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

No judgment structure available for this case.

CITATION: MK & JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2006] NSWSC 810
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 07/08/06, 08/08/06, 09/08/06

JUDGMENT DATE :
25 August 2006

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Defendant unable to establish both of the estoppel and election defences. Findings on matters remitted by Court of Appeal. Findings on new issues litigated

CATCHWORDS: Contract - Construction - Principles - Whether provision for automatic rescission on non-satisfaction of conditions self executing or requires the giving of notice - Whether awareness of circumstances entitling party to terminate contract - Whether action adverse to other party established - Conventional estoppel - Whether distinct from equitable estoppel - Whether reliance by and detriment to party seeking to raise estoppel established - Whether the party against whom estoppel asserted played such a part in adoption of assumption that it would be unjust if it were left free to ignore it - Election - Proceedings before the Court on remitter from Court of Appeal for the purpose of the Court making factual findings necessary to determine whether defendant had proven its estoppel and election defences - Proceedings also remitted in order for findings to be made in respect of liability of the guarantors - Parties elect to amend pleadings to embrace events taking place following first instance judgment - Whether plaintiff entitled to litigate an issue which could have been but was not litigated at first instance

LEGISLATION CITED: Civil Procedure Act
Crown Lands Act 1989 (NSW)
Luna Park Site Act, 1990 (NSW)

CASES CITED: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Autodesk Inc v Dyason [No. 2] (1993) 176 CLR 300
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
Brimaud v Honeysett Instant Print Pty Limited [unreported, McLelland J, Supreme Court of New South Wales, 19 September 1988]
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Henderson v Henderson (1843) 67 ER 313
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Pty Ltd (1990) 20 NSWLR 310
International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Lakatoi Universal Pty Ltd v Walker [2000] NSWSC 113
L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235
Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246
Meehan v Jones (1982) 149 CLR 571
New South Wales Bar Association v Smith [unreported, Supreme Court of New South Wales Court of Appeal, 4 July 1991, BC 9102691]
Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61
Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114
Pittalis v Sherefettin [1986] QB 868
Prenn v Simmonds [1971] WLR 1381
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289
Sagacious Procurement Pty Limited v Symbion Health Limited [2006] NSWSC 654
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Smith v New South Wales By Association (No 2) (1992) 176 CLR 256
Tricontinental Corporation Ltd v HDFI Ltd (1987) 21 NSWLR 689.
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15

PARTIES: MK & JA Roche Pty Limited (First Plaintiff)
Michael Kevin Roche, Christopher John Roche, William Timothy Roche, Kevin Michael Roche and Gabrielle Mary Roche (Second Plaintiffs)
Metro Edgley Pty Limited (First Defendant)
Multiplex Limited (Second Defendant)

FILE NUMBER(S): SC 50069/04

COUNSEL: Mr D Hammerschlag SC, Mr V Kerr (Plaintiffs)
Mr F Kunc (Kevin Michael Roche and Gabrielle Mary Roche)
Mr CRC Newlinds SC, Ms R Francois (Defendants)

SOLICITORS: Lane & Lane (Plaintiffs)
Baker & McKenzie (Kevin Michael Roche and Gabrielle Mary Roche)
Clayton Utz (Defendants)

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

Einstein J

Friday 25 August 2006

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

JUDGMENT

The background

1 These proceedings have been the subject of:

i. a judgment delivered at first instance on 18 August 2004: [2004] NSWSC 744;

ii. a judgment delivered on appeal: [2005] NSWCA 39 [which remitted the proceedings to the Commercial List for further determination on certain issues];

iii. an application for Special Leave to appeal to the High Court.

2 It is unnecessary to repeat the record and the reader is taken to be familiar with the reasons given in the original first instance judgment and those given by the Court of Appeal.

3 As and when appropriate specific reference will be made to the reasons given by the Court of Appeal.

4 The Appeal Books were before the Court [MFI volumes 1 - 4] as a convenient mode of following the evidence adduced in the original first instance hearing.

The issues before the Court

5 There are three brackets of issue presently before the Court:

i. the issues remitted to the Court by the Court of Appeal;

[the original pleadings having been amended to plead the facts which have occurred since August 2004 and for the purpose of the parties seeking further relief]

The relevant up-to-date pleadings

6 The relevant pleadings in their present form are as follows:

i. Roche’s Second Further Amended Summons (Summons)

ii. Roche’s Commercial List Statement (to Second Further Amended Summons) (Claim)

iii. Metro’s Commercial List Response (to Statement to Second Further Amended Summons) (Defence)

iv. Metro’s Further Amended Cross Summons (Cross Summons)

v. Metro’s Commercial List Further Amended Cross Claim Statement (Cross Claim)

The curiosity

7 Somewhat curiously the parties have seen fit to permit the post-August 2004 events to be litigated alongside the determination of the issues remitted to the Court by the Court of Appeal. Notwithstanding the niceties it has seemed that this consensual approach is permissible and efficient.

Brief overview of facts

8 The following brief overview of the facts [both preceding as well as post-dating August 2004] provided by the Roche parties is accepted as correct and provides a convenient vehicle from which to move into the determination of the issues presently before the Court:

Pre August 2004

i. Luna Park Reserve Trust (LPRT) had the care, control and management of Luna Park Reserve and is entitled to lease the whole or part of the Reserve.

ii. On 23 December 2002 LPRT entered into an Agreement for Lease with the First Defendant, Metro Edgley Pty Limited (Metro), and Luna Park Sydney Pty Limited (LPS). Metro was to redevelop the Luna Park site, at the conclusion of which LPRT was to grant a 40 year lease of the site to LPS. The redevelopment included the development of a Restaurant which was to be subleased to a Restaurant operator. The Restaurant came to be known as the Waterfront Brasserie. Construction work commenced in January 2003.

iii. Metro is a company in the Multiplex group, of which the Second Respondent, Multiplex Limited (Multiplex), also forms part. LPS is part owned by Metro, with the remainder owned by other property developers – Metro does not control LPS.

iv. On 26 September 2003 the First Plaintiff, MK and JA Roche Pty Limited (Roche), entered into three contracts with Metro – the Waterfront Brasserie Development Contract (Development Contract), the Liquor Licence and Fitout Works Deed of Agreement (Fitout Deed) and the Deed of Agreement for Waterfront Brasserie Sublease (Agreement for Sublease). Metro was referred to as the “Developer” in the Development Contract but as “Metro” in the Fitout Deed and the Agreement for Sublease. Roche paid a deposit of $2 million to Metro.

v. The three contracts formed part of a suite of contracts (the remainder not then executed by all parties) under which Metro was to build, and obtain a Liquor Licence and a Place of Public Entertainment Licence for, the Brasserie and Roche was to fitout the Brasserie, pay Metro $18.5 million and obtain a 40 year sublease of the Brasserie from LPS. Thus Metro’s obligation to construct the Brasserie, which the parties referred to as the base building works, arose under both the Agreement for Lease (with LPRT and LPS) and under the Development Contract, once operative (with Roche).

vi. The Second to Sixth Plaintiffs (guarantors), who are individual members of the Roche family, gave guarantees for the obligations of Roche under the Development Contract, the Fitout Deed and the Agreement for Sublease.

vii. The Development Contract, the Fitout Deed and the Agreement for Sublease contained a number of conditions precedent, the fulfilment of which was a prerequisite to the parties’ obligations.

This Contract will be deemed to be automatically rescinded and of no force and effect if the conditions precedent 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).

ix. The Sunset Date was 31 December 2004.

This Deed will be deemed to be automatically rescinded and of no force and effect if Development Contract is rescinded due to the conditions precedent under the Development Contract not being satisfied.

xi. The Development Contract also contained a provision in clause 35.2 which entitled Roche to terminate the Development Contract if Metro failed to achieve practical completion of the base building works by the Sunset Date. The Fitout Date was, by clause 13, deemed also to be rescinded if the Development Contract was rescinded.

xii. On 18 December 2003 Metro gave Roche a written notice extending the clause 2A(b) date in the Development Contract to 31 March 2004. Metro gave no further written notice on or before 31 March 2004. Metro gave no written notice extending the clause 1A(b) date in the Agreement for Sublease until 21 September 2004.

xiii. The conditions precedent were not satisfied by 31 March 2004. Between 31 March and 21 May 2004 Metro continued the base building work for the Brasserie, which was at an advanced stage by 31 March 2004.

xiv. On 21 May 2004 Roche wrote to Metro asserting that the Development Contract was at an end because of the failure to satisfy the conditions precedent by 31 March 2004.

xv. Metro then issued a written notice on 1 June 2004 purporting to extend the Clause 2A(b) date to 30 September 2004.

xvi. The first trial in the matter was heard between 9 and 12 August 2004. Two judgments were given – the first on 18 August and the second on 24 August 2004.

Post August 2004

i. By a series of notices given in September, October and November 2004 Metro purported to extend the clause 2A(b) date (in the Development Contract) and the clause 1A(b) date (in the Agreement for Sub-lease) to 31 December 2004.

ii. Roche alleges, and Metro disputes, that 2 of the conditions precedent remained unsatisfied by 31 December 2004 and that, for 4 discrete reasons, practical completion had not been achieved by that date.

iii. On 4 January 2005 Roche purported to terminate each of the Development Contract, the Fitout Deed and the Agreement for Sublease.

The remitted matters in outline

9 The Court of Appeal found that:

i. the automatic rescission provision in the Development Contract was effective according to its tenor [such that clause 2A (b) effected an automatic rescission of the Development Contract on 31 March 2004 without Roche having to give written notice]

10 However the Court of Appeal also held that Roche could not rely on that automatic rescission if it was estopped and if it had elected to affirm the Development Contract prior to 21 May 2004. Metro would have to prove both.

