Oxanda Childcare Pty Ltd v MAAG Developments Pty Ltd
[2018] VSC 370
•13 July 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S CI 2015 06246
| OXANDA CHILDCARE PTY LTD (ACN 166 793 004) ATF THE OXANDA EDUCATION SERVICES TRUST | Plaintiff |
| v | |
| MAAG DEVELOPMENTS PTY LTD (ACN 603 949 891) | Defendant |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 July 2018 |
DATE OF JUDGMENT: | 13 July 2018 |
CASE MAY BE CITED AS: | Oxanda Childcare Pty Ltd v MAAG Developments Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 370 |
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LEASES AND TENANCIES – Agreement for Lease part of sale and lease-back arrangement – Construction of termination provisions – Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 – Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 – Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 – Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.
WORDS AND PHRASES – Meaning of “and” and “or” – Associated Newspapers Ltd v Wavish (1956) 96 CLR 526 – Re The Licensing Ordinance (1968) 13 FLR 143 – Larwint Pty Ltd v Norwich Union Life Australia Ltd (2007) 15 VR 371 – Able Demolition & Excavations Pty Ltd v Yarra Ranges Shire Council [2008] VSC 294.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D.G. Collins QC with Mr T.E. Barry | Arnold Bloch Leibler |
| For the Defendant | Mr L. Glick QC with Ms C. Pierce | SBA Law |
HIS HONOUR:
Introduction
This proceeding arises out of a contract for the sale of land at 19-21 Point Cook Road, Altona Meadows (“the Land”) by Oxanda Management Danke Pty Ltd (ACN 167 210 077) (“Oxanda Management”) to the Defendant, MAAG Developments Pty Ltd (ACN 603 949 891) (“MAAG”) dated 11 March 2015 (“the Contract of Sale”) and an agreement for MAAG to build and lease to the Plaintiff Oxanda Childcare Pty Ltd (ACN 166 793 004) ATF the Oxanda Education Services Trust (“Oxanda”) under an Agreement for Lease between MAAG and Oxanda dated 21 April 2015 (“the Agreement for Lease”) the Land for a childcare centre.
The issue which now remains for determination in this proceeding is whether MAAG was entitled to terminate the Agreement for Lease, which MAAG purported to do by letter dated 7 September 2015.
It is common ground that this issue is to be resolved as a matter of the proper construction of cl 2.1(e) of the Agreement for Lease, which entitled either party to terminate if certain approvals from the Hobsons Bay City Council (“the Council”) enabling the lawful construction of the childcare centre had not been obtained “and” (Oxanda contends) but “or” (as MAAG contends) MAAG had not completed its purchase of the land by a particular date. Thus, the question is whether these elements as the precondition for enlivening the right to terminate under cl 2.1(e) were separate and independent elements, each capable of enlivening such right, or cumulative so that both had to be satisfied before the right was enlivened.
An additional issue which was the subject of these proceedings was whether MAAG breached cl 2.1(b) of the Agreement for Lease, which required MAAG to obtain the Council approvals in circumstances where MAAG says that it was prevented from doing so by Oxanda’s failure to consent to the form and content of the plans of the childcare centre required for submission to the Council pursuant to cl 2.1(c)(i) of the Agreement for Lease. The parties agree that this is not now an issue in the proceedings.
At the conclusion of the hearing of this matter, the Court was advised that the parties agree that in the event it is found that Oxanda is entitled to damages for the wrongful termination of the Agreement for Lease by MAAG, then it is accepted that the quantum of such repudiation damages should be fixed at $3.5 million—a sum consistent with the expert report of Ms Piera Murone dated 14 March 2018. Ms Murone was briefly cross-examined in relation to her expert report, but more by way of clarification than any challenge to its methodology or contents.
Additionally, though this goes to the cl 2.1(b) of the Agreement for Lease issue and so is only referred to for completeness, Oxanda has advised MAAG that, in order to reduce the cost of the trial in the proceeding, and in accordance with its obligations pursuant to the Civil Procedure Act 2010, Oxanda will not contend that it had given its consent prior to 7 September 2015 to the form and content of applications for certain “Landlords Approvals” that MAAG had an obligation to obtain pursuant to cl 2.1(b) of the Agreement for Lease. In any event, MAAG concedes that Oxanda does not need to prove that contention once it has established that MAAG was not entitled to terminate the Agreement for Lease on 7 September 2015.
Thus, at trial, the ultimate issue between the parties is Oxanda’s contention that MAAG did not have a right to terminate the Agreement for Lease pursuant to cl 2.1(e) of the Agreement for Lease, which MAAG purported to exercise on 7 September 2015, because MAAG had already settled its purchase of the Land as part of the sale and leaseback transaction which has been briefly described.
Factual background
Having regard to the position that the only issue in controversy now before the Court is the critical construction issue with respect to cl 2.1(e) of the Agreement for Lease, the factual matters now relevant are quite constrained.
Oxanda was established in November 2013 and is the plaintiff in this proceeding in its capacity as trustee of the Oxanda Education Services Trust. That trust was, at all material times, the owner and operator of a childcare centre business.
On 20 May 2014, Oxanda Management, a related company of Oxanda, acquired the Land for the purpose of developing and operating a childcare centre.
