Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council - [2006] NSWCA 291

NEW SOUTH WALES COURT OF APPEAL

CITATION: Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council & Ors [2006] NSWCA 291

FILE NUMBER(S):
40509/05

HEARING DATE(S): 11 July 2006

DECISION DATE: 02/11/2006

PARTIES:
Sanpine Pty Ltd - Appellant
Koompahtoo Local Aboriginal Land Council - First Respondent
Terry Lawler - Second Respondent
KLALC Property and Investment Pty Ltd - Third Respondent

JUDGMENT OF: Giles JA Tobias JA Bryson JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 4606/04

LOWER COURT JUDICIAL OFFICER: Campbell J

COUNSEL:
T Hale SC & A Mitchelmore - Appellant
B A Coles QC & G A Sirtes - Respondents

SOLICITORS:
Solari Legal, Miranda
Bartier Perry, Sydney

CATCHWORDS:
Contract - joint venture for development of land - breaches in some respects by one party - other party terminated for repudiation - whether breaches showed intention to perform contract only in a manner substantially inconsistent with obligations and not in any other way - whether breaches where breaches of intermediate terms sufficiently serious to entitle termination - consideration of what amounts to repudiatory conduct - and of whether a term is essential or non-essential.

LEGISLATION CITED:
Aboriginal Land Rights Act 1983

DECISION:
(By majority) (1) Refuse leave to rely on contention ground 1 and grant leave to rely on contention ground 2: dispense with filing of the notice of contention; (2) Appeal allowed; (3) Set aside orders 1 and 2 made by Campbell J on 22 April 2005 and the orders made on 31 March 2006, and in lieu thereof order that the question be answered no and that the first and second defendants pay the plaintiff’s costs of the hearing of the separate question; (4) Remit the proceedings to the Equity Division for directions for their continuance; (5) Respondent pay appellant’s costs of the appeal and have a certificate under the Suitors Fund Act if otherwise qualified.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40509/05
ED 4606/04
GILES JA
TOBIAS JA
BRYSON JA
Thursday 2 November 2006