11 The matter has been remitted to this Court to make the factual findings necessary to determine whether Metro had proven the estoppel and election defences.

12 The matter has also been remitted to make findings as to:

i. the liability of the guarantors, noting that, subject to the operation of an estoppel and election, their liability came to an end on 31 March 2004;

ii. the efficacy of an order for specific performance;

iii. return of the deposit; and

Estoppel

The Court of Appeal’s findings

13 The Court of Appeal held that there is an ‘all-or-nothing’ doctrine of common law ‘estoppel by representation’ [or ‘conventional estoppel’], rejecting Roche’s submission that the common law doctrine of conventional estoppel had been subsumed in an over-arching doctrine of equitable estoppel.

14 However the Court of Appeal held that common law estoppel by representation or conventional estoppel still required proof of assumption, inducement and detriment, rejecting Metro’s submission that reliance and detriment were not necessary.

15 The Court of Appeal was satisfied that the first instance finding was that both parties had acted on the assumption “that the contract had not automatically come to an end on 31 March 2004”.

16 However the Court of Appeal remitted the matter to this Court to make findings as to whether there was relevant inducement and detriment [incorporating the notion that the conduct must be such as to make Roche’s departure from the above-described assumption unjust].

17 The Court of Appeal also remitted the task of identifying the appropriate remedy if, contrary to the position stated above, there is one over-arching doctrine of equitable estoppel.

The estoppel pleading

18 Metro relies on an estoppel alleged to have arisen from conduct by Roche after 31 March 2004.

19 At trial Metro had also relied on estoppel alleged to have arisen from conduct by Roche prior to 31 March 2004, and in particular, from discussion at a meeting on 2 March 2004. That is no longer pursued by Metro, [nor could it be because it failed in its quest for a factual finding as to the conversation for which it contended at that meeting]

20 Metro pleaded that between 31 March and 21 May 2004 Roche participated in preparing the conditions precedent documents, attended site meetings, issued variations to the design of the base building works and participated in preparing applications for the liquor licence and POPE licence required under the Fitout Deed. It is upon that conduct which, Metro pleads, it relied in making the assumption. [Cross Claim paragraph 26 (the cross reference to “paragraph 29” in paragraph 26 is plainly a typographical error and should be a cross reference to “paragraph 24”)]

21 Although Metro submitted to the Court of Appeal that detriment is not a necessary element of conventional estoppel, it pleaded detriment as the expenditure of “time, effort and resources” in preparing the conditions precedent documents, finalising plans for Roche’s fitout, obtaining fitout approvals, completing building works as varied by Roche and obtaining the liquor licence and POPE licence.

22 Metro claims a declaration that both Roche and the guarantors are estopped from denying that the clause 2A(b) date was extended from 31 March to 30 June 2004, but pleads nothing against the guarantors which fixes on their conscience. In opening Mr Newlinds SC, leading counsel for the defendants, made clear that Metro does not contend for any estoppel other than that as between the principal parties which gives rise to what has been referred to as “the metaphysical problem”. [A reference to the awkwardness involved in the notion that an estoppel could operate to prevent the contention that a contract which had terminated, in fact remained on foot]

23 Returning to the first instance factual findings and the holding of the Court of Appeal in that regard, the following appears to be the case:

i. At first instance the only relevant factual findings were that between 31 March and 21 May 2004 both parties conducted themselves as if the contract was still on foot and, in particular, that after 31 March 2004, Metro carried out work which related directly to the Roche fitout.

Detriment

24 Albeit somewhat outside of what may be considered the logical order of dealing with the parameters of estoppel remitted by the Court of Appeal, it seems to me presently convenient to commence by considering detriment.

25 In light of the holding by the Court of Appeal [that common law estoppel by representation or conventional estoppel still requires that the party relying on the estoppel must have placed itself in a position of significant disadvantage if departure from the assumption be permitted], this leg of the matters remitted for decision concerns the need for a factual finding.

26 In my view Roche’s submissions in this regard are of substance. They are adopted in what follows.

27 Metro pleads that it expended “time, effort and resources” in:

i. preparing the conditions precedent documents;

ii. finalising plans for Roche’s fitout;

iii. obtaining fitout approvals;

iv. completing building works as varied by Roche; and

28 The particular difficulty with that contention is that there is no evidence from which to assess the magnitude of the alleged expenditure or the economic consequences of what it is Metro said it did.

29 This is a critical matter because this Court is required to assess whether Metro would suffer “significant detriment” if Roche is permitted to resile from the material assumption. The only witnesses who give relevant evidence are Mr Yeo, Mr Accardo and Ms Bailey. Mr O’Regan asserts that Metro expended resources and time in carrying out certain activities but his evidence is at such a high level of generality as to provide the Court with no assistance.

30 As Roche has observed:

i. It is not without significance that the defendants have led no evidence as to the economic value of any detriment or costs incurred.

ii. This is so even though almost 2 years have elapsed since the initial judgment of this Court.

iii. The defendants have made no application to lead any evidence concerning what has happened with the development or what they have done with it.

31 In dealing with each of the categories of alleged detriment it is the conduct of Metro, not Roche, which is primarily relevant.

Conditions precedent documents

32 On 19 March 2004 Clayton Utz, acting for Metro, emailed Lane & Lane, acting for Roche, 4 documents being an Agreement for Sublease, varied to reflect changes sought by LPRT, Deed of Assignment and variation of the Independent Certifiers Deed (Amending Certifiers Deed), the Independent Certifiers Deed and a s88B instrument. Thereafter Clayton Utz made only minor amendments. On 22 April 2004 Clayton Utz sent Lane & Lane a copy of a Building Management Statement, being an annexure to the Agreement for Sublease. Clayton Utz sent further versions of various of those documents on 22 and 29 April with minor amendments.

33 Of all those documents, only the Amending Certifiers Deed was a conditions precedent document which needed to be drafted. Clayton Utz made no changes during April to the Amending Certifiers Deed sent to Lane & Lane in March because Clayton Utz were first waiting for Lane & Lane’s comments.

34 None of the changes made to the other documents during April were sought by Roche. Indeed Roche refused to consider any changes to the other documents (most of which had been made before 31 March 2004) until Metro agreed to pay its costs of doing so. Given Ms Bailey’s concessions as to the minor nature of all the changes, whether made before or after 31 March 2004, the time and expense in making them can only have been insignificant.

Roche’s fitout plans

35 The design work for Roche’s fitout was completed by late February 2004, when Mr Jago sent the relevant plans to Mr Yeo for him to lodge with SHFA, the consent authority, to obtain development approval for the Roche fitout. The application was lodged before 2 March 2004. SHFA’s draft determination was provided to Metro on 19 May 2004. Metro did nothing to refine the Roche fitout plans between 31 March and 21 May 2004.

Obtaining fitout approvals

36 Metro lodged the development approval for the Roche fitout with SHFA before 2 March 2004 and a draft determination was issued by SHFA on 19 May 2004. The only evidence which Mr Yeo gave of work done by him between 31 March and 19 May 2004 concerning obtaining that approval was:

i. receiving feedback from SHFA about calculating POPE numbers;

ii. telephoning Michael Roche on 28 April 2004 to discuss that issue;

iii. meeting representatives of Roche and others, and subsequently representatives of SHFA on 29 April 2004 to discuss the application;

37 That work did not involve significant expenditure of time, effort or resources by Metro.

Completing building works as varied by Roche

38 In considering what Metro did after 31 March 2004 in reliance on the assumption, the demarcation of roles must be kept in mind. Metro’s primary role was to complete the base building works whereas Roche’s primary role was to complete the Roche fitout – that is, to fitout the base building so that it could be used as a bar/brasserie.

39 Between 1 April and 21 May 2004 Metro proceeded with the base building works. However neither Mr O’Regan nor Mr Yeo give any qualitative or quantitative evidence of the extent of that work. Mr Boonzaaier had no role in the base building works. Mr Accardo gives (partly hearsay) evidence of the position of the base building works as at 31 March 2004 and some evidence of work carried on after that date. Mr Accardo’s evidence provides no indication of the time or expense involved in completing that work.

40 Nor, between 1 April and 21 May 2004, did Roche request variations of the base building works. Indeed, save for one minor exception, none of the base building work done by Metro after 31 March 2004 related directly to the Roche fitout. The exception related to widening certain egress doors. There was no evidence that widening was consequent upon a request made by Roche after 31 March 2004.

41 The detriment which Mr O’Regan suggests Metro suffered by carrying out base building works between 31 March and 21 May 2004 is the costs that will be incurred in altering the base building works to accommodate the needs of another operator. He provides no quantification of those costs and certainly no quantification of the extent to which any such costs are referable to work carried out after 31 March 2004 as opposed to referable to work carried out prior to 31 March 2004. By 31 March 2004 the vast bulk of the base building works had been completed. Mr Jago’s evidence, upon which he was not cross examined, was that a new operator is unlikely to require any significant changes to the base building works.

Obtaining liquor and POPE licences

42 Metro was responsible for obtaining the liquor licence for the Brasserie. Metro originally proposed that the liquor licence for the Brasserie would be a sub-licence of the Governor’s Licence already issued for Luna Park. On 2 March 2004 Metro informed Roche that it had decided to apply for a separate Governor’s Licence for the Brasserie, a process which it expected to take approximately 10 weeks. That application was lodged sometime prior to 15 March 2004.

43 Mr O’Regan gave no evidence of doing anything concerning obtaining the liquor licence after signing the application.

44 The only evidence which Mr Yeo gave of work done by him between 31 March and 19 May 2004 concerning obtaining the liquor licence was:

i. reporting to the Roche brothers on 1 April 2004 on a meeting he had held with the representatives of the Minister and the Liquor Administration Board – a meeting which took place the previous Monday, namely 29 March 2004;

ii. reporting to Michael Roche on 20 April 2004 that the Liquor Administration Board was preparing a report and that he proposed to commence advertising;

iii. sending a copy of a letter from Phillips Fox, acting for Metro on the application;

iv. a telephone call to Michael Roche on 7 May 2004

45 That work did not involve significant expenditure of time, effort or resources by Metro.

46 There was no work associated with obtaining a POPE Licence in that period. No application could be made for the POPE licence until the Roche Fitout works were completed.