On 11 March 2015, Oxanda Management and MAAG entered into a sale and leaseback arrangement in the form of the Contract of Sale and the Agreement for Lease.
The Contract of Sale contains “Special Conditions”, including the following:
1.Definitions
In this Contract:
Agreement for Lease means the Agreement for Lease attached to the Vendor’s Statement at Annexure 1.
…
…
16. Nomination
16.1 Nomination
(a) The Purchaser may nominate an additional or substitute transferee if:
(i) the purchaser is not in breach of this Contract;
(ii) at least 7 Business Days before the due date for settlement, the Purchaser notifies the Vendor of the name, ACN (if applicable), address and any other details of the transferee of title to the Property as reasonably required by the Vendor;
(iii)at least 5 Business Days before the due date for settlement, the Purchaser delivers to the vendor’s legal practitioner:
(A)a signed notice nominating the additional or substitute transferee;
(B)the Agreement for Lease (in duplicate) in a form approved by the Vendor:
(1)and amended as follows:
(i)delete the name of the Landlord wherever occurring and replace with the name of the transferee of title to the property; and
(ii)delete the ACN of the Landlord wherever occurring and replace with the ACN of the transferee of title to the property (if applicable); and
(2)executed by the transferee of title to the property as Landlord; and
…
…
17. Agreement for Lease
17.1 Entry into Agreement for Lease
On settlement:
(a)if there is no additional or substitute transferee under clause 16, the Agreement for Lease must be executed, entered into and exchanged by the Landlord and the Tenant named in the Agreement for Lease; or
(b)if there is an additional or substitute transferee under clause 16, the Agreement for Lease referred to in and amended under clause 16.1(a)(iii)(B), must be executed and entered into by the Landlord and the Tenant named in the Agreement for Lease referred to in and amended under clause 16.1(a)(iii)(B).
…
22. Further condition regarding lease documents
Notwithstanding anything else in this contract, the parties agree that:
(a)within 24 hours after exchange of this contract, the parties will execute the Agreement for Lease; and
(b)settlement of this contract is conditional on execution of the Agreement for Lease.
The Agreement for Lease referred to in the definition of the same contained in the Special Conditions of the Contract of Sale is the Agreement for Lease to which reference has been made—that is, an agreement by MAAG to lease the Land to Oxanda for the purposes of a childcare centre.
The Agreement for Lease contains a number of terms which are of particular relevance to the present live issue, including:
1.1 Definitions
…
Approvals means the approval of every relevant government, statutory authority and service provider, including the benefited party of any easement registered over the Land, for the relevant works to be lawfully commenced and completed.
…
Landlord’s Works means:
(a)all work to be undertaken (or already undertaken) by or on behalf of the Landlord in respect of the Premises as referred to in Schedule 1 of this Deed; and
(b)the building work generally described in the Specifications to be carried out (or already carried out) by the Landlord on the Land.
Landlord’s Works Approval Date means the date specified in the Reference Schedule.
…
2. Landlord’s works
2.1 Landlord’s Works Approvals
(a) The Landlord and the Tenant agree and acknowledge that the Tenant has obtained planning permit number PA1429313 issued by Hobsons Bay City Council required for the Landlord Works (Planning Permit) and has assigned the planning permit (and the intellectual property in it) to the Landlord.
(b)The Landlord will do all reasonable things to obtain and keep current all necessary Approvals for the Landlord’s Works and for the Tenant to lawfully occupy the Premises for the Permitted Use under the Lease, excluding Provider Approval and the Planning Permit (Landlord Approvals).
(c)The Landlord acknowledges and agrees that the Landlord will:
(i)obtain the prior written consent of the Tenant (which may be withheld or granted with conditions, by the Tenant acting reasonably) to the form and content of the applications the Landlord makes for Landlord Approvals;
(ii)promptly inform the Tenant of any response the Landlord receives to applications the Landlord makes for Landlord Approvals; and
(iii)consult with the Tenant if any Government Authority indicates any application requires modification before a Landlord Approval will issue. For clarity, the Landlord agrees to only make the modification if the Tenant has given its prior consent (which may be withheld or granted with conditions, by the Tenant acting reasonably).
(d)The Landlord must produce complete copies of all Landlord Approvals to the Tenant promptly upon the same being obtained.
(e)If:
(i)the Landlord Approvals are not obtained; and
(ii)the Landlord has not settled its purchase of the Land,
by the Landlord’s Works Approval Date on terms satisfactory to the Tenant (acting reasonably):
(iii)either party may by written notice to the other terminate this Deed and this Deed will be at an end; and
(iv)neither party will have any right or claim against each other, and the Security Deposit will be refunded in full to the Tenant.
(f)The Landlord and Tenant agree:
(i)the Tenant must apply for and actively seek and prosecute for Provider Approval for the premises;
(ii)if Provider Approval does not issue by the Provider Approval Date, then:
(A)the Tenant will be deemed to have defaulted under this Deed;
(B)the Landlord may, subject to the terms of this document, call on the Security Deposit; and
(C)the Landlord may immediately terminate this Deed and Lease.
