence given by Mr Accordo in his affidavit of 15 July 2004 and confirmed under cross-examination [and in part dealt with in the re-examination] clearly established the carrying out of work which related directly to the Roche fitout following 31 March 2004.

56 In those circumstances Roche had at the least by 21 May 2004, affirmed the Development Contract, hence waiving any anterior entitlement it may otherwise have had to avoid the Contract.

Conclusion

57 What then is the correct analysis in terms of the present status of the Development Contract?

58 To my mind the following represents the correct analysis in the particular circumstances:

· Roche having had an entitlement on or after 31 March 2004 to avoid the Development Contract, failed to exercise that entitlement;

· That entitlement may have continued for a [presumably short] period following 31 March 1994 depending upon whether or not, during that period Roche moved outside simply keeping its options open as by conduct affirming the Contract;

· Roche had at the least by 21 May 2004 affirmed the Development Contract hence waiving any anterior entitlement it may otherwise have had to avoid the Contract;

· As it happens Roche never even purported to avoid the Contract;

· Metro-Edgley [by letter dated 1 June 2004] purported to extend the date for satisfaction of the conditions precedent to 30 September 2004;

· Notwithstanding that the 1 June 2004 purported extension of the relevant date advanced the incorrect contention that the relevant date had, by agreement of 2 March 2004, been extended to 30 June 2004, the 1 June 2004 letter constituted a valid extension of the date for satisfaction of the conditions precedent to 30 September 2004.

59 In those circumstances Roche is shown to have waived such anterior entitlement as it may have had to avoid the Contract on the basis of the failure by Metro-Edgley to extend the date by notice in writing on or prior to 31 March 2004

60 In the result the date referred to in clause 2A (b) of the Development Contract has been extended to 30 September 2004 and it is appropriate for the Court to declare accordingly.

61 The above analysis holds good notwithstanding that upon the proper construction of the so-called automatic termination provision, the right [on more than one occasion up to the Sunset Date, to notify an extension of the date by which the Contract was to be deemed automatically rescinded] could only be exercised prior to the expiration of an earlier nominated deadline.

62 These findings likely require the suit to be dismissed.

The way forward

63 In the circumstances where the plaintiffs may seek to appeal against the approach taken in the above reasons it is likely appropriate for the court to treat with certain of the remaining issues particularly where findings of fact require to be made.

64 Accordingly, I proceed directly to the disputed issues of particular relevance.

Dealing with the evidence

65 Whilst there were a number of witnesses called on the defendants disparate alternative pleaded cases, this is not a case in which it is necessary to examine more than a small amount of the voluminous documentary evidence. Nor is it necessary to do more than to examine the evidence given by the witnesses for the purpose of determining very limited factual issues.

The meeting of 2 March 2004

The evidence given by the Roche Brothers

66 Each of Messrs Michael Christopher and William Roche gave evidence denying absolutely that there was any discussion at all at the meeting of 2 March 2004 regarding an extension of time of the conditions precedent. Each of Messrs Michael and Christopher Roche swore in their affidavits that if that topic had been raised, they would have considered it to be an important matter and would have made notes accordingly. Mr William Roche under cross-examination swore that he could say with absolute confidence that there was no statement that Multiplex was extending the time under the clause until the end of June [Transcript 344]. Mr Christopher Roche had taken some notes of the meeting in his diary and one of the reasons why he was confident that nothing was said about extending the conditions precedent on that date was because he had no note of this in his diary. He swore that if Mr O’Regan had said that the time for the satisfaction of the conditions precedent was being extended he would have written that statement down as he would have thought the matter important. [Transcript 327].

67 Mr Michael Roche had a file note of the meeting. This includes no reference to the time extension question. His evidence under cross-examination included:

“Q. Isn't this the fact of what happened on 2 March: Mr O'Regan did say to you words to the effect, "We are extending the time under the condition precedent clause until the end of June," and that, of course, was something that was of no particular moment to you because you fully expected there to be such an extension?
A. No, that's incorrect.

Q. In other words, it wasn't important to you at all?
A. That's incorrect.

Q. Because you were just about to have discussions about all sorts of things that were going to happen after 31 March?
A. We were to discuss things that were going to happen after 31 March; yes, that's correct.

Q. So you just shrugged your shoulders and said, "Well, of course you are", and moved onto to important matters, which were the licence and the POPE licence?
A. That's incorrect.

Q. Your evidence when you confidently assert that nothing at all was said about the conditions precedent provision is false, isn't it?
A. That's incorrect.

[Transcript 305-306]

The evidence given by the defendants’ witnesses

Evidence of Mr O’Regan

68 Mr O’Regan was aware at the time that he went into the meeting, that in terms of the December 2003 extension notice, the deadline for the satisfaction of the conditions precedent was to expire on 31 March. [Transcript 102-103] His evidence was that before he went into the meeting he intended to inform Roche that Multiplex was going to exercise its right to extend [Transcript 105.35]. His evidence was that the extension of the conditions precedent was a principal matter which was going to be discussed. [Transcript 107.24]. His evidence was that before the meeting he had discussed with Mr Boonzaaier and Mr Yeo that he was going to advise Roche that the period/deadline was being extended [Transcript 108-109].