SANPINE PTY LTD v KOOMPAHTOO LOCAL ABORIGINAL LAND COUNCIL & ORS

Judgment

GILES JA: Koompahtoo Local Aboriginal Land Council (“Koompahtoo”), established under the Aboriginal Land Rights Act 1983 (“the Act”), came to hold approximately 885 ha of land near Morisset. On 14 July 1997 it entered into a joint venture with Sanpine Pty Ltd (“Sanpine”) for development and sale of part of the land. Koompahtoo and Sanpine each held a 50 per cent interest in the joint venture, to which broadly speaking Koompahtoo contributed its land and Sanpine contributed its services. Sanpine was the development manager under the joint venture agreement (“the Agreement”),
On 25 February 2003 Mr Terry Lawler (“the Administrator”) was appointed administrator of Koompahtoo pursuant to the provisions of the Act. By a letter to Sanpine dated 12 December 2003 he asserted on behalf of Koompahtoo that Sanpine had repudiated the Agreement, and said that Koompahtoo accepted the repudiation and would not be proceeding with the joint venture.
Sanpine brought proceedings claiming a declaration that the Agreement was valid and subsisting and orders directed to its performance. Campbell J heard as a separate question -
“Whether, on the proper construction of the agreement entitled ‘Morriset Joint Venture Agreement’ between the plaintiff and the first defendant, dated 14 July 1997, as amended by the ‘Morriset Joint Venture Supplemental Agreement’ dated 17 October 2000 (‘the Agreement’), and in the events which have happened, the Agreement was validly terminated by the first defendant by its letter to the plaintiff dated 12 December 2003.”
The trial judge answered the question yes. He found that Sanpine had breached the Agreement in a number of respects, although not all those alleged against it, and held that the breaches amounted to a repudiation and that Koompahtoo was entitled to terminate the Agreement by acceptance of the repudiation. Orders were made that Sanpine’s proceedings be dismissed and that it pay Koompahtoo’s costs.
Sanpine appealed. It did not dispute that, subject to waiver or estoppel as to some of the breaches, it had breached the Agreement in the respects found against it, but contended that the trial judge had erred in not holding that waiver or estoppel had relieved it from some of the breaches. It contended that, even on all the breaches found against it, the trial judge had erred in holding that it had repudiated the Agreement.
At the conclusion of the hearing of the appeal, and after it had arisen in oral submissions, Koompahtoo applied for leave to rely on a notice of contention asserting additional repudiatory breaches. The application was opposed. Written submissions were directed, with the grant of leave and (if leave was granted) the contention ground to be determined together with Sanpine’s grounds of appeal. In Koompahtoo’s written submissions it applied also for leave to rely as a contention ground on termination for breach of essential terms of the Agreement, as distinct from repudiation and acceptance of the repudiation. That also was opposed.
The reasons of the trial judge (Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365) provide a comprehensive account of the progress of the joint venture and the circumstances in which the breaches found against Sanpine came about. These reasons should be understood against the more full background of that account.
The Agreement
As appears from the separate question, the joint venture agreement of 14 July 1997 was amended by a supplemental agreement dated 17 October 2000. The amending agreement significantly increased the area of land to be developed and the staging of the development. The detail of the amendments is not of significance in the appeal and, as did the trial judge, I will refer to the provisions of the Agreement as amended.
Clause 2.1 of the Agreement established the joint venture. Clause 2.2 provided -
“2.2 Objects
The objects and extent of the Joint Venture are:
(a)to undertake the Development;
(b)to determine the scope of the Development;
(c)to carry out the design of the Development;
(d)to apply for and obtain consents, approvals and authorisations from the Council and all other relevant statutory and regulatory authorities for the Development to the extent that this has not been done prior to the date of this Agreement;
(e)to arrange funding for the Development at the most commercially advantageous terms;
(f)to engage all such architects, town planners, valuers, environmental experts, engineers, excavators, civil works contracts, builders, tradesmen, consultants, real estate agents and all other relevant persons that may be necessary to carry out the Development in the most economic, efficient, workmanlike and professional manner;
(g)to carry out the Development to the best commercial advantage of the Venturers and within the shortest practicable time;
(h)to identify and procure purchasers for the Residential Lots;
(i)to sell the Residential Lots upon commercial terms and at not less than market value (subject to clause 22) on the terms and subject to the conditions provided for in this Agreement;
(j)to do all such things as shall be incidental or conducive to the attainment of the foregoing but only as shall be determined by the Management Committee.”
The Development was defined -
“’Development’ means:
(a)the rezoning of the Joint Venture Site by the Council to permit residential development of the Joint Venture Site.
(b)the application for and the obtaining of the approvals for, the subdivision of the Joint Venture Site;
(c)the carrying out of the Works;
(d)the registration of one or more plans of subdivision at the Land Titles Office resulting in the creation of such number of Lots on the Joint Venture Site as may be agreed between the Joint Venturers.
(e)the marketing and sale of the Residential Lots; and
(f) anything incidental to the matters referred to in (a) – (e).”
The Council was Lake Macquarie City Council. The significance of obtaining its development consent, see cl 2.2(d), was underlined by cl 4.2, which provided under the heading “Condition Subsequent” that the joint venture agreement was conditional upon the Council granting development consent to -
“ … the subdivision for an integrated community development incorporating but not limited to residential, medium density, commercial and business lots and any other form of development approved by relevant authorities on terms and conditions reasonably acceptable to Sanpine after consultation with Koompahtoo.”
The significance of obtaining development consent was also underlined by cl 3.1(l), by which Koompahtoo represented and warranted to Sanpine that -
“ … to the best of its knowledge, information and belief the re-zoning of the Joint Venture Site to permit residential development will occur within a reasonable time of the date of this Agreement and that all approvals for the Development and the subdivision of the Joint Venture Site may be obtained within a reasonable time”.
As I have indicated, by cl 6.1 Sanpine was appointed as the development manager for the Development. Clause 6.2 relevantly provided -
“6.2 Obligations of Sanpine
Sanpine agrees to:
(a)co-ordinate the overall Development;
(b)negotiate with, effect the appointment of, instruct and monitor the performance of all professional consultants required to provide services to the Joint Venture during the course of the Development (including any contractors or sub-contractors providing building, civil works, construction or associated services) including without limitation solicitors, architects, surveyors, real estate agents and marketing consultants;
(c)seek funding for the Development from recognised, reputable and experienced project financiers including preparation of all applications, information memorandums and supporting documents required and negotiating the finance facility offered by a project financier which the Management Committee agrees to accept;
(d)arrange all necessary or desirable insurances for the Development Assets and the Development generally;
(e)engage bookkeeping and accounting services for the Joint Venture and the Development and maintain all records and documents of the Joint Venture to the extent that the Management Committee does not require the records or documents for the purposes of the Works and prepare tax returns for the Joint Venture if tax returns are required to be lodged;
(f)arrange the provision of security and patrol services for the Joint Venture Site;
(g)coordinate and instruct solicitors and surveyors concerning the proposed plans of subdivision of the [Joint Venture Site] being solicitors and surveyors carrying on business in the Newcastle or Lake Macquarie area, … ;
(h)supervise and co-ordinate marketing arrangements and exchange and completion of contracts for sale of Residential Lots forming part of the Joint Venture Site and co-ordinate discharges of mortgage in respect of the Joint Venture Site with the financiers to the Joint Venture;
(i)formulation of a Development Program showing the manner in which Sanpine expects the Development to proceed including a timetable for the completion of each of the stages of the Development and the envisaged cost to complete each of the stages of the Development;
(j)regular updating of the Development Program to take account of events or circumstances which affect the progress of completion of the Development;
(k)co-ordinate monthly meetings of the Management Committee, take minutes of those monthly meetings and distribute to the Venturers a copy of the minutes; and
(l)make recommendations concerning the Development and its progress to the Management Committee.”
The Development Program was defined -
“’Development Program’ means the program prepared by the [sic] Sanpine setting out each of the stages of the Development and the estimated timetable and cost for each stage of the Development in accordance with cl 6.2(i) and updated from time to time in accordance with clause 6.2(j).”
The objects and obligations referred to a Management Committee, and cl 10 provided for formation and the functions of that committee; I will shortly come to it. By cl 6.3 -
“6.3 Development Manager’s Discretion
Except where the Management Committee otherwise is required to control a particular aspect of the Development or the determination of certain matters is reserved to the Management Committee, Sanpine shall be entitled to act without specific instruction from the Management Committee but only to the extent that Sanpine acts within the parameters of the stated objectives of the Joint Venture. Sanpine must follow all instructions of the Management Committee where instructions are issued.”
Apart from Sanpine as development manager, the Agreement provided in cl 7.1 for the appointment of a project manager nominated by Sanpine. The Agreement did not define or describe the duties and obligations of the project manager, but by cl 10.1(e) and (h) the Management Committee had the function of approval of the project manager and “overall supervisory control and authority over the activities” of the project manager.
Shortly after the execution of the Agreement Mr Bob Scott began to perform the role of project manager, although the trial judge noted that there was no evidence of an arrangement under which he was appointed. In February 1999 Sanpine entered into a project management agreement with Bronzewing Property Holdings Pty Ltd (“Bronzewing”), through which the services of Mr Scott were provided. It appears that in practice Sanpine also performed many of its duties and obligations as development manager through Mr Scott.
Coming to the Management Committee, cl 10.1 of the Agreement provided -
“10.1 Formation of Management Committee
The Venturers shall form a Management Committee to manage the affairs of the Joint Venture and to consider and make decisions in relation to all aspects of the Development including, without limitation, financial issues and aboriginal culture and aboriginal employment issues. The Management Committee shall have the authority and power to act on behalf of the Venturers in relation to all matters with respect to the Joint Venture except as otherwise provided for in this Agreement. Without limiting the generality of the foregoing the Management Committee shall have the following functions:
(a)approval of the Approved Development Program and Approved Budget;
(b)preparation of the Annual Accounts;
(c)appointment of the Auditors;
(d)approval of financing for the Development in accordance with clause 11;
(e)approval of the Project Manager and any replacement Project Manager;
(f)approval of architects, engineers, civil works contractors, builders, consultants and advisors to the Development;
(g)approval of the marketing and sale arrangements for the Residential Lots;
(h)overall supervisory control and authority over the activities of the Project Manager;
(i)whenever it has been agreed by the Management Committee to sell a Residential Lot, Koompahtoo shall sign all documents necessary to effect such sale, including without limitation the sale of land contract, the transfer and any discharge of mortgage, or procure a duly appointed attorney to sign such documents on behalf of Koompahtoo.”
Four initial representatives of each of Sanpine and Koompahtoo were named. The quorum for meetings of the Management Committee was four, with two representatives of each of the joint venturers. By cl 10.6, unless otherwise agreed by the joint venturers the Management Committee was to meet every month. Resolutions were passed by majority vote, there were joint chairmen with the Koompahtoo chairman having a casting vote on matters having a significant impact on Aboriginal culture and environmental matters and the Sanpine chairman having a casting vote on all other matters.
It is convenient to note at this point the membership of the Management Committee, or at least what could be ascertained from the evidence.
The initial representatives of Sanpine were Messrs Charles Perkins, John Leece, John Landerer and Adam Perkins. The initial representatives of Koompahtoo were Messrs Malcolm Smith, Edward Smith, Ray Roberts and William (Bill) Smith. At all material times Mr Bill Smith was the chairman of Koompahtoo.
As at February 1999 the membership had changed, although when the changes occurred did not appear. The representatives of Sanpine were Messrs Charles Perkins, Adam Perkins and Graham Steer and Mrs Lesley Moloney. Mr Scott was appointed as alternate for Ms Moloney, and invariably attended the meetings of the Management Committee in that capacity as well as in the role of project manager. The representatives of Koompahtoo were Messrs Bill Smith, Malcolm Smith, Edward Smith and Stephen Griffen. Mr Griffen was the treasurer of Koompahtoo from at least February 1999.
The membership remained the same until the death of Mr Charles Perkins in November 2000. The membership thereafter is not clear, but I do not think it was suggested that there were material changes.
By cl 10.13 -
“10.13 Compliance with Provisions
(a)A Venturer must ensure that its representatives comply with the obligations placed on them and the Management Committee under the terms of this Agreement.
(b)Each Venturer agrees and undertakes that all decisions of the Management Committee shall be binding upon it as if that decision was a valid, binding and fully enforceable agreement entered into by the Venturers.”
Clauses 11, 12 and 13 of the Agreement relevantly provided -
“11.1 Management Committee to Determine Project Financier
The Management Committee shall determine from time to time the manner in which the Development is to be funded by a project financier. The funding of the whole of the Development must be on terms and subject to conditions approved by the Management Committee and shall be without recourse to any assets of the Venturers other than the Development Assets.
11.2 Use of Joint Venture Account
All funds advanced by project financiers for the purposes of the Development shall be immediately deposited in the Joint Venture Account to be used solely for the purposes of the Development, subject to any special arrangements for the advance of the funds provided by project financers and approved by the Management Committee.
12. DEVELOPMENT PROGRAM AND BUDGETS
12.1 Approved Programs and Budgets
As from the date of this Agreement until the termination of the Joint Venture, all activities of the Joint Venture from time to time shall be carried out pursuant to and in compliance with Approved Development Programs and Approved Budgets relating to such activities for the time being.
12.2 Approval Procedure
(a)Within 90 days of the date of this Agreement and thereafter at least 30 days prior to the last day of December and June in each year, or at such other times as the Management Committee may determine, Sanpine as development manager for the Development must prepare and submit to the Management Committee with respect to:
(i)the period to the earlier of the next following 30 June or 30 December; and
(ii)the period to the date on which the Joint Venture is expected to be completed,
a Development Program and cost and revenue budget outlining a program for the overall Development and the costs and revenues expected to be associated with the Development and their timing.
(b)Each such Development Program and cost and revenue budget shall be prepared and submitted as determined by instructions of the Management Committee.
(c)A meeting of the Management Committee shall be convened no later than 7 days after the submission of the last to be received of the Development Program and cost and revenue budget referred to in clause 12.2(a). At that meeting the Management Committee shall consider the Development Program and cost and revenue budget submitted and may approve those programs and budgets or any of them and reject others of them.
(d)Upon approval by the Management Committee of any Development Program or cost and revenue budget, those programs and budgets for the period to which they relate shall become the Approved Development Program and the Approved Budget.
12.3 Alterations to Approved Programs and Budgets
Sanpine as development manager may at any time and from time to time submit to the Management Committee any proposed alterations to an Approved Development Program or an Approved Budget which, on approval by the Management Committee, shall form part of such Approved Development Program or Approved Budget (as the case may be).
13 EXPENDITURE REIMBURSEMENTS
13.1 Sharing of Liabilities
(a)The net amount of any Project Costs or any other expenditures, disbursements or other liabilities incurred in relation to the Development Assets or the Development shall be borne and paid by the Venturers in the proportions equal to their respective Percentage Interests, which at the date of this Agreement are:
Sanpine 50%
Koompahtoo: 50%
(b)Each Venturer hereby indemnifies and undertakes to hold harmless the other against all damages, losses, costs, expenses and liabilities claimed, suffered or incurred with respect to the obligation of the Venturer to meet and satisfy its proportionate share of expenditures, disbursements and other liabilities relating to the Development Assets or the Development, as provided for in clause 13.1(a).
(c)Notwithstanding paragraphs (a) and (b) of this clause, the liability of Koompahtoo shall be limited to recourse against the Joint Venture Site.
13.2 Monthly Report
A monthly report shall be submitted by Sanpine to the Management Committee on or before the fifteenth day of each month showing in reasonable detail the net expenditure of the Joint Venture and progress of the Joint Venture on the Development including:
(a)total Project Costs during the preceding month;
(b)total estimated Project Costs for the current and the next month;
(c)accumulative cost to date and cost to complete reports progressively updated;
(d)a detailed account of all moneys deposited in the Joint Venture Account during the preceding month and all moneys paid out of the Joint Venture Account during the preceding month;
(e)cash flow forecasts for the Development Assets and the Development for the current and next six months including any funds to be made available under any existing project finance facility;
(f)unusual charges and credits during the preceding month (which shall be separately identified and described in detail);
(g)income and revenue derived by the Joint Venture during the preceding month;
(h)design and construction including progress to date comparison of progress with the Approved Development Program, details yet to be resolved and existing or potential problem areas;
(i)comparison of Project Costs and revenue of the Joint Venture during the preceding month with the Approved Budget and details of existing or potential problem areas; and
(j)such other matters as the Management Committee may determine from time to time or as any Venturer may reasonably request from time to time.
13.3 Obligation to Make Contributions
It is acknowledged that it is the intention of the Venturers that:
(a)Koompahtoo’s obligation to make contributions to the Joint Venture be limited to the obligation to make the Stage One Land and the Stage Two Land available to the Joint Venturer and not to make any contribution by way of cash payment to fund the Development; and
(b)Sanpine’s obligation to make contributions to the Joint Venture be limited to providing expertise as a development manager for the Development and where Sanpine considers it appropriate (in its discretion) to provide limited funding to the Joint Venture to enable certain preliminary negotiations with Council, potential project financiers, potential project managers and other persons who will be required to perform a role in the Development.
Notwithstanding the above, either of the Venturers at any time may offer to provide finance to the Joint Venture to assist the completion of the Development in the shortest practicable time. In such event the Venturer making a cash contribution required by the Joint Venture shall be entitled to have that cash contribution included in either Koompahtoo’s Contribution or Sanpine’s Contribution, as the case may be.
13.4 Recording of Contributions
The Secretary shall keep a record of all amounts contributed by each Venturer.
13.5 Initial Project Costs
Each Venturer agrees that to the extent there are Project Costs which have been incurred by that Venturer prior to the date of this Agreement, that Venturer will be solely responsible for and pay those Project Costs and cannot require contribution from the other Venturer for any share of those Project Costs.”