…
2.3Cancellation
(a)Despite anything to the contrary, if the Landlord has not:
(i)commenced construction of the Landlord’s Works on or before the date that is six months after the date of this document, the Tenant or Landlord may by written notice to the other after that date, cancel this Deed; or
(ii)effected Practical Completion by the Estimated Date of Practical Completion, then:
(A)the Moratorium Period will increase, for each day after the Estimated Date of Practical Completion until Practical Completion occurs, by the same amount of days; and
(B)if Practical Completion has not been effected by the Final Sunset Date, the Tenant (provided it has not contributed to such failure; or Landlord may by written notice to the other after that date cancel this Deed.
(b)If this Deed is cancelled under this clause 2.3:
(i)the cancellation is without prejudice to any other prior liability of any party under this Deed. For example, if Practical Completion is not achieved by the due date due to a matter unrelated to the Tenant, the Tenant will not be liable to the Landlord for the Landlord’s failure to achieve Practical Completion by the due date. But the Tenant remains liable for any of its prior defaults under this Deed, separate to any Landlord default causing delay in Practical Completion being achieved; and
(ii)for clarity, if the cancellation is effected by the Tenant, the Landlord acknowledges it may be liable to the Tenant for damages.
The “Landlord’s Works Approval Date” definition refers to a date specified in the Reference Schedule to the Agreement for Lease. Item 7 of the Schedule provides that the date is “… 120 days after the date of this document”. The relevant date is 21 April 2015 in terms of the “date of this document”—being the execution date of the Agreement for Lease. The parties agree that the Works Approval Date was 19 August 2015.
At 4.40pm on 11 March 2015, before executed counterparts of the Contract of Sale were exchanged, MAAG’s legal advisers wrote to the General Counsel of the Oxanda Group, Mr Oliver Meehan, and Oxanda’s legal advisers, and proposed that the parties agree to the following process:
We understand that you are executing the Agreement for Lease and will email the executed copy to us today, as contemplated by new special condition 22 of the Contract.
Special condition 22 of the contract contemplates that our client will also sign the Agreement for Lease within 24 hours of exchange of the Contract. Given that the timelines in the Agreement for Lease commence on the date of the Agreement for Lease (ie. the date both parties sign), our client proposes to execute the Agreement for Lease before settlement and hand your client’s counterpart over at settlement with all other settlement documents and monies.
Would you mind confirming you are comfortable with this proposal. Our client would be prepared to sign the Contract as is on the understanding that special condition 22 is interpreted to reflect the process outlined above. To this end, our client does not think it is necessary to amend special condition 22 to reflect the above process.
At 5.24pm on 11 March 2015, Mr Meehan replied that Oxanda Management agreed with MAAG’s “proposal regarding operation of special condition 22 of the Contract”.
Mr Meehan attached a counterpart of the Agreement for Lease which had been executed by Oxanda as tenant in the form that was attached to the Vendor’s Statement at Annexure 1 to the Contract of Sale of the Land (in other words, the Agreement for Lease as defined in and provided for in the Contract of Sale).
At 6.36pm on 11 March 2015, MAAG completed the exchange of executed counterparts and entered into the Contract of Sale.
On 21 April 2015, MAAG, as landlord, and Oxanda, as tenant, entered into the Agreement for Lease, and MAAG settled its purchase of the Land from Oxanda Management pursuant to the Contract of Sale.
On 7 September 2015, MAAG purported to terminate the Agreement for Lease pursuant to cl 2.1(e)(iii) on the basis that the Landlord’s Approvals had not been obtained by the Landlord’s Works Approval Date—which, as indicated previously, is agreed to have been 19 August 2015. MAAG has, at all material times, maintained that its purported termination on 7 September 2015 was effective.
Principles applicable to construction of documents
The principles guiding the construction of commercial contracts such as the Agreement for Lease—and the particular provisions to which reference has been made—are well established. More recently, they were stated by the High Court in Electricity Generation Corporation v Woodside Energy Ltd[1] and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[2] and may be summarised as follows:
(1)In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean; that enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
(2)A commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
(3)If an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.
[1](2014) 251 CLR 640 at 656–7 [35].
[2](2015) 256 CLR 104 at 116–7 [46]–[52].
In relation to the factual enquiry contemplated in this process, the High Court, in Pacific Carriers Ltd v BNP Paribas said:[3]
The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:
“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”
[Emphasis added; citations omitted]
[3](2004) 218 CLR 451 at 462 [22].
To similar effect, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd the High Court said:[4]
The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[5]
[Emphasis added.]
[4](2004) 219 CLR 165 at 179 [40].
[5]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461–462 [22].
Application of principles of construction of documents
Circumstances surrounding the parties’ entry into the Agreement for Lease
The circumstances surrounding the parties’ entry into the Contract of Sale and the Agreement for Lease are reflected in the structure and “deal” embodied in the Contract of Sale and the Agreement for Lease: that Oxanda Management sold the Land to MAAG on the condition that MAAG would build a childcare centre on it to be used and occupied by Oxanda. On the basis of the principles of construction to which reference has been made, MAAG contends that evidence of those circumstances is admissible as an aid to the construction of the Agreement for Lease.