Matters put forward by Metro in written submissions as substantiating significant detriment

47 In truth none of the matters relied upon by Metro [in its written submissions, several of which had already been referred to], whether considered individually or collectively, are probative of significant detriment to Metro having arisen from the common assumption that the Development Contract was on foot between 31 March 2004 and 21 May 2004 as Metro expended moneys and continued to undertake work to progress the Project and accommodate the Roche Fitout of the Waterfront Brasserie.

48 The matters relied upon by Metro in this regard were as follows:

i. the Roche fitout required Metro Edgley to alter the base building works to accommodate the fitout plans. The principal changes to the base building works were to the sliding doors, the servery counter and airport door details to suit the Roche bar joinery details, the window seat details facing the boardwalk to Luna Park, the stackable window details, the boardwalk details abutting the windows and the material hoist room and adjacent storeroom;

ii. at the request of Roche, Metro Edgley widened the external stairs to the Waterfront Brasserie in April 2004;

iii. the retractable windows to the Waterfront Brasserie requested by Roche were built in early May 2004;

iv. between 31 March 2004 and 21 May 2004 Mr Accardo attended various meetings with Roche and/or their agents, worked to progress the completion of the base building works to accommodate the Roche fitout and to progress the Roche the fitout design, including attending a fitout tenderer's inspection;

v. between 31 March and 21 May 2004 Ms Bailey also worked to progress, with Roche’s solicitors, the documents required under the Development Contract;

vi. Mr O’Regan gave evidence that Metro Edgley expended significant resources in varying and finalising the base building works as requested by Roche, preparing the application for fitout, progressing procurement of the Liquor Licence and progressing condition precedent documents for Roche. Resources included external solicitors regarding the Liquor Licence, Paul Boonzaaier, Pino Accardo, Raymond Yeo, David Tierney, Clayton Utz and consultants in relation to the Roche fitout;

vii. between 13 April 2004 and 20 May 2004 Mr Yeo attended site meetings to progress the fitout tender, progress the Liquor Licence, progress the development application for the fitout and assisted Roche in the preparation for the fitout;

a) "if we knew on 31 March that the Roches were not going to be involved, we would have put a stop to the project, taking stock of what has happened and we would have then considered, you know, any future operator's design"; and

49 This above finding that significant detriment has not been established is in itself, sufficient to put an end to the defendant's estoppel case.

50 Hence the question of the precise part played by Roche in the adoption of the assumption has far less significance absent a finding that Metro would be at a significant disadvantage if a departure from the assumption were permitted.

The part played by Roche in the adoption of the assumption

51 It is fair to say however that the evidence established that Roche did play a part in the adoption by Metro of the assumption. The question is how significant a part did Roche play in relation to the adoption of that assumption.

52 The very same matters referred to above [as matters put forward by Metro in written submissions as substantiating significant detriment], establish that Roche indeed played a significant part in the adoption by Metro of the assumption already referred to. Roche induced Metro to believe that performance of the contract was insisted upon and did so quite simply by conducting itself between 31 March 2004 and 21 May 2004 as if the contract was still on foot.

53 Roche misconceives the issue in its submission that on the evidence, it is simply not open for the Court to find that the assumption held by Metro [that the contract was on foot] was something brought about by Roche. The test concerns a parameter of degree. It requires an assessment of the nature and character of the relevant activity by Roche and of the impact of that activity upon a belief induced in Metro. It may be observed that had detriment been able to be established by Metro, it would have been appropriate to hold that Roche indeed played such a part in the adoption of the assumption as to make it unfair to permit Roche to depart from it. At the least, that conduct included the failure of Roche to inform Messrs O’Regan and Yeo that Roche considered the Development Contract to have been rescinded on 31 March 2004 [O’Regan 8/7/04 para 30 (Blue 1/8); Yeo 9/7/04 para 53 (Blue 1/41)].

54 I reject the submission put forward by Roche that on the evidence, the beliefs of Messrs O’Regan and Yeo [that the development contract remained on foot after 31 March 2004] was gained solely by reason of their belief that Metro had validly extended the clause 2A (b) date prior to 31 March 2004. Nor do I accept that each party held the assumption through March and April, that the contract was on foot by reference to a parallel assumption as opposed to a common or mutual assumption.

Election

The Court of Appeal’s findings

55 In considering the question of election, it must be kept in mind that the right of election, with which the principle is concerned, arises when events occur which enable a party to exercise alternative and inconsistent rights. Thus, in a contractual setting, a right of election arises when a party has a right to terminate for breach and an alternative right to insist on the continuation of the performance of the contract. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655.

56 In the Court of Appeal, Metro submitted that there was conduct by Roche between 31 March and 21 May 2004 which was justifiable only if an election had been made by Roche to affirm the contract.

57 The Court of Appeal held that the consequence of such an affirmation would be that Roche lost any right to rescind prior to the Sunset Date, unless Metro in the meantime gave written notice of a new clause 2A(b) date. [Appeal judgment [66] and [75]. Beazley JA did not decide the point. In her Honour’s view there may have been conduct that extended the contract but did not amount to an irrevocable election so that the effect of Roche’s conduct depended upon further factual findings: [2]].

58 In so holding, the Court of Appeal rejected Roche’s submission that clause 48 of the Development Contract required the election to affirm to have been in writing. [Beazley JA did not decide the point, in the absence of further factual findings]

59 To establish that Roche elected to affirm the contract Metro must show, applying the principles in Sargent at 658, that:

i. Roche was aware of circumstances giving rise to the right to rescind prior to 21 May 2004; and

only

60 It is those two questions which have been remitted for factual determination.

61 Hodgson JA put the matter as follows:

Sargent v. ASL Developments Ltd

If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected.

63 The question of Roche’s awareness of the circumstances giving rise to the right to treat the contract as at an end was not specifically addressed by the primary judge. Roche’s evidence was that it knew of its right to treat the contract as at an end on 10 May 2004, so that if conduct amounting to an election between that time and 21 May 2004 had been identified, that would it seems have amounted to a binding election. However, the judgment did not identify relevant conduct within that period of about eleven days.

64 In his evidence in the case, Michael Roche at one stage conceded that he was aware from 31 March 2004 that the condition numbered (iii) in cl.2A had not been satisfied, and was also aware that no written notice of extension of time beyond 31 March 2004 had been given. In circumstances where Michael Roche was the person most concerned on behalf of Roche with the matter, that evidence, if accepted, may have satisfied the requirement stated in Sargent that the party know of circumstances giving rise to the right to terminate the contract. However, the primary judge made no finding on this.

65 I am inclined to think that the matters referred to by Mr. Newlinds, although not specifically referred to by the primary judge, would be sufficient to satisfy the other aspect of the requirements referred to in Sargent . The attending at site meetings, making arrangements for the continuation of works in accordance with plans approved by Roche, the notification of a change of plans, and the continued procuring of co-operation by the respondents to achieve satisfaction of the conditions precedent (involving the incurring of legal costs), all seem to be matters adverse to the respondents to which Roche would have had no entitlement but for the continued operation of the contract. However, again, there is the difficulty that there is no express finding on these matters by the primary judge.

66 I do not think the other points raised by Mr. Hammerschlag succeed. The contract cannot fully take effect unless and until conditions precedent are satisfied; but I am inclined to think that the right to rescind for non-satisfaction of the conditions precedent, prior to the Sunset Date, is tied to the particular date specified in cl.2A(b) or any extended date; that is, that if the right to rescind for non-satisfaction of the conditions precedent by that date is lost, there is no right to rescind prior to the Sunset Date, unless the Developer in the meantime gives notice in writing of some other date prior to the Sunset Date. As regards cl.48 and waiver, I am inclined to think that this clause does not preclude the operation of the doctrine of election, which, although sometimes loosely referred to as waiver, is in my opinion a different concept.

Sargent

Roche's awareness

62 It is sufficient if the party electing has knowledge (or awareness) of the facts or circumstances which give rise to the alternative right, even if that party is not aware of the existence of the alternative right itself.

63 Mr Michael Roche was the person most concerned on behalf of Roche, with the matter.

64 The evidence established that had Roche signed an agreement for the Waterfront Brasserie Sublease before 31 May 2004, Mr Michael Roche would have known about it [transcript 263.19]. He would also have known had Roche executed a Deed amending the Independent Certifiers Deed [provided for in clause 2A (v)].

65 The finding is that Mr Michael Roche was aware from 31 March 2004:

i. that the conditions numbered (iii) and (v) in clause 2A had not been satisfied;

66 The balance of probabilities is in favour of a rejection of the evidence given by Mr Michael Roche that the matter of the issue of satisfaction of the conditions precedent had completely slipped his mind between 18 December 2003 and March 2004.

67 Hence the finding is that Roche was aware of circumstances giving rise to the right to rescind prior to 21 May 2004.

Whether Roche engaged in conduct, after becoming aware of circumstances giving rise to the right to rescind, between 31 March and 21 May 2004, justifiable only upon the footing that an election had been made to affirm the contract.

68 It is true that there is some difficulty in identifying the precise dates upon which particular site meetings were held and that one requires to be very cautious to travel through the evidence of a number of witnesses in order to actually tie down what was the date when a particular site meeting was held. The footnotes to Roche's submissions generally appear to establish the precise dates and to identify what is incorrect and what is in fact correct in the evidence of particular witnesses in that regard.