Clause 16 of the Agreement relevantly provided -
“16 BANK ACCOUNTS: BOOKS AND ANNUAL ACCOUNTS
16.1 Establishment of Bank Accounts
(a)The Venturers agree and undertake that as soon as possible following the date of this Agreement they will establish a bank account in their name with Australia and New Zealand Banking Group Limited at its 20 Martin Place, Sydney, New South Wales branch for the purposes of the Joint Venture to be titled the ‘Morisset Land Subdivision Joint Venture Account’. The bank will be instructed to forward copies of all periodic bank statements to each of the Venturers.
(b)The Joint Venture Account shall compromise part of the Development Assets.
16.2 Signatories to Bank Accounts
The signatories to the Joint Venture Account be representatives of Sanpine and of Koompahtoo. Either party may remove a signatory of the Joint Venture Account and appoint another person as a signatory in his place with prior notice. This clause does not limit Sanpine’s accountability to Koompahtoo. This clause may be amended at a later date.
16.3 Deposit of Funds
Except as provided in clause 15.1, the Venturers agree that all cash and other funds received from time to time by the Venturers concerning the Development, the Development Assets or the Joint Venture will be promptly deposited in the Joint Venture Account before any disbursement or use of those funds is made for any purpose. Unless financing arrangements require an alternative treatment or the Management Committee approves otherwise, the funds to be deposited in the Joint Venture Account will include all funds advanced by third parties to the Joint Venture as contemplated by clause 11.
16.4 Withdrawal of Funds
The Venturers agree that payments will only be made from the Joint Venture Account in accordance with the Approved Development Program and Approved Budget and payment guidelines previously approved by the Management Committee.
16.5 Maintenance of Books
(a)Sanpine shall ensure that proper Books are kept so as to permit the affairs of the Joint Venture to be duly assessed. Financial records comprised in the Books shall be kept in accordance with generally accepted accounting principles and in such a manner as enables the Venturers to extract from the Books any information in relation to the affairs of the Joint Venture as that Venturer may reasonably require from time to time. The Secretary shall consult with and comply with any reasonable request from any Venturer on matters relating to the Books and the design and implementation of the accounting system and other recording systems for the Joint Venure.
(b)Each Venturer may from time to time at its own expense inspect all or any of the Books or any other books and records of the Joint Venture and receive such information and explanations as that Venturer may require with respect to the Joint Venture.
(c)The Books shall be kept at the registered office of Sanpine.
(d)Each Venturer shall ensure that to the best of its ability the other Venturer may from time to time enter upon and inspect the Joint Venture Site and also inspect all or any materials, documents or records with respect to the Development Assets or the Joint Venture, including without limitation copies of all plans, approvals, valuations, drawings, advices, feasibilities, sale proposals, tenders and contracts held by, or in the possession of, or under the control of the Project Manger.
16.6 Annual Accounts
(a)The Management Committee shall prepare annual accounts of the receipts and expenses of the Joint Venture as at the Balance Date in each year during the term of the Joint Venture for the immediately preceding Annual Accounting Period and also in respect of the last accounting period up to termination of the Joint Venture. Annual Accounts shall also be prepared as at 30 June 1997 with respect to the period from the date of this Agreement to 30 June 1997.
(b)The Annual Accounts shall be prepared in accordance with generally accepted accounting principles (except that there shall be no revaluations of assets in the Annual Accounts) as if the Joint Venture was a legal entity and shall be drawn up so as to give a true and fair view of the receipts and expenses of the Joint Venture and to give a true and fair view of the state of affairs of the Joint Venture.
(c)It is agreed and understood that the accounting treatment for the Joint Venture agreed to above shall not bind in any way the accounting treatment adopted by each venturer in its own accounts with respect to its interest in the Joint Venture.
16.7 Audit of Annual Accounts
(a)The Annual Accounts and the Books shall be certified in accordance with the principles set forth in clause 16.7(b) (or in such other manner as all of the Venturers may agree from time to time) by the Auditors appointed for the time being pursuant to clause 17 as soon as practicable after each Annual Accounting Period.
(b)The Auditors shall be required to deliver a written report on the Annual Accounts and the Books as soon as practicable after the end of each Annual Accounting Period in which the Auditors will certify whether or not they have formed the opinion that:
(i)The Annual Accounts are properly drawn up so as to give a true and fair view of the receipts and expenses of the Joint Venture and to give a true and fair view of the state of affairs of the Joint Venture within the principles referred to in clause 16.6(b); and
(ii)proper Books have been kept with respect to the Joint Venture; and
(iii)the Auditors have obtained all information and explanations they require; and
(iv)there is any defect or irregularity in the Books, Annual Accounts or in the Joint Venture generally.
16.8 Copies of Reports to Venturers
Copies of the Annual Accounts and the Auditor’s Report must be provided to each Venturer by the Management Committee as soon as possible following their preparation.
16.9 Costs of Audit
All audit costs and expenses relating to the Annual Accounts and the Auditor’s Report shall be a Project Cost.
...”
In the Agreement “Joint Venture Account” was defined to mean “the bank account or accounts to be established by Sanpine pursuant to clause 16.1”, and “Books” was defined to mean “the accounting, financial and other documents and records of the Joint Venture”.
Clause 19 of the Agreement was a significant provision of the Agreement. It provided that the non-defaulting party had the right to purchase the interest of the defaulting party on certain terms and conditions then set out if, amongst other things, the defaulting party “commits any material breach of this Agreement and shall decline or neglect to remedy the breach within 30 days after receipt of a written notice from the other Venturer requiring such remedy” (cl 19.1(a)). There was otherwise no provision in the Agreement for termination upon breach by the other party.
Clause 23 of the Agreement included -
23 COVENANTS BY VENTURERS
23.1 General Covenant
Each Venturer must be just and faithful to the other Venturer and at all times properly and fully give to the other all information and truthful explanation on all matters relating to the Development and the Development Assets and afford every assistance in its power in carrying out the Development.
23.2 Consultation
The Venturers shall consult together regularly in connection with the Joint Venture.
23.3 Reporting
Each Venturer shall regularly report to the other Venturer in connection with the Joint Venture. Each Venturer shall promptly inform the other Venturer of all material information concerning the Joint Venture. Each Venturer shall promptly comply with any reasonable request for information concerning the Joint Venture which it may received from the other Venturer.”
…”
Clause 25.4 provided that waiver of any breach or provision of the Agreement had to be in writing and signed by the waiving party, and that failure to exercise or partial exercise of any right or remedy was not a waiver. Clause 25.5 provided that a variation of any term of the Agreement had to be in writing and signed by the parties.
The breaches found by the trial judge
The trial judge summarised in his [369] the breaches of the Agreement by Sanpine with references to the paragraphs in his reasons in which he had stated his findings -
“369 To recapitulate, I have found that the following breaches have occurred:

Delay of the order of five months in appointing Umwelt (para [231]).
Breach of the obligation in Clause 6.2(i) to prepare a Development Program (para [236]).
Breach of the obligation in Clause 6.2(j) to regularly update the Development Program (para [240]).
Breach, on fourteen occasions over seven years, of the obligation under Clause 12.2 to prepare and submit a Development Program and a cost and revenue budget (para [241]).
Breach of the obligation under Clause 13.2 to prepare a Monthly Report, containing the information listed in Clause 13.2. This breach occurred every month that the Joint Venture Agreement was on foot. Even if one regards the period from and including March 1999 to January 2003 as the more important part of that time, it involves breaches on forty six occasions (para [242]).
Breach of its obligation under Clause 16.1(a) to open the Joint Venture Account as soon as possible following the date of the Joint Venture Agreement (para [260]), [286])
Breach of the obligation in Clause 16.3 to pay money into the Joint Venture Account (para [261]).
Breach of Clause 16.4, concerning manner of application of funds withdrawn from Joint Venture monies (para [263]).
Failure to maintain proper books and records (para [301] – [309], [348] - [353].”