On this basis, MAAG submits that in order to give effect to the “deal” between MAAG and Oxanda, two circumstances were necessary: namely, completion of MAAG’s purchase of the Land and the lawful construction of the building on the land for the “Permitted Use” as a childcare centre. Thus it is said that sub-paragraphs 2.1(e)(i) and (ii) of the Agreement for Lease describe those two necessary circumstances. Additionally, MAAG submits that the significant evidence of surrounding circumstances relevant in the present context is that the settlement of MAAG’s purchase of the Land and the execution of the Agreement for Lease were effectively simultaneous. Moreover, it is submitted that the evidence of the circumstances surrounding the parties’ entry into the Agreement for Lease to which reference has been made[6] does not contradict the plain meaning of clause 2.1(e) and is, consequently, admissible.
[6]See above, [14]–[19].
Construction of cl 2.1(e)(i) and (ii) of the Agreement for Lease
Oxanda submits that the plain ordinary reading of the text of cl 2.1(e) of the Agreement for Lease, as indicated by the use of the word “if” in the opening text and the use of the word “and” connecting the two conditions or elements, is that these provisions in the opening text apply and only apply—If:
(i) the Landlord Approvals are not obtained; and
(ii)the Landlord has not settled its purchase of the Land,
by the Landlord’s Works Approval Date…
[Oxanda’s emphasis]
On this basis, Oxanda contends that by these terms neither party has a right to terminate the Agreement for Lease pursuant to cl 2.1(e) once the Landlord [MAAG] has settled its purchase of the Land or the Landlord Approvals are obtained. This follows, it is submitted, because in the context of these provisions, the word “and” should be given its ordinary and usual meaning as being conjunctive, rather than disjunctive. Oxanda submits that only if both elements are satisfied could the right to terminate be enlivened, otherwise the sale and leaseback arrangement could be partially undone exposing one or other of the parties to the arrangement—with either only a land sale or only a lease, with no land. Thus, it is contended, the commercial purpose of both the Contract of Sale and the Agreement for Lease would fail to be achieved.
In this respect, Oxanda made reference to a number of cases in which the meaning of the word “and” has been considered in various contexts. It is to these cases that I now turn.
In Associated Newspapers Ltd v Wavish,[7] the High Court considered the effect of s 169 of the Police Offences Act 1928-1954 (Vic) which provided:
[7](1956) 96 CLR 526.
(1)In this Part – “obscene” (without limiting the generality of the meaning thereof) includes –
(a)tending to deprave and corrupt persons whose minds are open to immoral influences; and
(b)unduly emphasising matters of sex, crimes of violence, gross cruelty or horror.
[emphasis added]
As to these provisions, the High Court (Dixon CJ, Williams, Webb, Fullagar and Taylor JJ) said:[8]
In relation to the definition of the word “obscene” in s 169(1), we are of opinion that the word “and” does not mean that what is stated in pars. (a) and (b) provides cumulative conditions which must be both fulfilled before an “article” can fall within that definition. It is enough if the article has the tendency described in (a) or has the undue emphasis described in (b).
[8](1956) 96 CLR 526 at 528.
An aspect of the approach in Wavish is that referred to in the following passage in Pearce and Geddes, Statutory Interpretation in Australia[9] in, perhaps, a more vivid illustration of the effect of context on meaning of “and” and “or”:
In the second group of cases the court has not decided that “and” or “or” was used in error. Instead, it has concluded, usually by reference to the context in which the word appears, that the cumulative effect of the provision should not be dictated by the presence of the word in question. Each group of cases is referred to in turn. R v Oakes [1959] 2 QB 350; [1959] 2 All ER 92 is a frequently cited example of a case in the first category. In that case the court held that the word “and”, where it appeared in a section of the Official Secrets Act 1920 (UK) providing “Any person who aids or abets and does any act preparatory to the commission of an offence”, was a mistake for “or”. There were traditionally two offences, one of aiding or abetting and the other of doing an act preparatory to the commission of an offence, and it was highly unlikely that the legislature had intended them to be combined into one new offence.
The other aspect of Wavish is the dispersive effect of the use of the introductory word “includes”. This is discussed by Blackburn J in the case to which I now turn.
[9]D C Pearce and R S Geddes, Statutory Interpretation in Australia (8th ed, LexisNexis Butterworths, 2014), 66 [2-29].
In Re the Licensing Ordinance,[10] the Supreme Court of the Northern Territory considered the meaning of s 5 of the Licensing Ordinance 1939-1967 (NT), which provided:
[10](1968) 13 FLR 143.
“Bar-room” means any room in which liquor is kept and in or from which liquor is directly supplied to customers; but, in the case of a bar-room having a counter or aperture over or through which liquor is ordinarily supplied to another room or place, does not include such other room or place whilst the counter or aperture of the bar-room is effectively closed off and locked in such a manner as to prevent any transfer of liquor from the bar-room to such other room or place except through a door between them.