69 That having been said it remains the fact that particular Roche brothers did attend a number of site meetings and an examination of the evidence in relation to what occurred at those meetings does establish, as one would expect, that the discussions took place with regard to the continuing works.

70 As observed in the initial first instance judgment, 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.

71 The following evidence demonstrates that Roche continued to exercise rights under the Development Contract between 31 March 2004 and 21 May 2004:

i. on 1 April 2004 Raymond Yeo and Pino Accardo (Metro Edgley’s consultant) attended a site meeting with Michael and Christopher Roche and Graham Jago of Nordon Jago (Roche’s architect) and discussed the fitout tender, the Liquor Licence and the Roche financing for the Waterfront Brasserie [notes of the meeting appear at blue 3/872-873] ;

ii. on 7 April 2004 Christopher and William Roche attended at a meeting with Mr Accordo and Mr Mark Diblen, site manager for Metro at the Luna Park site. they were accompanied by the management team of the Unicorn Hotel in order to review the progress of the works and to give the management team and understanding of the location and premises for the Luna Park Bar.

iii. on 22 April 2004 Michael and Christopher Roche and Graham Jago attended a site meeting at the basement of the Waterfront Brasserie with Pino Accardo regarding the panels under the boardwalk. Mr Hindes was also in attendance. The meeting had been arranged by Mr Accordo so that Roche could review the high level awning windows of the Waterfront Brasserie and the existing timber boardwalk and in particular, a panel which had been inserted under the boardwalk. At that stage it was not determined on whether to insert a panels under the boardwalk has Roche wanted to maximise the view from the basement of the Waterfront Brasserie and the panels would obscure that view. At the meeting Michael Roche said to not put in the rest of the panels. ;

iv. in late April Pino Accardo had a discussion with Richard Stone of Nordon Jago regarding the tender drawings;

v. on 20 April 2004 Michael Roche had a conversation with Raymond Yeo concerning the Liquor Licence;

vi. on 23 April 2006 Michael Roche had a telephone discussion with Raymond Yeo regarding the development application for the fitout and the Place of Public Entertainment Licence ("POPE Licence");

vii. on 29 April 2004 Michael and Christopher Roche and Graham Jago attended a meeting at Multiplex's offices with Raymond Yeo, Mark Cogo of McKenzie Consulting and Ian Cady from JBA Urban Planning Consultants regarding the fitout development application;

viii. directly after that meeting and on the same day Michael and Christopher Roche and Graham Jago attended a meeting with Raymond Yeo, Mark Cogo, Ian Cady and Stephane Kerr and Nick Fterniatis from the Sydney Harbour Foreshore Authority regarding the fitout development application. The POPE calculations were discussed it being agreed that the council was in error and the statement being made that consent for the Development application could be finalised within a week. ;

ix. Directly after that meeting and on the same day Michael and Christopher Roche and Graham Jago attended a lunch with Raymond Yeo, Mark Cogo and Ian Cady at which the fitout tender and the Roche financing for the Waterfront Brasserie were progressed. Various matters were discussed including the Roche fitout Development Application, the status of the fitout tender, the fitout drawings and marketing for Roche;

x. Following that meeting Michael and Christopher Roche had a discussion with Mr Yeo during the course of which Mr Yeo asked the Roches to push Mr Jago on the tender and asked how funding with the Commonwealth Bank was position. Mr A Roche indicated that the Roche's were working on the feasibility report and asked for a further update of the status of Luna Park

xi. on 28 April 2004 Kalinda Cobby had two telephone discussions with Deborah Bailey (Metro Edgley’s solicitor) relating to variations to the documents required under the Development Contract during which Ms Cobby requested on behalf of Roche that the second defendant pay the costs of the variations and provide a copy of the building model;

xii. on 30 April 2004 Metro Edgley’s solicitors received an email from Kalinda Cobby regarding variations to documents required under the Development Contract;

xiii. on 4 May 2004 Michael Roche had a telephone discussion with Raymond Yeo regarding maximum seating capacities of the Waterfront Brasserie;

xiv. on 7 May 2004 Michael Roche had a telephone discussion with Raymond Yeo concerning the handover of the Waterfront Brasserie, site access, status of the Liquor Licence, proposed fitout presentation and status of fitout tendering and finance;

xv. in early May 2004 Michael and Christopher Roche attended a site meeting at the Waterfront Brasserie with Pino Accardo;

xvi. on 17 May 2004 Pino Accardo had a telephone discussion with Richard Stone concerning the tenderers for the fitout;

xvii. on 20 May 2004 Pino Accardo received a facsimile concerning the Waterfront Brasserie from Nordon Jago;

xviii. on 20 May 2004 Pino Accardo attended a site meeting at the Waterfront Brasserie with Richard Stone of Nordon Jago for a fitout tenderer inspection;

xix. on 21 May 2004 Deborah Bailey had a telephone discussion with Kalinda Cobby regarding payment of the costs for variations to the documents required under the Development Contract;

xx. Michael Roche gave evidence that he did not inform Nordon Jago of his view that the Development Contract was at an end and permitted Nordon Jago to continue to perform work as if the Development Contract was on foot;

xxi. Michael Roche gave evidence that between 31 March 2004 and 21 May 2004 he did not withdraw instructions from Kalinda Cobby and permitted her to continue implementing the Development Contract.

72 The conduct was unequivocal in terms of being justifiable only if an election had been made to affirm the contract.

The issues concerning the guarantors

The Court of Appeal

73 Each of Michael, Chris and William Roche [the Roche brothers], together with their parents Kevin and Gabrielle [the Roche parents], signed guarantees for Roche’s obligations under the Development Contract, the Agreement for Sublease and the Fitout Deed.

74 The Court of Appeal observed that “there would be a real question as to whether the Guarantors remain bound” if Metro succeeds on the combination of conventional estoppel and election. The Court posed 2 issues for determination on the remitter:

themselves

ii. are any other provisions of the guarantees sufficient to maintain liability of the guarantors notwithstanding that, but for a conventional estoppel as between Roche and Metro, the contract would have been automatically discharged.

75 On the pleadings before the Court for the first trial, the question of the guarantors’ liability arose only by adjunct to Roche’s claim for declarations that the Development Contract and Fitout Deed had been automatically rescinded on 31 March 2004.

76 On the pleadings now before the Court, the question of the guarantors’ liability continues to arise in that fashion, but also by adjunct to Roche’s claims for declarations that the Development Contract, Fitout Deed and Agreement for Sublease had been automatically rescinded on 31 December 2004 [and alternatively, in the case of the Agreement for Sublease, on 31 December 2003] or validly terminated on 4 January 2005. In addition, it arises by reason of the claim for damages against them as the Second Cross Defendants.

The present position

77 Metro has not succeeded in its case put in terms of conventional estoppel. Hence Metro has not succeeded on the combination of conventional estoppel and election.

78 The material contracts were automatically rescinded on 31 March 2004

79 There is not even a suggestion by Metro that the Roche parents had an involvement in Roche's conduct between 31 March and 21 May 2004 or could have played any part in the adoption of the material assumption by Metro.

The guarantee terms

80 The guarantees in each of the 3 agreements were, mutatis mutandis, in identical terms. Outside of the reliance placed upon sub clause (b), the only provisions in the guarantees which Metro suggests might maintain liability of the guarantors notwithstanding the automatic rescission are sub-clauses (d) and (i). Sub-clauses (d) and (i) , together with the introductory words of the guarantee provide:

(d) (Guarantors a 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 a primary debtor and contractor jointly and severally with Roche ;

(i) (Invalidity etc.): the liability of the Guarantors will 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.

81 Clause 6(d) does not assist Metro. At best, it equates the obligation of the guarantors to that of Roche. Its effect is the same as that of clause 6(a), which denotes the scope of the guarantee liability. It is delimited by the “covenants, terms and conditions” required to be “performed and observed” on the part of Roche. The effect of the automatic rescission on 31 March 2004, consequent upon the conditions precedent not being satisfied by that date, was that Roche never became bound by any covenants, terms or conditions of the Development Contract, Fitout Deed or Agreement for Sublease, apart from clauses 2A, 1A and 1A respectively. Thus, absent the conventional estoppel, there was nothing to be performed by Roche upon which the guarantees could operate. Identically there was no primary obligation imposed on the guarantors by any of the contracts, if that is the effect of clause 6(d).

82 Clause 6(i) purports to impose a liability on the guarantors even if Roche ceases to be liable. The critical word in clause 6(i) is “becoming”. It connotes that the relevant covenants were once legal, valid, not void and enforceable but, by reason of some event, have ceased so to be. That is not this case, because the consequence of the automatic rescission is that no relevant covenants ever became operative. This is a provision intended to protect the guarantee from discharge where the principal debtor has contracts review or Amadio type claims or defences which depend on the intervention of a Court, hence the use of the word “becoming”.

83 During final address Metro sought to rely upon subclause (b). This is in the following terms:

84 Recital E to the Development Contract refers to a guarantee, not to an indemnity. Properly construed, the subclause (b) indemnity provision now sought to be relied on is no indemnity at all but itself a subsidiary obligation depending for its existence on the breach or non observance by Roche.

The way forward

85 As earlier indicated there are two categories of matters now sought to be pleaded:

i. an issue not based upon events subsequent to the handing down of the first instance judgment was that of the Court of Appeal;

Rescission of Agreement for sublease

86 For the reasons given below [heavily weighted by the precise present state of the pleadings], the principled exercise of the Court's discretion is to accede to the application by Roche to now permit to be litigated an argument based on facts and circumstances which existed and were known to exist at the time of the original hearing.

The principles concerning leave to reopen

87 Clearly the court has jurisdiction to entertain a motion to set aside or vary a judgment provided that the motion is filed before entry of the judgment. The position at common law as stated in Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256 at 265 was as follows:

88 The present position is that the orders made at first instance have been set aside and particular issues remitted to be determined. Presumably this puts the position into the category where judgment is not entered.