It is not entirely clear whether the breach constituted by delay of the order of five months in appointing Umwelt was found as a breach of cl 6.2(a), the obligation to co-ordinate the overall Development, or as a breach of an implied term to advance the development diligently and promptly which the trial judge held (at [223]) “emerged as a matter of the proper construction of the express terms”: probably the latter. The breach consisting of failure to maintain proper books and records was found as a breach of cl 16.5(a) of the Agreement.
The breaches can conveniently be considered in the categories suggested in the appeal by counsel for Sanpine. As will appear, however, there is some overlap in the consideration, and it is necessary to appreciate the breaches in the context of the overall conduct of the joint venture. A brief framework can be given at this point.
Mr Scott gave evidence that from July 1997 to February 1999 planners were engaged “to carry out planning consultancy over the site” and that during 1998 he assisted Mr Steer in approaching over fifty financiers to obtain funding. Only in late 1998 was finance obtained.
The first step in the development was obtaining a rezoning of the relevant part of the land, which centrally involved the preparation of environmental studies. The trial judge accepted that there was no point in engaging consultants to carry out an environmental assessment until finance had been arranged and approval of the NSW Aboriginal Land Council had been obtained. That occurred in February 1999. Mr Scott said that the “preliminary work” in relation to the rezoning was therefore until then limited.
In the manner later indicated, funds for the work carried out prior to February 1999 were provided by a number of people “friendly to the project” paying directly for the work. In February 1999 finance of $670,036 was received and the friendly people were repaid. The application for rezoning was then more intensively prosecuted.
There were difficulties, and by April 2002 the application for rezoning was still not resolved. Other finance had been received, but with payment of expenses only about $114,000 remained to the joint venture. Koompahtoo had throughout suffered from internal disruption, and in April 2002 a dissident member of Koompahtoo caused the lodgement of a caveat against the title of the major part of the land. This effectively prevented obtaining further funding and resulted in cessation of work.
A lot of effort was devoted to having the caveat removed, but without success. In June 2002 the NSW Aboriginal Land Council appointed an investigator of Koompahtoo, and the Administrator was appointed in February 2003. By this time almost no funds remained to the joint venture. In practice, the Administrator’s consent was required if money was to be spent on the joint venture at all, and he did not give it. In May 2003 he told Mr Scott and Mr Steer that he thought the joint venture favoured Sanpine over Koompahtoo and said “I will do all that I can to get out of this agreement”; he effectively affirmed an earlier direction that no more expenditure was to be incurred on behalf of the joint venture.
(a)First category – Delay of the order of five months in appointing Umwelt
Umwelt was Umwelt (Australia) Pty Ltd, which was engaged to carry out an expanded flora and fauna study as part of the environmental assessment necessary to obtain re-zoning. As I have said, the breach was probably one of an implied term to advance the development diligently and promptly. The surrounding events, more fully explained in the account in the trial judge’s reasons, should be noted.
An application for re-zoning had been made to the Council in December 1996, prior to the formation of the joint venture. In October 1997 the Council passed a resolution in support subject to, amongst other things, the preparation of a local environmental study. The Council had the statutory obligation to undertake the study, but it said that it could not prepare a brief for that purpose until the Director-General of the Department of Urban Affairs and Planning issued specifications for the study. Eventually, in April 1998 dispensation was obtained by the joint venture whereby Koompahtoo could prepare the study. But then in June 1998 the Council said that an environmental assessment should be undertaken rather than a local environmental study.
As previously noted, the trial judge said that the joint venturers did not immediately engage consultants to carry out the environmental assessment because (at [65]) “[s]ensibly, they took the view that there was no point in doing so until both finance had been arranged for the development, and approval of the [NSW Aboriginal Land Council] had been obtained.”
In February 1999 the NSW Aboriginal Land Council approved the change of use and disposal of the land. The judge said (at [69]) that “the pace of worked stepped up”, and -
“Work started to identify consultants for the environmental assessment, and Mr Scott began to have regular meetings with [the Council] to establish what consultants were required and for what purposes.”
Mr Martin Johnson was appointed as planner for the joint venture. He came to an arrangement with the Council by which the environmental assessment would involve various consultants in their respective specialisations each giving reports, to be integrated into a single document to be prepared by Mr Johnson. In March 1999 Mr Scott presented to the Management Committee a list of potential consultants in the various specialisations. Difficulties were encountered which extended the time which it had been thought would be taken, but in November 1999 Mr Johnson’s environmental assessment report was given to the Council. The flora and fauna study which formed part of the environmental assessment had been undertaken by consultants Shortland Wetlands, as a study over the area of then land to be developed.
The Council began its consideration of the environmental assessment and, it seems, flagged the need for some further studies; there was also a need for further studies because, leading up to the supplemental agreement of 17 October 2000, there was an increase in the area of land to be developed and, in the joint venture’s planning, a change in the mix of residential lots, medium density sites, retail, commercial and like sites, and open space. The judge noted (at [104]), speaking of reports to a meeting of the Management Committee on 29 February 2000, that “[i]t can be seen that substantial work, on many topics besides flora and fauna, remained to be done.”
Then came a major complication. At a meeting on 1 March 2000 a representative of the National Parks and Wildlife Service (“the NPWS”), which in an earlier letter had said that a cultural and heritage study was not required, said that it now wanted such a study, and a study in which the Service was involved because it wished it to “become the benchmark for future studies carried out in NSW”. The NPWS said also that it believed that a flora and fauna study should be carried out over the entire site: this meant an additional area of more than 500 hectares.
The judge said -
“107 Mr Scott tried to talk NPWS out of these requirements. He had some powerful arguments in his favour: that it was unfair for NPWS to change its mind about the need for a Cultural and Heritage Study when the environmental assessment had gone on, over the better part of a year, on the basis that no such study would be needed; that it was doubly unfair in those circumstances for NPWS to decide to make this development the guinea pig which NPWS would use to conduct a study which could be the benchmark for its future Cultural and Heritage Studies; that it was unfair to require the additional Flora and Fauna Studies, over a huge area like 500 ha, when the Director-General of DUAP had specifically said on 4 April 1998 (para [61] above) that an Environmental Study over the whole of the site owned by Koompahtoo was not necessary, and the environmental assessment had proceeded on that basis.
108 Any force in these arguments was lost when Mr Smith said that the additional studies should be done, “because we must be seen to be working in harmony with the community”.
109 Mr Scott was furious with Mr Smith, and accused him of putting back the development by twelve to eighteen months. As well, Mr Scott was extremely disappointed that Shortland Wetlands had not argued in favour of the adequacy of their own study. He had heard that Shortland Wetlands were in financial difficulties, and suspected that their silence sprang from a desire to get a significant new assignment. Whatever the reasons, the practical reality was that, by the end of the meeting, the joint venturers were stuck with a requirement to carry out the extra two studies.”
The cultural and heritage study was commenced in April 2000, and was complete by early December 2000. At a meeting of the Management Committee on 27 March 2000 it was agreed that Umwelt would be appointed “to complete the revised preliminary Flora and Fauna Study as required”.
The judge found (at [119]) -
“Notwithstanding the resolution at the March 2000 Management Committee meeting, Umwelt (Australia) Pty Limited (“Umwelt”) had not been engaged to carry out the study. Mr Scott had had some meetings with Umwelt, and found out what their requirements were for carrying out a study (including the need to have the site surveyed), but it was not until February 2001 that Umwelt submitted a written proposal and quotation for a Flora and Fauna Study. Mr Scott agrees that it was only around February 2001 that Umwelt was formally appointed to carry out the study.”
The Umwelt study was completed in November 2001. It was given to the Council at that time, which referred it on to the NPWS. In April 2002 the NPWS wrote to the Council to the effect that it did not think the study adequate in a number of respects, and that further information and a supplementary study were necessary. This was passed on to the joint venturers in mid-April 2002, but by this time the other events earlier mentioned (which ultimately led to the appointment of the Administrator) had intervened, whereby funds were not available to continue with the application for re-zoning; the joint venture was stalled.