As to these provisions, Blackburn J said:[11]
I turn to Mr Mitchell’s next contention. If, he said, the force of the word “and” in the phrase “room in which liquor is kept and in or from which liquor is directly supplied” was cumulative, that is to say, if for a room to be a bar-room it must answer two descriptions, “a room in which liquor is kept” and “a room in or from which liquor is supplied”, then the 1961 amendment was quite pointless. Adequate provision was made by the original definition for the conditions which made a room a “bar-room”, and the amendment could have had no additional effect. Therefore, said Mr Mitchell, the word “and” could not be cumulative, but must be dispersive. The original part of the definition means “any room in which liquor is kept or in or from which liquor is directly supplied to customers”, so that a room would be a bar-room if it satisfied either the description of a room in which liquor is kept or the description of a room in or from which it is supplied. This gives significance to the word “but” which is the first word added by the amendment, and a clear meaning to the amendment—that when the counter is closed a room which would otherwise be a bar-room is excluded from that category. Mr Mitchell urged me to adopt a construction which gives meaning to the 1961 amendment rather than one which makes it pointless. He contended that the preferable construction of the unamended definition was that the word “and” had dispersive, not cumulative, force. This seems to me to do violence to plain English. But he did not shrink from the contention, which I put to him, that even if, before the 1961 amendment, the word “and” had cumulative force, its force became dispersive by reason of the 1961 amendment. In other words, he accepted that the 1961 amendment may have significantly altered the meaning of “and” from “and” as it is commonly understood, to “or”. It seems to me much more likely that if the legislature had wished to make a significant change in the primary meaning of the word “bar-room” it would have altered the “and” to “or” at the same time as it added the latter part of the definition.
Mr Mitchell supported this argument by authorities which, he submitted, showed that the word “and” can sometimes mean “or”. I do not think that I need examine these authorities seriatim. Each of them in my opinion falls into one or the other of two categories. The first category is that of cases where, if “and” was given its natural meaning, the result was so extraordinary (to quote Lord Parker CJ in R v Oakes,[12] “an absurdity or unintelligibility”) that in order to make sense of the provision the court was obliged to say that it must read the word “and” as if it had been “or”. The cases in the second category were those in which there was a list of items, the items being joined by “and” and the list being governed or affected by words which showed that the list was a list of alternatives. In such a case, the word “and”, which is used to join the items in the list, is truly cumulative; it links the members of a class and its function is to indicate that the whole class is to be considered together. Governing the words which enumerate the members of the class are other words which categorize the class, as a whole, as a class of alternatives. Pace Mr Mitchell, the word “and” inside the class does not have dispersive or alternative force; its force is wholly cumulative; it is the words outside the class which give the dispersive effect. A common example is the wording of a statutory definition—for example, “‘motor vehicle’ includes motor cycles, tractors, and trailers”—where the “and” has a truly cumulative meaning, but dispersive effect is given by the word “includes”. That is the explanation of Associated Newspapers Ltd v Wavish,[13] which Mr Mitchell cited to me. It may be that this principle would be applicable if the definition read “any room in which liquor is kept and any room in or from which liquor is directly supplied to customers”, but that is not the case.
In my opinion, the proposition that “and” can sometimes mean “or” is true neither in law nor in English usage, and the authorities do not show otherwise. In the case before me, Mr Mitchell’s argument in my opinion could rest only on the contention that the legislature could not have meant “and” but must have meant “or”.
[11](1968) 13 FLR 143 at 146–7.
[12][1959] 2 QB 350.
[13](1956) 96 CLR 526.
However, Larwint Pty Ltd v Norwich Union Life Australia Ltd,[14] is an example of the purpose of the provisions of the document being construed outweighing the otherwise “dispersive” effect of the word “includes”, introducing the various elements. In that case, the Court of Appeal was called upon to construe the definition of “heart attack” in a policy of medical benefits insurance. The definition was as follows:[15]
[14](2007) 15 VR 371.
[15]Larwint Pty Ltd v Norwich Union Life Australia Ltd (2007) 15 VR 371 at 373 [6].
Heart attack means death of a portion of heart muscle as a result of inadequate blood supply to a relevant area. The basis for diagnosis shall include:
(i)electrocardiographic changes associated with the myocardial infarction; and
(ii)elevation of cardiac enzymes consistent with the myocardial infarction.
If in the policyowners (sic) opinion the above tests are inconclusive we will, at our discretion, consider other appropriate tests.
In relation to this definition, Ashley JA (with whom Maxwell P and Chernov JA agreed) said:[16]
71.Should “and”, where appearing between (i) and (ii) in the second sentence of the definition, be read disjunctively? Larwint submitted, citing Victims Compensation Fund v Brown,[17] that “and” may be given a dispersive effect from the general context in which it is used, and where the purpose of the instrument suggests such interpretation. Building upon that principle, Larwint submitted that clause D.3(ii) set the framework for considering cl C.14. The latter specified two diagnostic criteria, either of which could—of itself—enable a diagnosis of heart attack. A normal ECG is not uncommon in the case of a patient who suffers a heart attack. The purpose of the policy is to give indemnity where the life insured suffers a heart attack. The purpose of the policy, and context, required that “and” be given a dispersive meaning.
72.My initial impression was that “and” where relevantly appearing should be given its primary, conjunctive application. Consideration of Larwint’s submissions has not led me to change my opinion. The purpose of the policy is to give indemnity not where a person suffers a heart attack in lay or medical parlance, but where a person suffers a heart attack as defined. The evidence in this case showed that it is not uncommon for a person who has suffered a heart attack to have a normal ECG. It follows that a medical man may diagnose a heart attack in reliance upon clinical presentation and having regard to other test results. But that is no occasion to manipulate the language of the definition to make it accord with modern day medical practice.
[16]Larwint Pty Ltd v Norwich Union Life Australia Ltd (2007) 15 VR 371 at 386, [71]–[72].