89 That notwithstanding it should be recalled that there is a discretion to be exercised. The matter is by no means a fortiori.

90 In Autodesk Inc v Dyason [No. 2] (1993) 176 CLR 300 at 302-3, Mason CJ identified various circumstances in which, under the authorities, the Court has exercised the jurisdiction to reopen a judgment which has apparently miscarried. Of course that is not this case.

91 Nonetheless one of the circumstances identified was the case of New South Wales Bar Association v Smith (unreported, Supreme Court of New South Wales Court of Appeal, 4 July 1991, BC 9102691) in which the New South Wales Court of Appeal reconsidered orders previously made in view of an argument that the Court had mistakenly assumed that particular evidence had not been given at earlier hearings. Another example given was Pittalis v Sherefettin [1986] QB 868 in which a judge recalled orders the day after the day they were made upon determining that he had erred in a material matter in his approach to the case.

92 The guiding principle, as stated by Mason CJ (at 302) is as follows:

93 It does seem to me to be significant to note that Mason CJ described the step of review or rehearing an issue following a judgment as an ‘exceptional’ step.

94 In Brimaud v Honeysett Instant Print Pty Limited, unreported, McLelland J, Supreme Court of New South Wales, 19 September 1988, his Honour noted that the private injustice and public undesirability of permitting the re-litigation of matters already litigated is recognised in a number of principles of law, notably the rules relating to res judicata and issue estoppel, vexation and abuse of process, and the restrictive provisions governing the adducing of further evidence on the hearing of an appeal.

95 The overriding purpose of the Civil Procedure Act and of the rules of Court in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. For the purpose of furthering the overriding purpose, proceedings in any court are to be managed having regard to the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources and the timely disposal of the proceedings and all other proceedings in the Court at a cost affordable by the respective parties.

The complicating factor

96 There is complicating factor in that Roche on the new pleadings, joined issue on the contention which Roche failed to pursue at the original trial, being that the Fitout Deed and Deed of Agreement for Waterfront Brasserie Sublease was automatically rescinded on 31 December 2003.

97 A close examination of the present state of the pleadings in relation to the matter discloses that Roche [in its statement to the Second Further Amended Summons] pleaded in paragraph 13D that Metro did not, prior to 31 December 2003, notify Roche and the guarantors in writing of an extension to the date of 31 December 2003 referred to in clause 1A (b) of the Agreement for Sublease. Metro [in its response to Statement to the Second Further Amended Summons] denied paragraph 13D and continued:

98 The fact is that Metro denied paragraph 13D. The claim to an estoppel is not made out. There is no Anshun estoppel because there is no existing order with which it is inconsistent. There is no issue estoppel or merger because there is no judgment which has determined the issue or in which the issue has become merged. Nor is the expanded principle dealt with in Henderson v Henderson (1843) 67 ER 313 engaged because there has been no adjudication on the issue. There was no pleading that the claim should not be allowed on discretionary grounds.

99 It is appropriate to also make clear that counsel for Metro did not put forward any submission of prejudice "in the true sense of what prejudice means on an application for discretionary re-opening and the like" [transcript 166.33]. There was a concession that it was possible to argue the issue.

100 But for the pleading consideration, it would have seemed to me that the principled exercise of the discretion was not to permit Roche at the present stage of these proceedings, to litigate the particular issue put forward, not being based upon events subsequent to the handing down of the first instance judgment or that of the Court of Appeal.

101 To my mind the fact that the matter was pleaded in the fashion in which it was, alters the picture considerably. It is appropriate to grant leave to litigate the matter.

The Metro submissions

102 Metro submitted that the Roche argument that there needed to be a separate notice extending the date for fulfilment of the conditions precedent was incorrect and misconceived for at least two reasons:

“i. it is obvious that the parties always intended the Development Contract and the Sublease to exist together. It is a commercial nonsense that the parties ever contemplated a circumstance where the Development Contract and Fitout Deed would continue to exist and operate but there would be no sublease. The practical effect of such a result would be that the building would have been built and fitted out to Roche’s specification, that fitout having been paid for by Roche, and yet Roche would have no right to occupy the premises. Such a result is absurd. The Court should simply reject, as a matter of construction, the need for separate and distinct notices to be served in relation to the two contracts; and

inter alia

Dealing with the issue

103 In my view there is no substance in Metro's submissions. The short position is that plainly Metro failed to extend the clause 1A(b) date in the Agreement for Sublease prior to 31 December 2003. Metro’s 18 December 2003 letter, which explicitly extended the clause 2A(b) date in the Development Contract, did not refer to the clause 1A(b) date in the Agreement for Sublease.

104 The automatic rescission provision in clause 1A(b) of the Agreement for Sublease was in identical terms to that in clause 2A(b) of the Development Contract. Four of the five conditions precedent in clause 1A(a) of the Agreement for Sublease were identical to four of the six in clause 2A(a) of the Development Contract.

105 None of the five conditions precedent had been achieved by 31 December 2003. Thus, on the findings of the Court of Appeal, clause 1A(b) operated to automatically rescind the Agreement for Sublease on 31 December 2003.

106 All parties have strongly impressed upon the Court a desire consistently with efficiency, for the Court to proceed to determine the so-called 'new matters' even should it eventuate that Metro would not be able to establish both of the estoppel and election defences. It seems to me appropriate to accede to those joint submissions. In that regard I take into account the possibility that the matter may eventually be treated with by High Court of Australia [where of course, there is still pending an application pursued by Metro for leave to appeal from the reasoning given by the Court of Appeal].

107 It is next appropriate to turn to the so-called "new matters".

Proper construction of commercial contracts

108 Bearing in mind the fact that the opposing contentions in relation to the new matters require attention to be given to the principles applicable to the proper construction of commercial contracts it is appropriate to commence by recording those principles. As Metro submitted the general observations as to the present state of law on these matters to be found in Sagacious Procurement Pty Limited v Symbion Health Limited [2006] NSWSC 654 constitutes a sufficiently informed summary.

109 That summary was as follows:

“43 The court is dealing with a commercial document. In endeavouring to discern the parties intent and in construing the meaning of the words used, the Court will strive to give the document a commercial, reasonable and rational operation: Australian Broadcasting Commission v Australasian Performing Right AssociationLtd (1973) 129 CLR 99 at 109; Hide & Skin Trading Pty Ltd v Oceanic MeatTraders Ltd (1990) 20 NSWLR 310.

Meehan v Jones

Biotechnology Australia Pty Ltd v Pace

Royal Botanic Gardens and Domain Trust v South Sydney City Council

Codelfa

"presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating".

Codelfa

51 To similar effect is the observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 (para 11), quoting with approval Lord Hoffmann in Investors Compensation Scheme [1998] 1 WLR 896 at 912-913 to the effect that interpretation of a written contract involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting.

Investors Compensation Scheme

“The background knowledge which a reasonable person in the position of the parties will be regarded as having, for the purposes of the construction of contracts, includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man with the proviso that it should have been reasonably available to the parties”.

Prenn v Simmonds

: Lakatoi Universal Pty Ltd & Walker

Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd

Australian Broadcasting Commission v Australasian Performing Right Association Ltd

L Schuler AG v Wickman Machine Tool Sales Ltd

[70] Dealing with the circumstances where there are internal inconsistencies in a contract, Gibbs J said “it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument.”: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

[71] Gibbs J’s statement in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 that “the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 at 350 per Neill LJ (with whom Roch and Auld LL.J agreed) that the primary focus is the agreement itself which “must speak for itself, but … must do so in situ and not be transported to a laboratory for microscopic analysis”.

Antaios Compania Naviera SA v Salen Rederierna AB

Maggbury Pty Ltd v Hafele Australia Pty Ltd

Optus Vision Pty Ltd v Australian Rugby Football League Ltd

Royal Botanic Gardens and Domain Trust v South Sydney City Council

· the Court endeavours to give primacy to unambiguous words used in a written contract, this matter generally being approached in the manner outlined by McColl JA in Peppers Hotel Management supra;

· the proper approach seeks the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract” (Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 citing Lord Hoffmann, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114; Peppers Hotel Management Pty Ltd supra at [66 et seq];

· commercial contracts should be construed so as to be given a sensible commercial operation: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 per Giles JA at [64].”

The new matters

110 The remaining so-called "new matters" are as follows:

i. Were the conditions precedent satisfied by the Sunset Date?

ii. Was Practical Completion achieved by the Sunset Date?

111 A deal of the submissions of Roche put in relation to the new matters are of substance. As and when appropriate the reasons which follow adopt many of the Roche submissions. However Metro also succeeds on certain issues.

Satisfaction of conditions precedent by Sunset Date

Construction in general

112 As will be seen in what follows, Metro on a number of occasions draws attention to use of words said to qualify the definition segments of particular contractual provisions. The main example is where clause 2 "Interpretation" of the General Conditions of Contract forming part of the Development Contract Development Contract “commences with the words: “In the Contract, except where the context otherwise requires…"

113 Naturally such terms may qualify particular definitions. Context is always very important. Generally [although not invariably] those terms will take their defined meaning. It is plain that the contracts contain definition sections where terms are used which are capitalised.

114 The general principles of construction apply with particular force to comprehensive contracts regulating a substantial development. Where the meaning in ordinary language of terms of the agreements is plain and unless the context requires, the definitions require to be applied.

Overview

115 It is convenient to return to an overview.

116 By a series of four written extensions on 1 June, 21 September, 25 October and 18 November 2004, Metro purported to extend the clause 2A(b) date and, in the latter 3, also the clause 1A(b) date in the Agreement for Sublease, progressively from 30 June 2004 ultimately to 31 December 2004, the Sunset Date.