Koompahtoo alleged against Sanpine a series of failures to act promptly to advance the re-zoning: delay prior to February 1999, delay in engaging consultants during 1999, delay in the period from December 1999 to March 2000, and delay in other respects, quite apart from delay in appointing Umwelt. The judge did not accept that Sanpine had failed to act with due diligence in these other respects, amongst other things pointing to the sequential nature of what had to be done, the impact of the acts of others and in particular the complication from the change of mind by the NPWS.
As to the appointment of Umwelt, however, the judge said -
“230 The first and second defendants next criticise the plaintiff and Mr Scott for not having acted on the resolution of the Management Committee of 27 March 2000 to engage Umwelt, and for having delayed until around February 2001 before appointing Umwelt. I accept that delays in obtaining usable results from aerial photogrammetry to be able to start the process of creating a grid pattern over the site (para [113] above) would have contributed to a delay of some eighteen weeks in the appointment of Umwelt, to around mid-August 2000. But that does not explain the whole of the delay in appointing Umwelt.
231 The picture which Mr Scott presents in his affidavit is that, by the time NPWS made known in March 2000, its desire to have a survey of the entire site for (amongst other things) TJ, the flowering season of TJ was over for the year. Mr Scott’s evidence is that he was told by Ms Moroney that she believed the flowering time of TJ was about three days in the middle of February. He also says, and I accept, that the Flora and Fauna Study was unable to be conducted “during the winter months” as some of the threatened species were either not detectable or in hibernation. As well, Shortland Wetlands had data relating to the site which was not included in their written report, and which Mr Scott spent some time trying to obtain from them. I would accept these two reasons as covering the period to the end of September 2000. I am not able to accept, however, that the limited flowering season of TJ was a significant contributor to the delay in appointing Umwelt. This is because, even when appointed, Umwelt did not carry out their own survey of TJ, but merely relied on Mr Payne’s results. In my view, Sanpine was in breach of its obligations to co-ordinate the Development in the manner required by the contract, by failing to appoint Umwelt in sufficient time to enable the survey to commence after the end of September 2000. That involved a delay of the order of five months.”
TJ was tetratheca juncea, a threatened flora. The trial judge may have been a little hard on Mr Scott. If Umwelt should have carried out its own survey of TJ, rather than relied on Mr Payne’s results, and was expected to do so, that could have explained the delay, and on my reading of the evidence it was not known that Umwelt would merely rely on previous results – after all, the survey was meant to cover a large area not previously covered, so how could it have relied only on Mr Payne’s results? However, Sanpine did not dispute the judge’s findings.
The trial judge found -
“357 As I have earlier said, one of the limits on Sanpine’s obligation to advance the Joint Venture was whether the advancing of the Joint Venture could be done within the financing constraints which the Joint Venture Agreement itself imposed. Faced with the Registrar General’s caveat, which made the raising of additional finance for all practical purposes impossible, I do not accept that the plaintiff was in breach of contract in failing to advance the Joint Venture between April 2002 and the time of appointment of the administrator. As well, the attitude of the Management Committee, as revealed in its minutes, did not change from that summarised in the minutes of 26 March 2002 (para [145] above) – they accepted that the Joint Venture was at a standstill and would remain so until the political and legal troubles besetting Koompahtoo were sorted out. In these circumstances I am not persuaded that the plaintiff was in breach of any of its obligations to advance the rezoning between April 2002 and the time of appointment of the administrator.
358 Once the administrator was appointed, his prohibition on drawing money down without his approval coupled with his not giving any such approval, followed by his prohibition on spending any money on the Joint Venture at all, had the effect that Sanpine was not in breach of its obligations to advance the Joint Venture after the appointment of the administrator.”
Although the trial judge found that the failure to appoint Umwelt “involved a delay of the order of five months”, he did not find that achievement of re-zoning was thereby delayed by five months, let alone that re-zoning would have been achieved prior to the events of April 2000 had there been a timely appointment of Umwelt. From the response of the NPWS to the Umwelt study, it would be very difficult to come to the latter conclusion, and the history of the bureaucratic attention to re-zoning could give little confidence that it would have been achieved without considerable further time and effort. Even the former conclusion must be doubted, since in December 2001 the Council said that before the re-zoning application was progressed it required further investigations on hydrology and water quality, acoustic assessment, traffic and transport, population projections and community profiles and opportunity and constraint mapping. Some studies on most of these topics had been provided to the Council by the end of 1999, and the judge observed (at [143]) that all further studies but the acoustic study were by way of an up-date or an expansion. But it was not suggested in the appeal that all else awaited provision of the expanded flora and fauna study, so that delay in appointing Umwelt was on the critical path in the program for obtaining re-zoning. That is not a matter which I would assume in the absence of a finding by the trial judge; nor was it submitted that this Court should so find.
(b)Second category – Breaches concerning development programs and monthly reporting
To repeat, within this category the breaches were found as breach of cl 6.2(i) of the Agreement (formulation of a Development Program); breach of cl 6.2(j) (updating the Development Program); breach of cl 12.2 (preparation and submission of a Development Program and cost and revenue budget); and breach of cl 13.2 (submission of a monthly report).
The cl 6.2 Development Program was an overall program, as to both time and cost, for each of the stages of the Development. The cl 12.2 Development Program was a six monthly program as to time and cost and as to revenue. Unlike the cl 6.2 Development Program, the cl 12.2 Development Program and cost and revenue budget was to be “prepared and submitted as determined by instructions of the Management Committee”. It could become the Approved Development Program and Approved Budget, and by cl 12.1 it, rather than the cl 6.2 Development Program, provided the basis for the carrying out of the activities of the joint venture. No doubt the cl 6.2 Development Program was intended to be a tool in the conduct of the joint venture, and to provide an overall program within which the cl 12.2 Development Programs would be prepared, but it was the cl 12.2 Development Program and cost and revenue budget which was given added contractual significance.
When it came to the monthly reports, so far as cl 13.2 specifically provided they were to report on progress, costs and revenue by regard to the Approved Development Program and the Approved Budget (see cl 13.2(h) and (i)). The reporting, however, was to be more detailed, with a focus on costs and expenditure for the month in question. The monthly reporting within the framework of six monthly time programs and budgets and an overall development program would be important aids to a well-managed joint venture development.
Sanpine did not formulate a cl 6.2 Development Program. In March 1999 Mr Scott provided to the Management Committee a re-zoning schedule timeline, a one page document listing tasks which needed to be done before a re-zoning could be achieved but only up to review of the draft re-zoning plan by the Council. In an accompanying report Mr Scott said that the timetable was “most ambitious”, and “has been prepared for the sole purpose of keeping consultants well and truly on track”. The timeline was discussed at the next meeting, but no doubt soon ceased to perform its limited function. It fell far short of a cl 6.2 Development Program, both because it dealt with a relatively small (although important) part of what was involved in the development and because it did not deal with cost to complete at all.
There being no cl 6.2 Development Program, there was no updating of the Development Program.
Sanpine did not prepare and submit to the Management Committee any cl 12.2 Development Programs and cost and revenue budgets. I will come to evidence about cash flow projections; it was not suggested that they were what would have been strictly required by cl 12.2.
As to the cl 13.2 monthly reports the trial judge said, and it was not suggested that he was incorrect or insufficiently described what occurred -
“242 Sanpine’s obligation under Clause 13.2, to prepare a Monthly Report containing the information listed in Clause 13.2, was never performed. There were some Management Committee meetings, over the period February 1999 to March 2000, when Mr Scott presented a written Project Manager’s Report. However, those reports (a) were, as their title suggested, from the Project Manager, not from the plaintiff as Development Manager, and (b) contained an account of whatever developments Mr Scott thought worthy of bringing to the attention of the Management Committee, but did not even attempt to cover all the topics listed in Clause 13.2(a).”
There was evidence on which Sanpine relied to explain or ameliorate its failure to adhere to the Agreement in these respects, in effect on the basis of acceptance of a different way of dealing with programming and costing and reporting to the Management Committee.
Mr Scott presented project manager’s reports to the Management Committee, and the trial judge accepted his evidence that cash flow projections were distributed at the meetings but were collected and returned to him at the conclusion of this meeting because Mr Bill Smith had said to him that he did not want to have the information “leak out into the [Aboriginal] community” lest a dissident group “get their hands on them and try to use it against me”. The trial judge also accepted the evidence of Mr Steer that there were presented to the Management Committee meetings, but at the direction of the Koompahtoo members of the committee taken back and “not … included as part of the minutes”, a “cash flow of expenses incurred to date”. At one point, when asked about consideration of a payment in February 1999 out of the Unit Trust Account, see later in these reasons, Mr Steer said -
“I think you should understand the actual events that were occurring at this stage. What we were running with and what we were presenting to the Management Committee on a regular basis was a detailed cash flow of all expenditure. The initial cash flow which helped support my $150,000 discussion earlier did not include the $150,000 of establishment fees. That certainly was included in the subsequent cash flows and discussed at a meeting.”
It is not clear whether the trial judge’s acceptance of Mr Steer’s evidence was as to projections, past expenditure or both; he noted that no particular cash flow documents were tendered as documents which had been presented to the Management Committee in this fashion.
Sanpine pointed to the minutes of a meeting of the Management Committee on 27 March 2000. This meeting was just after the representative of the NPWS had required the cultural and heritage study and the expanded flora and fauna study, and was the meeting at which it was resolved that Umwelt would be appointed. The minutes included -
“It was recognised that as the Project Manager and the Liaison Officer were conducting meetings on an almost daily basis there was not need for written voluminous reports. The meeting agreed unanimously to dispense with the requirement that written reports from the Project Manager and Aboriginal Liaison Officer be replaced by detailed verbal reports.” [sic]
At least from this time on Management Committee meetings were not held monthly, and at the Management Committee meeting on 11 September 2000 the minutes recorded -
“Future meetings
As discussed previously it has become apparent that as all of the members of this committee are meeting and talking on the telephone on an almost daily basis that there is not the necessity to convene these meetings as often as previously. This has come about because of the continued delays from both actions within the KLALC and the extra studies required. Bob [Scott] and Billy [Smith] agree to keep each party informed and will advise when a regular meeting structure will be required. In the meantime and considering the regular updates the members of the Committee agree to defer the monthly meetings to be quarterly or half yearly.”
The trial judge accepted that Mr Scott was “in constant communication (almost daily) with Mr Bill Smith and other members of the Management Committee”.
In amplification of this, although not fleshed out by the trial judge, Mr Scott agreed that Sanpine did not as development manager prepare and submit Development Programs as required by the Agreement, but said that he “kept the Management Committee up to date … on all but a daily basis and provided all relevant information”. Mr Scott’s evidence included -
“Q. What I am suggesting to you is there was neither prepared nor presented this orderly, periodic sequence of documentary reports identifying the level of progress and anticipated activity which needed to be provided from time to time; that was not done, was it?
A. It was provided formally [sic: informally?] by myself at management meetings, initially, every month and it was provided, as I said, on almost a daily basis. I mean, people knew exactly where we were at on a daily basis.
Q. These are oral reports or conversations; were they?
A. Just a continuation of oral conversations, sometimes from 5.30 in the morning till midnight.”
Mr Scott also said -
“Q. Right. Of course, I take it that, as far as you were aware, no-one else connected with Sanpine, apart from yourself, was engaged in preparing any development program, or other document referred to in the joint venture agreement.
A. That’s correct.
Q. So, if it was not done by you; it wasn’t done by Sanpine?
A. That’s correct.
Q. The same goes for the monthly reports that were required to be submitted by Sanpine to the Management Committee?
A. The reports submitted to the Management Committee by myself as project – via Bronzewing as project manager, there were reports submitted to the Management Committee by the Aboriginal Liaison Officers, there were reports submitted to the Management Committee by Graham Steer, in respect of accounting and so on.
Q. Did you prepare any reports that were supplied each month, showing in reasonable detail the net expenditure of the joint venture and the progress of the joint venture on the development?
A. Yes, I provided the Management Committee with costings and accounts as they were received, yes.
Q. In the form of a report?
A. Not always. Well if you say in the form of a verbal report, formal report, possibly not but, certainly, in the form of a verbal report. These meetings, as I said, were – everyone knew what was happening. We continued to have management meetings more or less as a formality, more than anything else.”
Mr Scott said that he provided information at and apart from the Management Committee meetings “continually, on almost a daily basis”. It is apparent from reading his evidence that Mr Scott thought that the information he provided meant that, as he put it at one point, “we knew on a daily basis where the whole thing was heading. It wasn’t as if no-one knew. It was a daily occurrence as to what was happening”.
Sanpine submitted before the trial judge that in the circumstances Koompahtoo had waived compliance with the obligations presently in question, or was estopped from relying upon their breach. The trial judge did not accept the submission, but Sanpine also relied on the circumstances in which it did not adhere to the obligations as relevant to repudiation.
(c)Third category – Breaches relating to banking and spending of money
To repeat, within this category the breaches were found as breaches of cll 16.1(a), 16.3 and 16.4 of the Agreement.
By cl 16.1(a) of the Agreement the joint venturers agreed to establish the Joint Venture Account with Australia and New Zealand Banking Group Ltd (“ANZ”). The definition of Joint Venture Account, however, was the bank account or accounts to be established by Sanpine pursuant to cl 16.1. In conjunction with Sanpine’s obligations under cl 6.2(e) to maintain all records and documents of the joint venture and its obligation under cl 16.5(a) to ensure that proper books were kept, the trial judge considered that it was for Sanpine to establish the Joint Venture Account. Sanpine did not submit in the appeal that he was incorrect in this respect.
No bank account was established with ANZ, by Sanpine or at all. No bank account for the joint venture was established until February 1999, when Sanpine opened two separate accounts with National Australia Bank Ltd (“National”). One account was styled “Sanpine Pty Ltd as Trustee for the Sanpine Unit Trust Business Management” (“the Unit Trust Account”). The authorised signatories were all Sanpine signatories. The other account was styled “Koompahtoo Local Aboriginal Land Council Business Management” (“the Business Management Account”). There were three authorised Koompahtoo signatories and three authorised Sanpine signatories; two signatures were required, one a Koompahtoo signatory and one a Sanpine signatory.
Clause 13.5 of the Agreement provided, in effect, that each joint venturer should bear its expenditure prior to the date of the Agreement. By cl 13.3 Koompahtoo was not obliged to but could provide money to fund the development, and Sanpine had a curious discretionary obligation to provide limited preliminary funding and could otherwise provide money to fund the development. The outside finance obtained in February 1999 was in fact on the security of part of Koompahtoo’s land; there was no clear requirement in the Agreement that Koompahtoo make the land available as security for outside finance, but it did so, presumably as a matter of expediency if not necessity. The circumstances of its doing so were not greatly investigated in the evidence.
The trial judge recorded that, according to Sanpine, significant expenditure was taking place for the purposes of the joint venture prior to February 1999 “financed by people friendly to the project making what amounted to unsecured loans by paying the creditors direct”. It seems, therefore, that until February 1999 no other bank account (for example, Sanpine’s current account or an account specially established by it) was in use. There does not seem to have been any question of mixing joint venture funds with Sanpine’s funds, and on the evidence Sanpine conducted no business other than as development manager for the joint venture.
The bank accounts opened in February 1999 appear to have been established because it was then that funds for the joint venture were borrowed by Sanpine for joint venture purposes on the security of part of Koompahtoo’s land. It was Sanpine’s obligation to obtain finance; as I have noted, Koompahtoo’s obligation to provide security is less obvious, but that is the way it was done. $670,036 borrowed from the financier was deposited into the Unit Trust Account on 16 February 1999. The friendly people who had made what amounted to unsecured loans by paying the creditors direct were repaid from the Unit Trust Account, other outstanding creditors of the joint venture were paid, and by 19 February 1999 the account balance had fallen to $219,599. Other money was credited from time to time to the Unit Trust Account, which the trial judge inferred was money raised by Sanpine from sources other than the mortgaging of the joint venture land.