[17](2002) 54 NSWLR 668 at 683–4, [73] per Mason P, McLellan J agreeing. Spigelman CJ dissented, see particularly at 672, [12] and 674–5, [28], [29], [31] and [36], not in principle, but in the application of principle. The High Court effectively agreed with the Chief Justice; see Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260; 77 ALJR 1797 per Heydon J at ALR 263–4, [12]–[16], ALJR 1799–1800 and ALR 268–70, [31]–[35], ALJR 1804.
Finally, reference was made to the decision of Kyrou J (as his Honour then was) in Able Demolitions & Excavations Pty Ltd v Yarra Ranges Shire Council.[18] The issue in that case concerned the Yarra Ranges Planning Scheme and the meaning of “treatment” in the context of the item “sanitary and garbage storage and treatment in transfer station” in the Scheme. As to this, Kyrou J said:[19]
44.The Tribunal was correct to read the expression “storage and treatment” conjunctively. Ordinarily, the word “and” means “and” rather than “or”. While cases such as Associated Newspapers Ltd v Wavish,[20] Re Licensing Ordinance,[21] Secretary, Department of Employment, Education, Training and Youth Affairs v Gray[22] and Melbourne CityLink Authority v Teford Pty Ltd,[23] which are discussed in Pearce and Geddes’ Statutory Interpretation in Australia,[24] acknowledge that the word “and” can sometimes be read disjunctively, where this interpretation has been adopted, it has been governed by the context in which the word “and” appeared in the relevant statutory instrument.[25] In the present case, the context indicates that the drafters of the Scheme understood the distinction between “and” and “or” because a number of items in the table to cl 52.10 use “and” while others use “or”. Moreover, the expression “storage” is used on its own in a number of items, which again indicates that the drafters have distinguished between situations where storage on its own is sufficient and situations where storage has to be accompanied by another activity. Likewise, the expression “treatment” is used on its own in a number of items.
As to the point made by Kyrou J that the context of the scheme indicated that the drafter has understood the difference between “and” and “or”, it is pertinent in the present circumstances to observe, as Oxanda submitted, that the same is true with respect to the Agreement for Lease. In this respect, attention was drawn to a number of provisions of this document which do, in my opinion, illustrate this point quite clearly.[26]
[18][2008] VSC 294.
[19][2008] VSC 294, [44].
[20](1956) 96 CLR 526, 528.
[21](1968) 13 FLR 143, 146-7.
[22](1999) 57 ALD 67; [1999] FCA 1150, [20]-[32].
[23](2001) 113 LGERA 102; [2001] VSCA 54, 10.
[24]D C Pearce and R S Geddes, Statutory Interpretation in Australia (6th ed, 2006) [2.26].
[25]See also Gillespie v Ford (1978) 19 ALR 102, 107-8; Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260; Re Peat Resources of Australia Pty Ltd; Ex parte Pollock (2004) 181 FLR 454, 460-7 [20]-[54], 474-5 [98]-[101], 478 [112]-[115].
[26]See below, [41].
MAAG, on the other hand, contends that cl 2.1(e) contains two conditions or elements, in paragraphs (i) and (ii), which are not cumulative; such that, if one of the two conditions or elements were not met by the Landlord’s Works Approval Date, the right to terminate would be enlivened. In other words, unscrambling the potential double negatives, if either the Landlord Approvals were not obtained “or”—as it contends—the Landlord had not settled the purchase of the Land by the Landlord’s Works Approval Date the termination right of either party to the Agreement for Lease would be enlivened. This construction is contended for because, in the present case, in the circumstances in which the Agreement for Lease was entered into simultaneously with the settlement of the Contract of Sale, the condition or element in sub-paragraph 2.1(e)(ii) could never be met—as MAAG’s purchase of the Land had settled on 21 April 2015. Thus it is said, contrary to the principles of construction applicable to commercial contracts, this would leave cl 2.1(e) with no possible operation.
Oxanda denies that MAAG was entitled to terminate the Agreement for Lease because MAAG had settled its purchase of the Land prior to the Landlord’s Works Approval Date of 19 August 2015. The effect of that construction, MAAG submits, is that because it had settled its purchase of the Land, it could never avail itself of the right to terminate the Agreement for Lease under cl 2.1(e). Moreover, it is submitted that this construction depends for its correctness upon disregard of the fact that MAAG’s purchase of the Land settled simultaneously with the execution of the Agreement for Lease, making the condition in sub-paragraph 2.1(e)(ii) redundant. MAAG submits that disregarding this critical fact is again to fail to apply the principles of construction applicable to commercial contracts, to which reference has been made. It is said that this fact is a critical part of the “factual matrix”—the surrounding circumstances known to the parties.
According to MAAG’s preferred construction of the Agreement for Lease, as the “Landlord Approvals” were not obtained by 19 August 2015—relevantly for the purposes of cl 2.1(e)(i)—that condition or element was fulfilled, for the purposes of that provision and so MAAG was entitled to terminate the Agreement for Lease pursuant to cl 2.1(e), on its proper construction.