117 As Roche has submitted, whether it was required to do so may be a moot point. [the Court of Appeal held at [66] (Beazley JA not deciding at [2]) that if Roche, by its conduct, elected to affirm the contract between 31 March and 21 May 2004 then it lost its right to rescind for non-satisfaction of the conditions precedent until the Sunset Date unless Metro in the meantime gave notice of some other date prior to the Sunset Date]

118 The effect of clause 2A(b) the Development Contract, clause 1(A)(b) of the Fitout Deed and clause 1A(b) of the Agreement for Sublease is that each of those agreements is automatically rescinded if the conditions precedent were not satisfied by the Sunset Date [That follows from the findings of the Court of Appeal as to the effect of the automatic rescission provision – Appeal judgment [47]]. If so then Roche had no obligations under any of the agreements and its non performance was neither in breach nor repudiatory. Indeed, Roche is then entitled to the return of its deposit. [Appeal judgment [49]]

119 Roche contends that two conditions precedent remained unsatisfied by 31 December 2004, namely:

i. consent by the Financier (a condition precedent to the Development Contract, and concomitantly the Fitout Deed, and also to the Agreement for Sublease);

Crown Lands Act

120 Each of these matters can be dealt with fairly shortly.

Consent of financier

121 Clause 2A in the Development Contract provides inter alia as follows:

(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).

122 It is common ground that on 24 December 2004 a letter was written by Minter Ellison to Clayton Utz the solicitors for Metro, advising inter alia:

“… We confirm that on or around 24 July 2004, the loan provided by BOS International (Australia) Limited (“Financier”) to Metro Edgley Pty Limited (“Project Loan”) under the Luna Park Subscription Agreement dated 17 December 2002, as amended (“Subscription Agreement”) was fully repaid. Where appropriate, terms used in this letter have the same meaning as in the Subscription Agreement.

· the clawback provisions contained in the Financing Document; and

· the indemnity provided by Multiplex Limited to the Financier,

1 the Roche Development Contract;

2 the Deed of Agreement to Waterfront Brasserie Sublease; and

123 Mr Rovers the solicitor for BOS International (Australia) Limited ("BOS"), [the financier of Metro] in connection with the redevelopment of the Luna Park site] gave evidence that on or about 24 July 2004, prior to the execution of the Deed of Consent and Variation, Metro repaid in full the finance provided by BOS to Metro pursuant to the Financing Documents.

124 During the hearing there was close debate whether or not three paragraphs [13, 14 and 15] of the affidavit of Mr Rovers were admissible. Following the debate a ruling on the issue was reserved.

125 Each of paragraphs 13 and 14 sought to prove that Minter Ellison had been given express instructions by BOS to provide a letter to Metro indicating that Metro waived the requirement to consent to the Development Contract, Brasserie Sublease and the Deed of Consent to the Brasserie Sublease.

126 Paragraph 15 simply sought to give evidence of the above-described letter.

127 Following some debate wherein Metro made plain that it sought to prove the authority of Minter Ellison to write the letter, it emerged that the stance taken by Roche was not to deny that Minter Ellison had authority to write the letter, but to deny that Minter Ellison had authority on the face of the letter to convey the material non requirement.

128 In my view each of the paragraphs was admissible and is allowed. They do prove that Minter Ellison had authority to write the letter. They do not prove that the letter on its face served as an advice by the financier's agent that its consent was not required to the subject contracts and deeds.

129 Ultimately the issue is one of short compass for determination by the Court. The letter was not a pleading. Nor was it a contract. Approaching the matter objectively, a reasonable bystander conversant with the circumstances would infer from the terms of the letter that it was sufficient to constitute an advice that the financier's consent was not required to the subject contracts and deeds. Precisely the same inference would have been appropriate to be drawn by Metro on receipt of the letter.

130 For those reasons and by dint of the sending of the letter, the financier waived the need for its consent to the relevant transaction documents. Hence Roche has failed to establish that the first of the conditions precedent on which it relies [in terms of the relevant consent by the financier not having been given] remained unsatisfied by 31 December 2004.

Ministers Consent

131 In what follows the submissions put by Metro are accepted as of substance.

132 Roche asserts that:

i. the consent of the Minister was not a consent to the Sublease; and

Crown Lands Act

133 With respect to the first proposition, the Minister’s consent was to the Sublease. The consent was a schedule to the Deed of Consent (Waterfront Brasserie). The consent was expressed to be in relation to “the within Deed and the Annexed Documents”. Annexure “A” to the Deed of Consent (Waterfront Brasserie) was the Agreement for Waterfront Brasserie Sublease. This position is made clear from recital B in the Deed of Consent (Waterfront Brasserie) and the definition of AWBS under clause 1.1 and clauses 2 and 8.

134 In terms of which Minister had to sign the consent, the word ‘Minister’ is defined under clause 1.1 under the Sublease as meaning “Minster responsible for the administration of the Crown Lands Act, 1989.” The relevant Government Gazette apportioning Ministerial responsibility for the administration of Acts [No. 35 dated Friday 13 February 2004] provides that the Minister for Tourism and Sport and Recreation is responsible for the Crown Lands Act, 1989 “so far as it relates to the …. Luna Park Reserve (within the meaning of the Luna Park Site Act, 1990)..” Three other Minister’s also share responsibility for the Crown Lands Act in different respects.

135 As a matter of construction, and looking at the matter objectively, the parties cannot have intended that the three Ministers [to whom there had not been allocated the responsibility for the administration of the Crown Lands Act, in so far as it applied to the Luna Park Reserve], would be required to execute a consent wholly outside their responsibility. The Court seeks the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract.

136 This objective view is reinforced by the antecedent lease between the developer and LPRT dated 23 December 2002 (where Minister was not a defined term) which operated with the consent of only one Minister [clause 3.1(e) on Blue AB page 158 and the last page Blue AB 215] being the then Minister responsible for the Crown Lands Act with respect to Luna Park Reserve.

137 The submission to the contrary put by Roche heavily relies upon the requirement for expressions in the Agreement for Sublease to be interpreted so that the singular includes the plural. Hence it is said that "the Minister" in the definition of "Minister" is to be interpreted to include the plural, so that where there is more than one person filling the description "Minister responsible for the administration of the Crown Lands Act 1989 (NSW)", all such persons need to give their consent but did not. In my view this is an area where the context can be taken into consideration. Ultimately the issue is simply a question of construction. And here it is appropriate to invoke the construction which gives a sensible commercial operation.

Practical completion by the Sunset Date

Metro's specific submission

138 Metro has submitted as follows:

i. The Roche case is that practical completion has not occurred, despite the independent certifier issuing a certificate of practical completion, due to the interpretation it places on the words “practical completion” in clause 35.2.

ii. Roche’s argument, whilst having an initial attraction of simplicity, is wrong. Roche contends that as the words “practical completion” are defined, one must read the whole of that definition into the requirements of clause 35.2.

“In the Contract, except where the context otherwise requires:

…. “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 4.23 and clause 1.21 of annexure part C.” (emphasis added)

iv. Roche specifically relies upon the inclusion of the words “ subject to clause 4.23 and clause 1.21 of annexure part C ” in the above definition.

v. The short question of construction is whether the parties intended that the words “practical completion” in clause 35.2 were to pick up the definition or whether the context requires either that the definition be ignored in full, or in part, ignoring the last phrase in the definition which reads “subject to clause 4.23 and clause 1.21 of annexure part C”.

139 Metro then proceeds to list a number of matters concerning what practical completion actually is; the contention that the majority of matters in clause 42.3 & 1.21 of annexure C of the Development Contract address the process of issuing of the certificate of practical completion rather than the substance and hence do not stipulate conditions precedent that could affect the purely factual question of whether particular building works were achieved to the level required to enable the fit-out to commence; the contention many of the matters stipulated in clause 42.3 & 1.21 of annexure C of the Development Contract are wholly irrelevant to Roche commencing its fit-out; and submitting that there were inconsistent requirements for the serving of notices of intended date for achieving practical completion: under clause 42.3(a)(i)

140 In my view none of these submissions are of substance. The parties are to be taken as intending that the words ‘practical completion’ in clause 35.2 were to pick up the definition in full. That is the natural meaning of the words used.

141 In my view the submissions of Roche in relation to these issues are generally of substance. They are adopted in what follows.

142 If Metro failed to achieve “Practical Completion” by the Sunset Date then, under clause 35.2, Roche was entitled to terminate the Development Contract, as it purported to do on 4 January 2005, and have the deposit refunded.

143 “Practical Completion” effectively means, in relation to the Works, the date so certified by the Independent Certifier “subject to clause 42.3 and clause 1.21 of Annexure Part C” (emphasis added). The “Works” are those to be executed on the Waterfront Brasserie Lot in accordance with the Development Contract, the Developer’s Program and Roche’s Project Requirements [The definitions of “Works” and “Site” are at Blue 2/299. The “Contract” referred to in the definition of “Works” is the General Conditions of Contract and the Developer’s Program – see Blue 2/293 for the definition of “Contract” and Blue 2/284 for clause 1 of the Formal Instrument of Agreement, referred to in the definition of “Contract”. The Developer’s Program is Annexure Part F to the Development Contract at Blue 2/366-7 (see definition of “Developer’s Program” at Blue 2/294)]. Roche’s Project Requirements comprise 185 pages of specifications and drawings, contained in Annexure Part D to the Development Contract [The definition of “Roche’s Project Requirements” is in clause 2 of the Development Contract at Blue 2/298. It refers to the document stated in Annexure Part A and the documents in Annexure Part E. The latter is a mistaken reference and should refer to Annexure Part D. The relevant item in Annexure Part A is item 9 at Blue 2/347. Item 9 states that the documents describing Roche’s Project Requirements are the Draft Documents and the Preliminary Design. Each of those expressions is defined in clause 2 of the Development Contract at Blue 2/295 and 2/298 in a circular fashion to pick up particular documents referred to in Roche’s Project Requirements. Annexure Part D formed part of Ex PX (pages 229-413) at the original trial. It was not reproduced in the Blue Books, but has been extracted from the original exhibit and is provided in a separate binder labelled “Roche’s Project Requirements”].