The Business Management Account was then used as an imprest account. When a payment was to be made from it, sufficient funds were transferred from the Unit Trust Account. Not all joint venture payments were made from the Business Management Account; some, such as Bronzewing’s monthly fees and payments to consultants, were paid direct from the Unit Trust Account.
The Business Management Account was closed in December 2000, and no other account was established in its place. It was closed because, after the meeting of the Management Committee on 9 June 1999 to which I later refer, all expenditure for the joint venture was paid out of the Unit Trust Account, and there were no transactions on the Business Management Account.
The trial judge regarded the Business Management Account as the Joint Venture Account, and considered that the fact that it was established with National rather than ANZ was trivial in the breach stakes. The breach of cl 16.1(a) found by the trial judge was that the Joint Venture Account was not opened as soon as possible following the date of the Agreement. The trial judge did not regard this as trivial, for reasons which will be better understood, and to which I will return, in connection with the other breaches as to banking and spending of money.
The trial judge found that there was breach of cl 16.3 of the Agreement by the deposit into the Unit Trust Account, rather than into the Business Management Account which he treated as the Joint Venture Account, of the money borrowed in February 1999, and of the further money raised from other sources on occasions during 2000 and in May 2001, June 2001 and November 2001. Clause 16.3 allowed alternative treatment if financing arrangements so required or if the Management Committee approved otherwise. It does not seem to have been suggested that the Management Committee had approved otherwise, at least in a formal manner.
The breach of cl 16.4 found by the trial judge was not that, contrary to its requirement that payments for joint venture purposes be made only from the Joint Venture Account, payments were made from the Unit Trust Account. It was that it required that the payments from the Joint Venture Account only be made in accordance with the Approved Development Program and Approved Budget and payment guidelines previously approved by the Management Committee, but since there was no Approved Development Program and no Approved Budget, and there were also no payment guidelines previously approved by the Management Committee, the payments out of the Business Management Account when used as an imprest account were contrary to cl 16.4.
The trial judge regarded these breaches of cl 16.1(a), 16.3 and 16.4 as significant. Sanpine conducted no business other than entry into and conduct of the joint venture. It was submitted to the trial judge that the Unit Trust Account effectively fulfilled the function of the Joint Venture Account. The trial judge went to the principal payments made from the Unit Trust Account in February 1999, from the $670,036. He said that there was some “rudimentary documentation” vouching the payments, a payment of $183,314 to Mrs E Perkins being “particularly problematic”. The trial judge thought it “more likely” that the payment to Mrs Perkins was not an expense of the joint venture, but that even if it was an expense of the joint venture it should not have been paid from the joint funds because it reimbursed expenditure prior to the date of the Agreement falling within cl 13.5 of the Agreement. He did not express similar views about the other payments, but said that the breaches of cll 16.3 and 16.4 were not trivial when departure from those provisions involved misapplication of over $183,000 raised on the security of Koompahtoo’s land. He said that he did not regard the breach of cl 16.1(a) as trivial when, if the Agreement had been adhered to, the expenditure of money provided by the friendly people would have passed through the Joint Venture Account, proper accounting records relating to the payments could have been maintained and proper accounts of the joint venture drawn up, and -
“The situation which in fact arose in February 1999, when very large sums of money were paid from the Unit Trust Account, in many cases on the basis of no documentation or scrappy and inadequate documentation, and in one case for what has been proved to be not a Joint Venture purpose, would not have arisen.”
Sanpine again sought to explain or ameliorate its failure to adhere to the Agreement, in effect on the basis of acceptance of the different way of dealing with banking and payment of money. The trial judge said, however, in dealing with what he described as an “impromptu” submission that there had been a waiver or estoppel in relation to the breaches of cll 16.3 and 16.4, that he declined to infer that the Koompahtoo representatives on the Management Committee knew of the Unit Trust Account as well as the Business Management Account, or of the payments made in February 1999 or the months shortly thereafter. He accepted that the February 1999 expenditure was included in cash flow documents discussed at meetings of the Management Committee, and that there was some discussion of the cash flow documents at the meetings, but said (at [284]) that he thought that “that falls a long way short of the Management Committee members as a whole having knowledge of and approving those particular items of expenditure”.
This response to a submission of waiver or estoppel is understandable. But, with respect, it seems to me well nigh inevitable that the Koompahtoo members of the Management Committee would have known during the period from the establishment of the joint venture to February 1999 that a Joint Venture Account had not been established in accordance with cl 16.1 of the Agreement, and that payments for the purposes of the joint venture were not being made in accordance with an Approved Development Program and Approved Budget and payment guidelines previously approved by the Management Committee. They must have soon come to know that the Business Management Account was being used as an imprest account, so that borrowed money was not being paid into it, and that the payments made out of the borrowed money were equally not made in accordance with an Approved Development Program and approved Budget and payment guidelines as required by cl 16.4. In this respect, and more widely also in relation to the other breaches found against Sanpine, none of the Koompahtoo representatives on the Management Committee, and noone else from Koompahtoo at the time, was called by Koompahtoo to give evidence of what they knew of the departures from the Agreement or how they came about or came to be tolerated, and I do not think the Court should shrink from inferring knowledge and approval.
(d) Fourth category – Breaches relating to failure to maintain proper books
The breach found was a breach of cl 16.5(a) of the Agreement, requiring that Sanpine ensure that proper Books were kept.
No separate, ledger, journal or cash book were kept for the joint venture. No accounts in the nature of a balance sheet and profit and loss account were prepared for the joint venture prior to accounts for the year ended 30 June 1999. Draft accounts were prepared for that year; the judge did not accept that they had been finalised, and considered that the draft accounts were inadequate or incomplete in a number of respects (including that some of the expenditure of February 1999 should have been included but was not). Accounts for the financial years after 1999 were also prepared in draft form. On the basis that funds were dealt with through the Unit Trust Account, they showed effectively zero activity. The accounts did not record any of the outgoings connected with the joint venture which resulted in the expenditure, over the years, of more than $2,300,000, and the judge found that they were wrong.
The trial judge said (at [309]) that “[t]he total failure to keep books of original entry for the Joint Venture, on the basis of which annual accounts could be drawn up and audited each year, is a gross departure from the terms of the Joint Venture Agreement”. He said that he did not “accept that it is just a matter of detail whether the books of original entry were kept in the name of the Joint Venture or in the name of the Sanpine Unit Trust”. He did not elaborate on the keeping of books of original entry in the name of the Sanpine Unit Trust, but it is apparent that he considered that, in whichever name the books were kept, they were not adequately kept. He referred to a number of transactions involving expenditure of joint venture funds, one being the payment to Mrs Perkins of $183,314 mentioned above, and found that there was inadequate documentation to enable the purpose and validity of the payment to be ascertained. Thus he concluded that there was breach of cl 16.5(a) in that the Books were not kept “in such a manner as enables the Venturers to extract from the Books any information in relation to the affairs of the Joint Venture as that Venturer may reasonably require from time to time”.
The evidence on which Sanpine relied for explanation or amelioration was particularly the minutes of a meeting of the Management Committee on 9 June 1999, which included, after reference to internal dissension within Koompahtoo -
“Billy [Smith] and Bob [Scott] then raised the issue of the upcoming audit and in particular the cost to the Joint Venture. The chairman [Mr Steer] advised that whilst there is a requirement under the Joint Venture for an audit, he believed that if the expenses were not incurred until the rezoning then the audit of the Joint Venture could be deferred. He confirmed that Sanpine has no requirement for an audit. After much discussion it was agreed by all members of the committee that because of the expense of the audit and the fact that at present the expenses of the Joint Venture are being incurred by Sanpine Pty Limited on behalf of the Joint Venture, that the audit of these expenses could be deferred until the re-zoning. The meeting resolved to defer the appointment of an auditor of the Joint Venture until the re-zoning.”
The evidence of Mr Steer went a little beyond the minute. After saying at the meeting that Sanpine had no requirement for an audit, he said -
“What I would suggest is that in order to save money and due to the fact that Sanpine is effectively undertaking all of the work and paying out all of the expenses that we leave all of the expenses in Sanpine. In due course once the re-zoning has taken place the expenditure can be transferred across to the joint venture and approved by the joint venture.”
According to Mr Steer, as a result of the meeting all of the expenditure for the joint venture was then paid out of “the Sanpine Pty Limited” account, meaning what I have called the Unit Trust Account. He said that Sanpine kept proper books identifying expenditure in relation to the joint venture, but after June 1999 there was little if anything to go into books of account of the joint venture because all expenditure was “incurred through Sanpine”. Mr Steer was cross-examined as to the meeting, and said firmly that what was discussed went beyond auditing and that it was agreed that “the methodology was that Sanpine would pay the expenses and submit the expenses at the end for audit”. Further, when asked about payment of expenses from the Sanpine account prior to the June 1999 meeting, he said that there had been prior discussion over a number of meetings “and June 1999 was the date by which the final decision was taken”.
The trial judge said of the minutes of 9 June 1999 -
“310 … I accept that, on 9 June 1999, faced with the prospect of dissension within Koompahtoo, all the members of the Management Committee reached a consensus that they would not have an audit of the Joint Venture until after the rezoning was complete, and that it would be Sanpine that would incur the expenses until the rezoning was complete. This consensus was one example of a repeated theme in the operations of the Management Committee over subsequent years, namely, that the Management Committee were united in wishing the Joint Venture to go ahead, and if necessary would achieve that objective by keeping details of the operation of the Joint Venture away from the members of Koompahtoo, NSWALC, or anyone else who might create problems. I do not conclude, however, that the discussion on 9 June was one which involved the Koompahtoo representatives on the Management Committee agreeing that it would be money which had been raised on the security of Koompahtoo’s land which would be expended by Sanpine. The resolution is quite consistent with Sanpine deciding (as the Joint Venture Agreement contemplated might possibly happen, and as had actually happened before February 1999) that it would use money raised from sources other than Koompahtoo’s land to pay those expenses. The resolution of 9 June 1999 is not one which, in terms, authorises a departure from the requirements of the Joint Venture Agreement that proper accounts be kept for the Joint Venture. Nor, on any reading, does it have anything to do with the plaintiff’s failure to maintain accounts for the Joint Venture for nearly two years before 9 June 1999. Nor does it authorise any particular expenditure which has been made in the past.”
Again, Sanpine submitted before the trial judge that the resolution of 9 June 1999 gave rise to a waiver, or to an estoppel against reliance on breach by failure to maintain proper Books. The trial judge did not accept the submission. But Sanpine submitted also that the resolution and the course of conduct which it accepted, going beyond auditing and confirmatory of prior and continuing acceptance of doing without the joint venture’s own Books, was relevant to repudiation.
The trial judge’s consideration of repudiation
The trial judge observed (at [359]) that the fact that there had been breaches of the Agreement was not sufficient to establish that there had been a repudiation. He said (at [360]) that he used “repudiation” to mean conduct by a contracting party which, as a matter of common law, entitled the other contracting party to terminate the contract.
The trial judge said (at [362]) that there were different classifications of the circumstances in which the common law recognised an entitlement to terminate a contract. He noted classifications in Carter, Breach of Contract, 2nd edition and Cheshire and Fifoot, Law of Contract, 8th Australian edition which involved, although expressed differently, broadly corresponding classifications of termination for breach of an essential term or a condition; termination for sufficiently serious breach of an intermediate term or for breach which had the effect of depriving the injured party of the substantial benefit of the contract; and termination for absence of readiness or willingness to perform constituting a repudiation or for repudiatory manifestation of unwillingness or inability to perform in substance or at all.
The trial judge said -
“365 In the present case, both parties gave only passing attention to the differing items in these taxonomies. Rather, they focussed attention on specific judgments of the High Court of the last twenty five years. From those judgments, I take the following propositions as being established.
366 In Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-6 Gibbs CJ said that:
‘… contract may be repudiated if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract … or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way …’
That passage has been referred to with approval in The Progressive Mailing House Pty Limited v Tabali Pty Ltd (1985) 157 CLR 17 at 33 (per Mason J) and 40 (per Brennan J), and again in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634 per Mason CJ, 643 per Brennan J, and 664 per Gaudron J.
367 A repudiation can arise either from a party showing an intention not to be bound by the entire contract, or by showing that it does not intend to be bound by a term or terms which are of sufficient importance in the contract: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 634 per Mason CJ, 641-642 per Brennan J. The question of whether the party in breach has shown the sort of intention which enables termination to occur is decided not by reference to that party’s subjective intentions, but rather by reference to how its conduct would appear to a reasonable person in the position of the other contracting party: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 643, 647-8 per Brennan J, 657-8 per Deane and Dawson JJ, 666 per Gaudron J. It is well established that “repudiation of a contract is a serious matter, not to be lightly found or inferred”: (per Lord Wright, Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 at 71, Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 643 per Brennan J, 657 per Deane and Dawson JJ.”
His Honour continued, and this extract includes his [369] earlier set out in which he summarised the breaches of the Agreement -
“368 I record that the first and second defendants have submitted that various of the obligations which they have found were breached [sic] were essential terms of the contract, and hence that termination of the contract was justified regardless of the seriousness of the particular breaches. I will not pause to examine that argument. Rather, I shall assume, without deciding, that all the terms which have been breached in the present case are intermediate terms.
369 To recapitulate, I have found that the following breaches have occurred:

Delay of the order of five months in appointing Umwelt (para [231]).
Breach of the obligation in Clause 6.2(i) to prepare a Development Program (para [236]).
Breach of the obligation in Clause 6.2(j) to regularly update the Development Program (para [240]).
Breach, on fourteen occasions over seven years, of the obligation under Clause 12.2 to prepare and submit a Development Program and a cost and revenue budget (para [241]).
Breach of the obligation under Clause 13.2 to prepare a Monthly Report, containing the information listed in Clause 13.2. This breach occurred every month that the Joint Venture Agreement was on foot. Even if one regards the period from and including March 1999 to January 2003 as the more important part of that time, it involves breaches on forty six occasions (para [242]).
Breach of its obligation under Clause 16.1(a) to open the Joint Venture Account as soon as possible following the date of the Joint Venture Agreement (para [260]), [286])
Breach of the obligation in Clause 16.3 to pay money into the Joint Venture Account (para [261]).
Breach of Clause 16.4, concerning manner of application of funds withdrawn from Joint Venture monies (para [263]).
Failure to maintain proper books and records (para [301] – [309], [348] - [353].
370 No waiver or estoppel is effective to take away the significance which these breaches have. They are breaches which extend over the entire period during which the Joint Venture operated.
371 The Joint Venture Agreement was one which set out a clear and coherent set of procedures to be followed for the administration of the Joint Venture. The Agreement is one which, if carried through according to its letter, would have imposed upon the joint venturers the discipline of considering, each month, the type of information contained in the Monthly Reports, and of receiving and giving consideration at regular intervals to projections which involved the entire Development (not just part of the rezoning stage of it). It would have resulted in all the money which was raised on the security of Koompahtoo’s land or otherwise for the purposes of the Joint Venture being paid into the Joint Venture Account, and only drawn on for proper purposes, and by a procedure which checked actual expenditure against expenditure which had been predicted to be required. All the expenditure would be from the Joint Venture Account, which had representatives of both Venturers as signatories. There would be full documentary records of the expenditure of the money, and accounts kept, giving considerable detail, and in a form fit for auditing.
372 The departures from this way of running the joint venture have been gross and repeated. The total failure to adhere to the accounting obligations, ever since the Joint Venture began, is alone sufficient to amount to a repudiation. Even accepting that some information was given to the Koompahtoo representatives on the Management Committee relating to the Joint Venture (although verbally, and of a type and with a frequency which it is now not possible to ascertain) there is still an extremely serious departure from the obligations imposed by the Agreement. Even if (contrary to my view) the resolution of the Management Committee of 27 March (para [114] above) was effective to dispense, thenceforth, with any obligation on the plaintiff to provide Monthly Reports the remaining and continuing breaches were sufficient to amount to a repudiation.
373 The unexplained delay of five months in appointing Umwelt, at a time when all parties must have known that significant monthly costs continued to be running up for fees to Bronzewing and Mr Smith’s company, and Mr Smith’s vehicle, and for interest on borrowings, only makes the repudiation worse.
374 The second defendant was entitled to terminate the Joint Venture Agreement, as he did on 12 December 2003.”

Mr Steer replied by a letter dated 14 July 2003 -
“In reference to your letter dated 8 July 2003, please find responses to your queries:
1 & 2.As discussed with you, the supporting documentation for cheque payments by Sanpine Pty Ltd and Sanpine Unit Trust is substantial. For this reason, we confirm that you have one of your staff make an appointment with Richard Green at our office to review the documentation and select documents to be copied at your expense.
3. …
5.Cash flow documents will be available for your staff to copy at our office.
6.You are not correct in stating that the mortgagee of Lot 556 has taken action as a result of a default in payment of interest The action is a result of the mortgagee’s inability to register a dealing on the title as a result of the Registrar-General’s caveat.
At a meeting you attended you attended with [sic] on 30 May 2003, you undertook to examine documents with a view to recommending to the NSWALC that it pass motions approving the transfer of the land to KLALC Property and Investments Pty Ltd. You also undertook to not to commence proceedings until completing your review. Your review was to take about a month after which you were to again confer with us.
In breach of your undertaking you commenced pleading against KLALC Property and Investment Pty Limited and the mortgagee.
At that meeting, we discussed the possibility of Sanpine making arrangements which may have resulted in the mortgagee being paid out. At that time Sanpine was in delicate commercial negotiations. In the spirit of openness which existed prior to your appointment, having been given undertaking, we informed you of this sensitive information. The negotiations have been severely prejudiced by your conduct in commencing proceedings. Sanpine, for the time being is unable to remedy the situation.
7.I do not have to hand any Management Committee minutes subsequent to those on 29 January 2003. We are intending to convene a Management Committee meeting with you when you are ready. I assume you would want to attend.
8.As discussed in our telephone conversation on 10th July 2003 and on numerous occasions prior to then.
If you have any queries on the enclosed information or require further documentation, please do not hesitate to contact either Richard or myself at this office.
I trust this now allows us to have a meeting to settle this matter in a timely and commercial fashion. I look forward to your early response.”
The Administrator did not take up the invitation to visit Mr Steer’s office to inspect documents there.
A further meeting was held on 11 September 2003. According to the Administrator, he said that he was not satisfied that Sanpine had diligently undertaken its obligations under the Agreement, and that he had engaged a town planner, Mr Tibor Kovats of GHD, to provide him with an independent assessment of the work performed by Sanpine. He invited communication with Mr Kovats, saying that Mr Kovats “needs to be satisfied that you have fulfilled your joint venture responsibilities with regards to the rezoning and in a professional manner in accordance with normal development standards”.
The evidence of the meeting given by Mr Steer and Mr Scott was rather different. Their evidence was to like effect, and it is sufficient to set out Mr Steer’s account -
“On 11 September 2003 I attended a meeting with the Administrator, Terry Lawler, David Creais, Peter Stern, Bill Smith, Adam Perkins and Bob Scott at the offices of Bartier Perry.
The Administrator said:
‘The issues I have in relation to the joint venture relate to the time frame. In five and a half years nothing has been achieved. I also require clarification in relation to a few cheques that have been paid.’
Bob Scott replied:
‘The rezoning process did not start until mid 1999, which would be more like four years. You are more than aware of all of the delays that we have experienced over which we had no control.’
The Administrator said:
‘I am still not satisfied that Sanpine has been proactive. You [Bob Scott] have raised the issue regarding my lack of knowledge of property development and I have appointed GHD to give me a report on the development. I already have their interim report which has raised some concerns based on Council documents.’
I said:
‘What is this achieving or what are you trying to achieve.’
The Administrator said:
‘I’m trying to establish whether Sanpine has complied with the Joint Venture.’
Peter Stern said:
‘There is a contract, the Joint Venture agreement, between KLALC and Sanpine.’
David Creais said:
‘It could be a breach of that contract.’
I said:
‘Assume we satisfy GHD in relation to the timeframe.’
The Administrator said:
‘Then it comes down to a dollar issue – the accounts would need auditing and we would need to resolve some issues in relation to the Joint Venture Agreement. It would have to be renegotiated. The default provisions are inequitable.’
David Creais said:
‘There are three stages – the GHD report, the audit and then the renegotiation of the Joint Venture Agreement’.”
The trial judge made no findings in relation to this meeting. Mr Kovats was engaged, and Koompahtoo relied on his report at the trial, but the trial judge did not accept his opinion as to the time and cost of obtaining rezoning because assumptions on which it was based were not borne out and the discrepancies were “so great as to deprive his opinion of weight” (at [195]).
As foreshadowed in the letter of 14 July 2003, on 2 October 2003 Mr Steer wrote to the Administrator advising that a “management meeting” for the joint venture would be held on 14 or 15 October and inviting his attendance. The Administrator replied that he could not attend and noted that the notice did not comply with the requirements of the Agreement. He said also, “My position regarding the joint venture was clearly stated at our meeting of 11 September 2003”, and that when he received Mr Kovats’ report he would “advise you of my position with regards [sic] to this matter”.
By a letter to the Administrator dated 23 October 2003 Mr Steer gave formal notice of a meeting of the Management Committee to be held on 3 November 2003, saying that “[t]he purpose of the meeting is to consider the status of the re-zoning including a recent meetings [sic] held with Lake Macquarie Council. The Project Manager will table this report at this meeting.”
The Administrator replied to the effect that there was no purpose in his attending, and that his position was as stated in the letter of 10 October 2003.
So far as appears, the next step was the termination of the Agreement by the Administrator’s letter of 12 December 2003.
To the extent to which the trial judge canvassed these events, he did so in his consideration of whether proper books had been maintained. He said -
“307 Mr Lawler’s ongoing puzzlement about the affairs of the Joint Venture, notwithstanding the information which he was provided by Mr Steer, provides some evidence that the standard required by Clause 16.5, namely that the Books shall be kept “in such a manner as enables the Venturers to extract from the Books any information in relation to the affairs of the Joint Venture as that Venturer may reasonably require” had not been adhered to. However, the weight of that evidence is limited by the fact that Mr Lawler did not inspect all of the books. In consequence, I do not rely upon his actually having failed to achieve an understanding of the affairs of the Joint Venture from inspecting such of the documents as he inspected, as being in itself adequate proof that the Books failed to meet the contractual standard.
308 The first and second defendants also rely upon Mr Lawler’s difficulties in ascertaining information in another way. Mr Steer’s evasion and prevarication in attending to Mr Lawler’s requests is, I accept, a strong admission by conduct that the books of the Joint Venture had not been kept in the way the Joint Venture Agreement required.
309 It is not necessary, however, to rely upon any such admission. ... ”
I do not consider, however, that there was repudiation of the Agreement by Sanpine.
Sanpine made plain that it wished to continue with the joint venture, specifically at the meeting of 4 May 2003 and by Mr Steer’s foreshadowing the convening of, and then taking steps to convene a meeting of the Management Committee. The Administrator was the one who did not wish to continue with the joint venture, and said that he would get out of it if he could, specifically at the meeting of 2 May 2003 and overtly in his engagement of Mr Kovats.
Almost all the Administrator’s requests were for historical documents and information. While it is difficult to be precise in the state of the evidence and without the assistance of submissions on the matter, it seems that the information requested was mostly provided to the extent that it existed, and since the Administrator did not take up the invitation to visit Mr Steer’s offices it can not properly be found that, despite what the trial judge referred to as “Mr Steer’s evasion and prevarication”, information in existence was held back.
There was a specific request for an updated cl 6.2 Development Program and a current monthly report by the letter of 4 June 2004. After saying on 13 June 2003 that he would not provide any further information, Mr Steer must have repented, because he did provide further information. However, it does not appear that the updated Development Program or the monthly report were provided. As the joint venture was stalled and Sanpine was forbidden to spend any more money, and the Administrator was saying he wanted to get out of the Agreement, the Administrator’s request did not deserve serious attention. It was pointless as a contractual step, and it is no wonder that the Administrator did not pursue his request. Perhaps it was implicit in the requests for financial information that, to the extent that Books had not been maintained, they now be written up so as to bring adherence to the Agreement. It was not made express.
Reverting to the contention ground, none of the failures in performance (b), (c) and (d) appears to have occurred in the period from 13 May 2003, save arguably failure to write up books for the past. The joint venture was stalled, and could not spend money. If there was prevarication in providing historical documents and information, or even failure to provide historical documents and information, that was not a breach of the terms of the Agreement involved in the trial judge’s findings of breaches against Sanpine, and Koompahtoo did not rely on breach of any other term (for example, cl 23.1). There was failure in performance (a) in the contention ground, in that the updated Development Program requested in May 2003 was not provided. In the circumstances of both standstill and stand-off, I am unable to see in that or otherwise any sound basis for the conclusion that Sanpine had evinced an intention either no longer to be bound by the Agreement or to fulfil it only in a manner inconsistent with its obligations and not in any other way.
Termination for breaches of essential terms
As has been noted, in his [368] the trial judge passed over the submission that there had been breaches of essential terms of the Agreement, and assumed that the breaches were of intermediate terms. Koompahtoo applied for leave to rely on termination as described in ground 2 in the notice of contention -
“2. Other than the term referred to in [231] of His Honour’s judgment regarding the appointment of Umwelt, His Honour ought to have characterised the terms found to have been breached as conditions, not intermediate terms, and held thereupon that such breaches constituted breaches of essential terms justifying the joint venture’s termination on 12 December 2003.”
Koompahtoo submitted that the additional contention ground should cause no prejudice “as it purely concerns a question of contractual construction”, and said that it relied upon the cases of Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 and Associated Newspapers Ltd v Bancks (1951) 83 CLR 322. Its written submissions said as to the substance only-
“(iii)the Trial Judge acknowledges at [368] … that the Respondents in the Court below contended that the terms breached were ‘essential terms’;
(iv)the Respondents also submitted in the Appeal that the terms breached, particularly those concerning the provision of a development program (updated or otherwise) and the maintenance of proper books and records were of foundational importance in the operation of the joint venture. The Respondents do not wish to address the Court further on this additional contention.”
Sanpine submitted -