69 His affidavit evidence included:

"Initially the Liquor Licence was to be a sub-licence of the section 18.4(g) licence. However, as a result of advice from Michael Roche, following discussions with Roche's accountant, the sub-licensing of the existing section 18.4(g) licence will not be acceptable to Roche and we are now pursuing a Governor's Licence for the Waterfront Brasserie. It is anticipated that the Governor's Licence will be lodged early next week and that on this basis it will not be possible to satisfy the conditions precedent and have the Liquor Licence procured by the end of March. We are therefore extending the date for satisfaction of the conditions precedent for a further three months to June."

Michael Roche: "We understand that. When do you expect to achieve the Liquor Licence?"

It is my understanding from recent Governor Licence applications, such as that at Walsh Bay with the Lyric Theatre, that these types of licences can be obtained within six weeks of filing the original application. We are entitled to extend the date to December but are confident that we can satisfy the conditions precedent prior to June."

Michael Roche: "What is your expectation for access to the base building to allow fitout to commence."

70 Under cross-examination his evidence included:

[Transcript 108]

[Transcript 110]

[Transcript 119]

[Transcript 110]

Evidence given by Mr Yeo

71 Mr Yeo gave relevant affidavit evidence as follows:

"Based on earlier advice from the Minister's office both Luna Park Sydney and Roche went down the path of sub-licensing the section 18.4(g) licence. However, Michael then advised Multiplex that Roche's accountant had reservations from a financing point of view. We had similar feedback and based on further discussions with the Minister's office the advice was to apply for a Governor's licence to which Roche agreed."

Michael Roche: "How long will it take?"

Dennis O'Regan: "It is not a short process and in a sense a function of the government delivering the outcome. Key people in government are aware and supportive of this application. For this reason we have to extend the agreement for three months. Metro could even extend to the sunset date but we are working to a tight deadline and so at this time only extend for three months."

72 It is to be noted that although Mr O’Regan in his affidavit had said that he used words to the effect of: "We are therefore extending the date…", if these had been the precise words used they are ambiguous. Had the words used been "we are hereby extending…" the matter would have been clearer. As so very much depends upon precisely what was said, it seems to me appropriate to approach the evidence given by Mr O’Regan upon the basis that his best recollection was that set out in the affidavit. He does not state that Mr Michael Roche said "fine". As note above Mr Yeo gives evidence that that is what then occurred and that Messrs Christopher and William Roche nodded in agreement.

73 There is a material difference between the wording used by Mr Yeo in his affidavit as compared to the wording used by Mr O’Regan. Mr Yeo says that the words were to the effect that for the reason given "we have to extend the agreement…". These words are clearly ambiguous, if they are to be taken to denote as close as may be his recollection of the precise words which were used, and if said, certainly may have been properly interpreted as indicating an intention to thereafter formally in writing [as per the terms of the contract] proceed to so extend the agreement.

Evidence of Mr Boonzaaier

74 Likewise the evidence given by Mr Boonzaaier in his affidavit, upon the assumption that albeit his reference to the statements being "words to the effect of", throws up the very same point [again the words which he has set out, if they are to be taken to denote as close as may be, his recollection of the precise words which were used, are clearly ambiguous and certainly may, if said, have been properly interpreted as indicating an intention to thereafter formally in writing [as per the terms of the contract] proceed to so extend the agreement].

75 The relevant portion of his affidavit was in the following terms:

"Can you provide us with a letter outlining the proposed Liquor Licence for us to give to our financiers".”

Mr Yeo under cross-examination

76 Under cross-examination Mr Yeo was asked to repeat what had been said. His evidence included:

“Q. Who at the meeting raised the question of extending the period?
A. Dennis O'Regan.

Q. What did he say?
A. He said words to the effect that given the time it would have required to do - to secure the Governor's licence, we needed more time, so - I'm really struggling with what - given the time taken to process the Governor's licence, we needed more time and it's quite likely that it will exceed the 31 March date and, therefore, we need an extension. He further said that we could actually extend it to December 2004, but in this instance we were only extending it to 31 June - 30 June, sorry.

Q. Is that what he said?
A. Words to the effect…

Q. So is this the position, Mr Yeo, as you understood it, that Mr O'Regan said, "We need more time and we're going to extend it"?
A. No, he said words to the effect that the process of Governor's licence is a lengthy process.

Q. Yes?
A. Whilst the government is committed to doing it quickly, there's no guarantee that we could have got it done by 31 March, and, therefore --

[Transcript 173]

77 Here again this acceptance of the notion that Mr O’Regan was "going to extend the time", raises the very same ambiguity to which I have already referred.

Dealing with the issue

78 This is one of those cases where the court can only decide on the balance of probabilities aided by the whole of the evidence. There is not a great deal that came forward in terms of a proper foundation for an attack of the credit of any of the witnesses called by either party. Whilst a number of attacks upon the credit of each of the material witnesses called by the opposing parties were mounted on disparate grounds, none of them was of sufficient weight to enable a positive finding on the critical issue.