In support of its contention, MAAG refers to the passage set out previously from the High Court judgment in Associated Newspapers Ltd v Wavish,[27] where the High Court construed the word “and” in the context of the legislation with which it was concerned as being disjunctive, rather than conjunctive. Whilst I accept that the decision in Wavish is one where the construction and process produced the outcome MAAG would seek to establish in the present proceedings, the High Court decision was, naturally, in a particular legislative context and purpose where it appeared to the Court that the latter would be negated were “and”, given its ordinary, conjunctive, meaning. Moreover, the legislative provision the subject of Wavish was drafted using the device of introducing the elements separated by “and” with the word “includes”. This linguistic difference is, as explained by Blackburn J in the Northern Territory case discussed above, of potential significance as tending to have a “dispersive” effect on the elements described, even though they are connected by “and”. Nevertheless the decision of the Court of Appeal in Larwint also indicates that the apparent purpose of the instrument or document construed may indicate the otherwise “dispersive” effect of the introductory word “includes” was not intended by the parties. In my opinion, having regard to the decisions and commentary to which reference has been made, the overwhelming position of the courts in approaching matters of construction involving “and” and “or” is that these words should, ordinarily, be given their ordinary and natural meaning unless the language or context indicates otherwise. For the reasons which follow I am of the view that in the present case, both the language used in cl 2.1(e) and the commercial purpose indicates that the critical “and” in these provisions should be given its ordinary and natural meaning.
[27](1956) 96 CLR 526.
Turning to the present context, MAAG submits that its preferred construction of cl 2.1(e) of the Agreement for Lease is the only one capable of sensible operation in the circumstances surrounding the parties’ entry into the Agreement for Lease and MAAG’s purchase of the Land under the Contract of Sale; the contract having settled on the same day as the entry into the Agreement for Lease. It is further submitted that Oxanda’s construction of the clause—requiring both conditions or elements to be satisfied before the right to terminate can be exercised—produces a commercially absurd result. In order to test that proposition, MAAG says that suppose, for reasons neither party could anticipate or control, and without fault on the part of either party, MAAG had been unable to obtain by a certain date the requisite approvals to enable it lawfully to build and Oxanda could not obtain permission lawfully to occupy and use the building as a childcare centre. In that scenario, it is said that, plainly, Oxanda would not wish to be obliged to pay rent for a non-existent building or for a building it could not lawfully occupy and use. Meanwhile, MAAG would not wish to be obliged to construct a building, unlawfully, and which could not be used for the intended purpose. Yet, MAAG contends, on Oxanda’s construction of cl 2.1(e), the parties would be required to proceed notwithstanding the absurdity of the situation.
Moreover, MAAG submits that on Oxanda’s construction of cl 2.1(e), a party could not terminate the Agreement for Lease even in circumstances where no building could lawfully be constructed or used as a childcare centre on the Land. It is said that this would be an example of a particular contractual construction working nonsense or commercial inconvenience and which is to be avoided, consistently with authorities to which reference has been made.
Accordingly, MAAG submits that, in the absence of the requisite Council approvals needed to enable the lawful construction and occupation of the childcare centre, it was entitled to terminate the Agreement for Lease in accordance with cl 2.1(e). Thus, it says, its termination of that agreement by letter dated 7 September 2015 to Oxanda did not constitute a wrongful termination; repudiation of the Agreement for Lease.
Oxanda, on the other hand, submits that cl 2.1(e) has utility in circumstances that it was open to MAAG to complete the exchange of executed counterparts of the Agreement for Lease before completion of the Contract of Sale. Once the Agreement for Lease is in operation, it says that either party would only have a right to terminate if the Landlord Approvals are not obtained and the Landlord has not settled its purchase of the Land by the Landlord’s Works Approval date. As submitted by Oxanda it is clear in my view from the provisions of the Contract of Sale, particularly special conditions 16 and 17 and also the “overarching” provisions of special condition 22 that the parties contemplated the entering into, execution and exchange of counterparts of the Agreement for Lease prior to settlement of the Contract of Sale. Consequently, cl 2.1(e) would have operation with respect to both its conditions or elements. So it cannot be said, against the construction contended for by Oxanda, that on the face of these documents—the Contract of Sale and the Agreement for Lease—this would leave cl 2.1(e) with no operation. And, having regard to the effect of the operation of special condition 16 it cannot be said that the possible operation of cl 2.1(e) was so unlikely as to be illusory.
Moreover, Oxanda contends that its construction of cl 2.1(e) reflects the plain and ordinary meaning of the text. MAAG’s construction instead, it says, requires the word “and”, separating conditions (i) and (ii), to be substituted with “or”. There is, Oxanda contends, no basis to adopt this construction in the context of the Agreement for Lease where the drafter has clearly understood the distinct ordinary meanings of “and” and “or” and used these words appropriately and consistently with these meanings elsewhere in the Agreement for Lease, including in cll 5.1(a), 5.2(a) and 6.3(a). This latter attention to language in drafting is, in my view, a strong indication that the parties were using the words “and” and “or” in the Agreement for Lease in their ordinary and natural meaning.[28]
[28]See above, [32].
Additionally, Oxanda submits that the construction contended for by MAAG makes no commercial sense. It says that MAAG’s construction would permit it to avoid its obligations to lease back the Land to Oxanda, after failing to obtain the Landlord Approvals by the Landlord’s Works Approval Date, regardless of the fact that MAAG had acquired the land as part of what was a sale and leaseback transaction. Consequently, the sale and leaseback “deal” could be undone to the prejudice of one or other of the parties.[29] In my view this is certainly a possible consequence as cl 2.1(e) is, subject to parties observing other obligations under the Agreement for Lease, a “walk away” provision.