144 Practical Completion was not achieved by the Sunset Date because the following conditions precedent in clause 42.3 and clause 1.21 of Annexure Part C were not satisfied:

(a) initial and final joint inspections were not notified or carried out (clause 42.3(a)(i) and Annexure Part C clause 1.21(b) and (d));

(b) Practical Completion of the Works was not reached simultaneously with Practical Completion of the Luna Park Works (Annexure Part C clause 1.21(a));

(c) Compliance Reports were not delivered to LPRT (clause 42.3(f)(iii));

Conditions precedent

145 Clause 42.3 and clause 1.21 of Annexure Part C together set out a process by which Metro, Roche and Incoll Management Pty Limited (Incoll), the Independent Certifier, together with certain other interested parties, were to participate in the process leading to the issue of a certificate of Practical Completion.

146 The issue of a certificate of Practical Completion was a significant milestone event because it was one of several critical triggers for Roche’s obligation to make the substantial contractual payment of $13 million required by the Development Contract [Under clause 42.1(d) (Blue 2/332) the Contract Sum of $13 million (see definitions at Blue 2/293 and 2/347) was payable on the Settlement Date, being 10 business days after the Date of Practical Completion (Blue 2/299). Clause 42.2 provided several further pre-conditions for payment, including grant of the Waterfront Brasserie Sublease and procurement of the liquor licence and the POPE licence (Blue 2/333)].

147 The requirements of clause 42.3 and clause 1.21 of Annexure Part C are conditions precedent to the issue of a valid certificate of Practical Completion. This is made plain by the words “subject to” in the definition of “Practical Completion” which show that satisfaction of those clauses is a necessary element of achieving Practical Completion.

148 It is made even more plain by the mandatory and emphatic language of particular sub-clauses, including, relevantly:

i. clause 42.3(a) provides that Metro “must” give at least 15 Business Days notice of the anticipated date of Practical Completion, as a prelude to the initial inspection which is to take place within 5 business days of the notice;

ii. clause 42.3(f) provides that a Certificate of Practical Completion “may not issue unless and until” , amongst others, the Compliance Reports have been delivered to LPRT and Approvals have been delivered to Roche and LPRT;

iii. clause 1.21(a) provides that Practical Completion of the Works “must” occur simultaneously with Practical Completion of the Luna Park Works and the Car Park Works;

iv. clause 1.21(b) provides that Metro “must” give 40 Business Days notice of the estimated date of Practical Completion, as a prelude to the final inspection required by clause 1.21(d);

“must”

149 The clause 1.21(d) joint inspection after the date Metro estimates Practical Completion will be reached is fundamental. The obligation of the Independent Certifier to issue a certificate of Practical Completion is dependent upon his being satisfied at the joint inspection that Practical Completion has been reached [Clause 1.21(e)]. If not so satisfied he must identify any problems and, after rectification by Metro, conduct a further joint inspection. The process is repeated as often as necessary until he is satisfied at the joint inspection that Practical Completion has been reached. It is only then that he may issue a certificate of Practical Completion [Clauses 1.21(f)-(i)].

150 It follows that, since clause 42.3 and clause 1.21 of Annexure Part C are conditions precedent, unless there has been literal compliance with their requirements, ‘Practical Completion’ has not been achieved. Substantial performance does not suffice. A condition precedent has either been performed or it has not: Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689.

Inspections

151 The Development Contract provided for Roche to be involved in the process leading to certification of Practical Completion by participating, having been given adequate notice, in both an initial inspection and a final inspection. In effect the Development provided for a 5 step process:

i. Metro to provide Roche with 40 business days written notice of the estimated date of Practical Completion (“first notice”) (clause 1.21(b));

ii. Metro to provide Roche with 15 business days notice of the anticipated date of Practical Completion (“second notice”) (clause 42.3(a)), which date presumably may have changed since the first notice;

iii. Metro, Roche and others to carry out a joint “initial” inspection within 5 business days of the second notice (clause 42.3(a)), at which time Practical Completion ought not to have been reached since, if the second notice was accurate, it would be a further 10 business days away;

iv. achievement of Practical Completion;

152 The Independent Certifier was not appointed by the agreement of the parties by the execution of the Deed of Variation of Independent Certifiers Deed until 30 December 2004. Until that time there was no Independent Certifier within the meaning of the Development Contract.

153 The contention by Metro that the Deed of Variation of Independent Certifiers Deed delivered by Roche on 30 December 2004 had a retrospective operation so as to convert the purported Certificate of Practical Completion dated 17 November 2004 into a Certificate of Practical Completion is rejected. Without express words an instrument is not to be construed so as to operate retrospectively.

154 A Certificate of Practical Completion which could not have bound Roche when it was given could not have become and did not become a Certificate of Practical Completion valid against Roche with retrospective effect. Keating on Building Contracts [5th edition, page 112] makes clear that a certificate will not be a binding certificate unless the person had, at the time when the certificate was given, the power to certify.

155 Additionally, under the Accession Deed Roche agreed to become bound by the Independent Certifiers Deed with respect to certification “of the matters required to be certified by the Independent Certifier under the Waterfront Brasserie Development Contract”. Given that all obligations under that contract were suspended until the conditions precedent were fulfilled it is difficult to see how a certificate which pre-dated fulfilment was “required to be certified” under the Development Contract within the meaning of the Accession Deed.

156 A submission was advanced by Metro to the effect that on the state of the pleadings, it was not open to Roche to litigate the issue as to the late December 2004 execution of the Deed of Variation of the Independent Certifiers Deed. However the amended cross claim contended that a valid certificate of practical completion had been issued on 17 November 2004 following an achievement of practical completion on 8 November 2004. This allegation was denied in Roche's response.

157 In my view the issue was available to be litigated.

158 Metro gave only one notice. It was given on 25 October 2004. It was, in terms, given pursuant to clause 42.3(a)(i). In it Metro stated that it anticipated Practical Completion would be reached on 10 November 2004 and nominated 1 November 2004 as the date for joint inspection.

159 The Roche brothers attended a meeting with Mr Yeo and others on the Site on 1 November 2004. They did so expressly on the basis that Roche did not concede the meeting was “a or the” meeting contemplated by the Development Contract. That meeting was the only inspection of the Works carried out after 25 October 2004 [there is no evidence of any other meeting. Mr Nicholas from Incoll Group, the Independent Certifier, has not put on evidence].

160 Incoll purported to issue two certificates of Practical Completion. It is not clear whether Metro relies on both certificates or only on the later [Defence paragraph 9B(b) refers to both but Cross Claim paragraph 42 refers only to the latter]. The first was issued on 18 June 2004 and certified Practical Completion of the Bar/Brasserie (Base Building Works) as having been reached on 17 June 2004 [the certificate actually states the date of Practical Completion as “17 June 2003”, but that is a typographical error]. The second was issued on 17 November 2004 and certified Practical Completion as having been reached on 8 November 2004.

161 The entire certification process was fatally flawed.

i. Metro did not give the first notice at all;

ii. Metro’s 25 October 2004 letter, which purported to be the second notice, did not give the required 15 business days notice – the period from 25 October to 10 November was 11 business days;

a) the conditions precedent had not been satisfied so that Roche had no obligation to attend;

b) the parties had not entered into a deed amending the Independent Certifiers Deed, as required by clause 2A(a)(v), and pursuant to which the independent certification process was to occur;

c) the notice pursuant to which the meeting was called was defective (see (b));

162 It follows that the conditions precedent to the achievement of Practical Completion set out in clauses 42.3(a)(i) and Annexure Part C clause 1.21 have not been satisfied. Practical Completion as not occurred and neither certificate of Practical Completion issued by Incoll is effective to certify the contrary.

Simultaneous completion

163 Clause 1.21(a) of Annexure Part C requires that Practical Completion of the Works must occur “simultaneously” with Practical Completion of the Luna Park Works and the Car Park Works. Simultaneous means at the same time.

164 Metro pleads that Practical Completion of the Works was achieved on 8 November 2004, relying on the second certificate.

165 Practical Completion of the Luna Park Works and the Car Park Works was achieved on 31 March 2004. Even if Practical Completion was achieved on 8 November 2004, as pleaded by Metro, it did not occur simultaneously with Practical Completion of the Luna Park Works and the Car Park Works.

Compliance Reports

166 Clause 42.3(f)(iii) requires that “all Compliance Reports have been delivered to LPRT”. The Compliance Reports were certificates required to be provided by Metro to LPRT 6 monthly during the carrying out of the Luna Park Works, certifying that Metro and LPS were complying with clause 4.16 of the Agreement for Lease, which imposed various environmental compliance obligations, and the environmental management plan for the Luna Park Works. The environmental management plan was one produced by Multiplex as part of the Project Management Plan. The Luna Park Works commenced in January 2003.

167 Metro pleads the following as constituting Compliance Reports:

(a) the Independent Certifier’s monthly progress drawdown reports to LPRT;

(b) Metro’s monthly Project Control Group Reports to LPRT; and

168 Neither the monthly progress drawdown reports nor the PCG Reports are Compliance Reports because they do not certify that Metro and LPS are complying with the undertakings in clause 4.16 of the Agreement for Lease and with the environmental management plan for the Luna Park Works. Further the monthly progress drawdown reports are provided by Incoll, not Metro.