The onus

79 At the end of the day the onus of proving that Mr O’Regan had said words to the effect that Multiplex was at that moment [or words reflecting the notion "hereby"] extending the date for satisfaction of the conditions precedent, rests upon the defendants. In my view the defendants have not established on the balance of probabilities that words to this effect were said.

80 It is particularly difficult to reach a finding of fact in terms of whether anything at all was said on the day regarding an extension of time of the conditions precedent. There are cases where the Court simply is unable, even on the balance of probabilities, to reach a finding of fact one way or the other as between two groups of parties, each swearing by its witnesses to what amounts to a 180 degree diametrically opposite version of the events. This is one of those cases. The matter therefore falls to be decided by looking at which party bears the onus of proving the particular facts. Here that onus rests upon the defendants and has not been discharged.

81 However even if the court had been in a position, which it is not, to accept one or more of the versions given by Messrs O’Regan, Mr Yeo or Mr Boonzaaier on the balance of probabilities, I would have had great difficulty in accepting from their evidence that what had been communicated was sufficiently precise, unambiguous and unequivocal [so as to reflect a statement that the developer would not still proceed to formally give the written notice which was required to be given by the terms of clause]. In short it would have been necessary to be quite clear as by using the words "hereby", or even better, as by stating "we here and now extend [the time] and take it that you will not require the formal written extension to be given".

Travelling further into the pleaded issues

The way forward

82 It is common ground that the proceedings received special expedition for commercial reasons.

83 Having dealt with the threshold issue of principle and with the central issues of fact it does not seem necessary or appropriate for the Court to proceed further with any of the pleaded issues. It would seem likely that the judgment will lead to consensual short minutes of order.

84 The convenient course is to give the parties an opportunity to take instructions on whether or not consensual short minutes of order can now come forward although of course costs may have to be argued.

85 In any event the appropriate way forward is to invite the parties to indicate whether any and if so which further findings of fact or law are sought on any outstanding matter. In the unlikely event that the Court is persuaded that some particular additional findings are necessary those findings can be handed down in a short supplementary judgment.

I certify that paragraphs 1 - 85
and Appendix “A”
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 18 August 2004
___________________
Susan Piggott
Associate

Revised 27 August 2004
Note: As to the last two sentences of paragraph 49, see MK & JA Roche & Ors v Metro Edgley Pty Limited & Anor [2004] NSWSC 780

Last Modified: 08/30/2004

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Citations

MK and JA Roche Pty Limited v Metro Edgley Pty Limited [2004] NSWSC 744

Most Recent Citation

MK and JA Roche Pty Limited v Metro Edgley Pty Limited [2005] NSWSC 684

Cases Citing This Decision

4

Finance & Equity v Leveraged Equities; Aussie Products v Leveraged Equities [2007] NSWSC 886

MK & JA Roche Pty Ltd & Ors v Metro Edgley Pty Ltd & Ors [2006] NSWSC 970

MK & JA Roche Pty Limited v Metro Edgley Pty Limited [2006] NSWSC 810

Cases Cited

8

Statutory Material Cited

1

Hagerty v Hills Central Pty Ltd [2018] NSWCA 200

Suttor v Gundowda Pty Ltd [1950] HCA 35

CITATION:	MK and JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2004] NSWSC 744 revised - 27/08/2004
HEARING DATE(S):	9/08/04, 10/08/04, 11/08/04, 12/08/04
JUDGMENT DATE:	18 August 2004
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Parties to bring in short minutes of order.
CATCHWORDS:	Contract - Construction - Proper construction of automatic rescission clause in Contract - Avoidance/Affirmation of Contract - Notification of avoidance of Contract - Waiver of rights to avoid Contract - Notification of extension of time for satisfaction of conditions precedent to Contract
LEGISLATION CITED:	Crown Lands Act 1989 (NSW)
CASES CITED:	Borda v Burgess [2003] NSWSC 1171 Gange v Sullivan (1966) 116 CLR 418 New Zealand Shipping Co Ltd v Societe` des Ateliers et Chantiers de France [1919] AC 1 Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 Sargent v ASL Developments Limited [1974] 131 CLR 634 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 Suttor v Gundowda (1950) 81 CLR 418 Tri-Continental Corporation Limited v HDFI Limited (1990) 21 NSWLR 689
PARTIES :	MK & JA Roche Pty Limited (ABN 25 076 529 952) (First Plaintiff) Michael Kevin Roche, Christopher John Roche, William Timothy Roche, Kevin Michael Roche, Gabrielle Mary Roche (Second Plaintiff) Metro Edgley Pty Limited (ABN 37 082 440 042) (First Defendant) Multiplex Limited (formerly Multiplex Constructions Pty Limited (ACN 008 687 063) (Second Defendant)
FILE NUMBER(S):	SC 50069/04
COUNSEL:	Mr DJ Hammerschlag SC, Mr VF Kerr (Plaintiffs) Mr CR Newlinds SC, Ms RS Francois (Defendants)
SOLICITORS:	Lane & Lane (Plaintiffs) Clayton Utz (Defendants)