[29]And see above, [25], [26].
Consequently, Oxanda submits that MAAG did not have a right to terminate the Agreement for Lease on 7 September 2015 because, on a proper construction of cl 2.1(e), this course was not open as MAAG had settled its purchase of the Land.
As indicated in the preceding reasons, MAAG calls in aid the “factual matrix”, particularly in relation to the agreed process of executing the Agreement for Lease in light of the provisions of special condition 22 of the Contract of Sale. In effect, the position contended for is that this state of affairs, known to both parties, is a matter critical to the interpretation of sub-cl 2.1(e)(i) and (ii) because they knew and had agreed—or were estopped from contending otherwise—that the Agreement for Lease would be executed prior to settlement of the Contract of Sale and, effectively, held in escrow, handed over at settlement and dated the same date in order to maintain the timing provisions set out in the Agreement for Lease. In other words, the settlement of the purchase and the entering into of the Agreement for Lease would occur, effectively, simultaneously. More particularly, the position put is that with this known state of affairs, the parties could not have intended the provisions of sub-cl 2.1(e) of the Agreement for Lease to have effect in a way which would prevent the operation of those same provisions, the settlement of the purchase of the Land having occurred.
As against this position, however, is that another part of the “factual matrix” or known state of affairs between the parties is the existence of the provisions of cl 2.1(e) of the Agreement for Lease as a then “agreed” document for the purposes of the Contract of Sale and the “deal”, the sale and leaseback itself. There is no doubt that the provisions of the Agreement for Lease were agreed and known by the parties at this time—as it is a document both defined in Special Condition 1 of the Contract of Sale and contained in Annexure 1 to the Vendor’s Statement. Thus, in my opinion, relying upon the “factual matrix”, the parties must be taken to have known that, having agreed this settlement procedure, the operation of the already agreed or settled sub-cl 2.1(e) provisions would be effected. For these reasons, I am of the view that the “factual matrix” arguments do not assist the interpretation of cl 2.1(e) of the Agreement for Lease and, accordingly, focus must be directed to its language and its context in the Agreement for Lease read as a whole.
As discussed previously, the court decisions to which reference has been made indicate that, in the process of construction, language should generally be given its plain and usual meaning and, subject to context and commercial purpose, this applies equally to the meaning of words such as “and” and “or”.
For the preceding reasons, I am of the opinion that the language of sub-cl 2.1(e)(i) and (ii) of the Agreement for Lease is clear and is properly to be construed as a set of provisions to be read with the word “and” used in the conjunctive, rather than disjunctive sense. In my opinion, this construction is also supported having regard to the drafting of the Agreement for Lease, which indicates in the other provisions to which reference has been made that the drafter has turned his or her mind to the meaning of “and” and “or” as the words are used in other provisions, clearly in circumstances where they would appear to be intended to bear their ordinary or usual meaning. Also, for the preceding reasons, I am of the opinion that the “factual matrix” argument raised by MAAG does not assist its position and, additionally, there is also a contrary and powerful argument to the contrary drawing on the “factual matrix”.
As to the issue of commercial absurdity, I accept the submission by Oxanda that MAAG’s construction would have the potential to permit it to avoid its obligations to lease back the Land after failing to obtain Landlord Approvals and, as indicated previously, it does not follow that cl 2.1(e) construed as contended by Oxanda necessarily leaves the provision with no work to do. So, looking at the Agreement for Lease at the time it was drafted and agreed to by the parties as part of the sale and leaseback “deal”, these provisions did have a real prospect of operation. The arguments as to commercial sense or absurdity raised by MAAG do indicate some possible undesirable consequences with respect to the timing of termination of the Agreement for Lease for failure to settle the purchase as a result of their having to wait up to 120 days until the Landlord’s Works Approval Date is reached.[30] However this is what the parties have agreed in my opinion, and in clear language. There is, in my opinion, no commercial absurdity in construing cl 2.1(e) as contended for by Oxanda. As observed previously it is a provision which allows the parties to “walk away” from the “deal” if after 19 August 2015 the purchase of the Land has not been settled—so the vendor has not received the purchase price—and the Agreement for Lease cannot proceed because the Landlord’s Works proposed have not been approved and cannot be achieved. Thus the commercial purpose of the “deal” is lost—so the parties are free to “walk”. For this to occur though it is evident that one or other party would be prejudiced if both of the conditions or elements of cl 1.2(e) had not first come into play.
[30]See Transcript, 78–9.
For these reasons, I find that MAAG did not have the right to terminate the Agreement for Lease on 7 September 2015 on the basis of a proper construction of cl 2.1(e) because MAAG had settled its purchase of the Land. Consequently, Oxanda is entitled to repudiation damages for MAAG’s wrongful termination of the Agreement for Lease. As indicated previously, the parties have agreed that, were I to reach this position, the quantum of damages is $3.5 million.
Conclusions
For the preceding reasons, Oxanda is entitled to damages for wrongful termination of the Agreement for Lease by MAAG, on the basis that such termination amounted to repudiation, in the sum of $3.5 million.
The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties on this issue.