169 Oral reports by Mr Yeo are not certificates.

170 In addition to the pleaded items, Metro sent a letter dated 16 March 2004 to LPRT, to which was attached a letter dated 15 March 2004 from Multiplex to Metro, in which Multiplex confirms that the environmental compliance requirement in clause 4.16 of the Agreement for Lease has been satisfied. Metro’s letter is not a Compliance Report. It does not does not certify that Metro and LPS are complying with the undertakings in clause 4.16. Indeed, it does not refer to LPS at all. In any event, it was issued at the end of the Luna Park Works project. It is not the plural, 6 monthly Compliance Reports, required to have been provided from the commencement of the Luna Park Works in January 2003 to March 2004.

171 It follows that Compliance Reports have not been delivered to LPRT as required by clause 42.3(f)(iii).

Approvals for use and occupation

172 Clauses 42.3(f)(iv) and (v) require all necessary regulatory consents and approvals for the erection, use and occupancy of the Site and Works to have been delivered to Roche. The Works are, in essence, the works to be completed on the Site in accordance with Roche’s Project Requirements.

173 A number of consents and approvals, including an interim Occupation Certificate and a Statement of Compliance, which permitted Roche to occupy the Works for the purpose of carrying out its fitout, were delivered to Roche on 9 November 2004.

174 However no complying development consent for Roche’s Fitout was delivered to Roche. Nor was a POPE licence delivered.

175 Roche required, by law, a development approval permitting it to embark on the Roche fitout before it could use and occupy the Works to do so. Such a development approval was thus an Approval within the meaning of clause 42.3(f)(v), and possibly also 42.3(f)(iv).

176 Metro delivered a Development Consent for Roche’s Fitout (Fitout DA) to Roche on 31 August 2004. It did not comply with Roche’s Project Requirements. Roche’s Project Requirements provided that the operating hours for the Brasserie were to be 7am to 1pm Monday to Saturday and 7am to 12 midnight Sunday. However clause F7 of the Development Consent permitted only substantially reduced hours for external areas – namely 10am to 10pm for Sunday to Thursday and 10am to 12midnight for Fridays.

177 Secondly, the Fitout DA did not comply with the requirements for the POPE Licence.

178 The issue of POPE licences is provided for in s68 read with s89 of the Local Government Act 1993. Those provisions provide that a person may carry out an activity only with the prior approval of the Council in certain cases, one being to “use a building or temporary structure as a place of public entertainment or permit its use as a place of public entertainment”.

179 The POPE Licence was also an Approval required to be delivered to Roche under clause 42.3(f)(v). In any event, the Works were required to be completed so as to permit the POPE Licence to be issued. The POPE Licence was defined in clause 6.1 of the Fitout Deed as a Place of Public Entertainment Licence “which permits the maximum capacity and use of the Premises having regard to the Design Documents and the requirements of … the relevant Authority which is to issue the POPE Licence”. However the Fitout DA did not permit the maximum capacity and use of the premises because, by clause A3, it confined the use of the Brasserie as a dance venue to 20% of the Brasserie’s annual events and, by clause F7, it limited the Brasserie’s external operating hours.

180 The proposition that North Sydney Council had no power to grant such a licence after completion of the building but before the Roche fitout is without substance.

181 What was sought was an approval in principle, for which the legislation makes no provision. The Council’s attitude to that application establishes nothing. Nothing in law inhibited it from granting a POPE Licence.

182 The way the Development Contract is structured is unexceptional. By the time the fitout would commence all of the conditions precedent would be fulfilled. Payment of the price under the Development Contract would only occur after Practical Completion (clause 42.1). Roche having committed itself to pay $18.5 million would be unlikely to take a lease of premises if it could not use them for the very purpose for which they were constructed. Roche’s risk was paying for the fitout. The defendants’ risk was constructing the base building.

183 Metro’s submission that the POPE Licence could not have been required because it could not have been granted before the fitout is not of substance. If Metro did not get it they would not be paid (clause 42.1(e)(vii)).

184 The Development Contract operates according to its tenor and without the POPE Licence no Certificate of Practical Completion could be issued.

185 A critical matter is that the failure to obtain the POPE Licence does not bring the contract to an end. Failure to obtain the POPE Licence means that Practical Completion is not reached either by the Sunset Date or at all and Roche then has the election to bring the contract to an end without having to pay. It however will have borne the risk of doing the fitout and it ultimately transpiring there is no POPE Licence. It would then be put to an election whether to live with that or not, that is whether to rescind under clause 35.2.

186 Roche would have a cause of action against the Developer if the Developer did not work together to obtain the POPE Licence under clause 6.2 of the Fitout Deed.

Conclusion

187 It follows that Metro did not achieve Practical Completion by the Sunset Date as required by clause 35.2 because the conditions precedent to doing so were not satisfied. Roche had no obligation to enter into the Waterfront Brasserie Sublease and no obligation to complete the Roche Fitout.

The repudiation case

188 It follows from the findings given that even had Metro been in a position to establish both its estoppel and election cases, Roche would not have been shown to have repudiated its obligations under the Development Contract in the manner contended for by Metro.

Appropriate remedy if there is only one overarching doctrine of estoppel

189 Having dealt with the miscellany of matters sought to be raised by the parties [both in terms of the remitter issues as well as the other issues], it seems to me that there remains only one remitter issue for determination. Even here one is dealing with matters which may well be entirely academic. In any event the parties are entitled to have the benefit of this Court complying to the letter with the dictate of the Court in terms of the entirety of the matters said to require attention on the remitter.

190 I refer here to the judgment of Hodgson JA (at [76]) where, against the event that the proceedings proceed to the High Court of Australia, it was said that it would be appropriate for a view to now be given as to what would be the appropriate remedy if there is now just one over-arching doctrine of estoppel [under which the appropriate relief is the minimum required to prevent injustice].

191 Upon the assumption that there is now just one over-arching doctrine of estoppel, under which the appropriate relief is the minimum required to prevent injustice from unconscionable conduct, the underlying parameter concerns Metro seeking to hold Roche to an $18.5 million contract involving a forty year lease, on the basis of an unquantified reliance over a short period of time. In my view the appropriate remedy would be an inquiry as to the damage suffered by Metro, which matter could be referred to a registrar or to an Associate Justice of the Court.

Short minutes of order

192 The parties are to bring in short minutes of order on which occasion costs may be argued.

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28/08/2006 - Spelling mistake - change "Edgely" to "Edgley" on first page in heading - Paragraph(s) no paragraph number

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Citations

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

Most Recent Citation

Metro Edgley Pty. Limited & Anor. v M.K. & J.A. Roche Pty. Limited [2007] NSWCA 160

Cases Citing This Decision

1

Metro Edgley Pty. Limited & Anor. v M.K. & J.A. Roche Pty. Limited [2007] NSWCA 160

Cases Cited

25

Statutory Material Cited

3

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

MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39

Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64

CITATION:	MK & JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2006] NSWSC 810 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	07/08/06, 08/08/06, 09/08/06
JUDGMENT DATE :	25 August 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Defendant unable to establish both of the estoppel and election defences. Findings on matters remitted by Court of Appeal. Findings on new issues litigated
CATCHWORDS:	Contract - Construction - Principles - Whether provision for automatic rescission on non-satisfaction of conditions self executing or requires the giving of notice - Whether awareness of circumstances entitling party to terminate contract - Whether action adverse to other party established - Conventional estoppel - Whether distinct from equitable estoppel - Whether reliance by and detriment to party seeking to raise estoppel established - Whether the party against whom estoppel asserted played such a part in adoption of assumption that it would be unjust if it were left free to ignore it - Election - Proceedings before the Court on remitter from Court of Appeal for the purpose of the Court making factual findings necessary to determine whether defendant had proven its estoppel and election defences - Proceedings also remitted in order for findings to be made in respect of liability of the guarantors - Parties elect to amend pleadings to embrace events taking place following first instance judgment - Whether plaintiff entitled to litigate an issue which could have been but was not litigated at first instance
LEGISLATION CITED:	Civil Procedure Act Crown Lands Act 1989 (NSW) Luna Park Site Act, 1990 (NSW)
CASES CITED:	Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Autodesk Inc v Dyason [No. 2] (1993) 176 CLR 300 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Brimaud v Honeysett Instant Print Pty Limited [unreported, McLelland J, Supreme Court of New South Wales, 19 September 1988] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Henderson v Henderson (1843) 67 ER 313 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Pty Ltd (1990) 20 NSWLR 310 International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Lakatoi Universal Pty Ltd v Walker [2000] NSWSC 113 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 Meehan v Jones (1982) 149 CLR 571 New South Wales Bar Association v Smith [unreported, Supreme Court of New South Wales Court of Appeal, 4 July 1991, BC 9102691] Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Pittalis v Sherefettin [1986] QB 868 Prenn v Simmonds [1971] WLR 1381 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Sagacious Procurement Pty Limited v Symbion Health Limited [2006] NSWSC 654 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Smith v New South Wales By Association (No 2) (1992) 176 CLR 256 Tricontinental Corporation Ltd v HDFI Ltd (1987) 21 NSWLR 689. Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15
PARTIES:	MK & JA Roche Pty Limited (First Plaintiff) Michael Kevin Roche, Christopher John Roche, William Timothy Roche, Kevin Michael Roche and Gabrielle Mary Roche (Second Plaintiffs) Metro Edgley Pty Limited (First Defendant) Multiplex Limited (Second Defendant)
FILE NUMBER(S):	SC 50069/04
COUNSEL:	Mr D Hammerschlag SC, Mr V Kerr (Plaintiffs) Mr F Kunc (Kevin Michael Roche and Gabrielle Mary Roche) Mr CRC Newlinds SC, Ms R Francois (Defendants)
SOLICITORS:	Lane & Lane (Plaintiffs) Baker & McKenzie (Kevin Michael Roche and Gabrielle Mary Roche) Clayton Utz (Defendants)