that the trial judge’s decision adverse to it was on the basis of termination for repudiation, and the appeal had been conducted as a challenge to that basis for termination;
that for the purposes of the appeal it had not disputed that, subject in some cases to waiver or estoppel, it had breached the Agreement in the respects found against it;
that it had not been concerned to question the breaches found against it or enter upon their characterisation (which might differ between the terms) as breaches of essential terms; and
that if Koompahtoo were permitted to raise at the last minute breach of essential terms, Sanpine’s acceptance of the breaches found against it would have to be reviewed, and there would have to be a close analysis of each of the terms for its characterisation as essential or otherwise.

Sanpine submitted that the Court should in these circumstances refuse leave. It said that if leave were granted it would wish to make detailed submissions, which it had not yet done.
Koompahtoo contended at the trial that the terms were essential terms, and would not be making a new case on appeal; it cannot be said that there is no substance in the contention ground. The lateness in seeking to rely on the contention ground, which Koompahtoo could have relied on without leave if it had filed a timely notice of contention, discommodes Sanpine (and the Court), but Sanpine can be given the opportunity to submit that the trial judge was in error finding the breaches against it, if that be necessary and it so desires, and to make the detailed submissions it seeks to provide. A lot is at stake in determining whether or not the Agreement was validly terminated. In my opinion, leave to rely on the contention ground should be granted.
However, for the reasons which follow I do not think the breaches found against Sanpine were breaches of essential terms. It is therefore not necessary to invite Sanpine’s detailed submissions. They may have included a submission that breach by Koompahtoo precluded termination by it in December 2003, but it remains unnecessary to consider that question.
In his well-known exposition in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd, Jordan CJ noted matters material to the legal consequences following from a breach of contract and said (at 641-2) -
“The nature of the promise broke is one of the most important of the matters. If it is a condition that is broken, ie, an essential promise, the innocent party, when he becomes aware of the breach, has ordinarily the right at his option either to treat himself as discharged from the contract and to recover damages for loss of the contract, or else to keep the contract on foot and recover damages for the particular breach. If it is a warranty that is broken, ie, a non-essential promise, only the latter alternative is available to the innocent party: in that case he cannot of course obtain damages for loss of the contract: A H McDonald & Co Pty Ltd v Wells [45 CLR 506 at 513-4].
The question whether a term in a contract is a condition or a warranty, ie, an essential or a non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor: Flight v Booth [(1834) 1 Bing NC 370 at 377]; Bettini v Gye [(1876) 1 QBD 183 at 188]; Bentsen v Taylor Sons & Co (No 2) [[1893] 2 QB 274 at 281]; Fullers’ Theatres Ltd v Musgrove [(1923) 31 CLR 524 at 537-8]; Bowes v Chaleyer [(1923) 32 CLR 159]; Clifton v Coffey [(1924) 34 CLR 434 at 438, 440]. If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will
ordinarily justify a discharge. In some cases it is expressly provided that a particular promise is essential to the contract, eg, by a stipulation that it is the basis or of the essence of the contract: Bettini v Gye [at 187]; but in the absence of express provision the question is one of construction for the Court, when once the terms of contract have been ascertained: Bentsen v Taylor Sons & Co (No 2) [at 280-281]; Clifton v Coffey [at 437-8].”
This test for whether a term is essential or non-essential has been adopted in the High Court in, for example, Associated Newspapers Ltd v Bancks at 337, DTR Nominees Pty Ltd v Mona Homes Pty Ltd at 430-1, Shevill v Builders Licensing Board at 627 and Ankar Pty Ltd v National Westminister Finance (Australia) Ltd (1987) 162 CLR 549 at 556. The Chief Justice’s reference to essentially where the party would not have entered into the contract unless assured of substantial performance, as distinct from strict performance, is probably now accommodated by the category of an intermediate (or innominate) term: see Tricontinental Corporation Ltd v HDFI Ltd (1987) 21 NSWLR 689 at 703 per Samuels JA; Carter on Contract 34-040.
In Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd at 478 the Court cited from Bentsen v Taylor Sons & Co (1893) 2 QB 274 at 281 -
“ … where Bowen LJ said:
‘ ... There is no way of deciding that question except by looking at the contract in the light of the surrounding circumstances, and then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages, or as a condition precedent by the failure to perform which the other party is relieved of his liability.’
As Kerr LJ said in State Trading Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 283:
‘ ... the Court may have no alternative but to follow the general statement of Lord Justice Bowen in Bentsen v Taylor ... by making what is in effect a value judgment about the commercial significance of the term in question.’
Earlier (at 282) he had cited the statement by Fletcher Moulton LJ in Wallis v Pratt [1910] 2 KB 1003 at 1012 that conditions are terms:
‘ ... which go so directly to the substance of the contract, or in other words, are so essential to its very nature that their non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all’."
In DTR Homes Pty Ltd v Mona Homes Pty Ltd a provision for termination if a deposited plan had not been lodged for registration within a stated period or such further time as might be mutually agreed upon was regarded as an indication that a term that the plan should be lodged for registration with all due dispatch was not an essential term, because it showed that the parties did not intend that strict compliance with the term was not required. Stephen, Mason and Jacobs JJ said at 430-1 that -
“ … the presence of the express right to rescind in the event of non-registration within twelve months indicates that mere failure to act expeditiously was not in itself a breach of an essential term.
…
[The statement of the law by Jordan CJ], emphasizes that the quality of essentiality depends for its existence on a judgment which is made of the general nature of the contract and its particular provisions, a judgment which takes close account of the importance which the parties have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances. Once this is understood, there is no sufficient foundation for holding that the respondents would not have entered into the contract had they known that the appellant had not lodged the contract plan of subdivision and that it would not proceed expeditiously thereafter. We know that the respondents were willing to accept a right to rescind conditioned by the events mentioned in special condition 4.”

See also Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd where it was held that a right to terminate for breach after notice excluded any right to terminate without notice.
While dealing with purchase of the defaulting party’s interest rather than termination, cl 19 suggests that strict compliance with the terms of the Agreement is not of prime importance, because it contemplates notice and an opportunity to remedy any breach before the entitlement under cl 19 is triggered. It applies to any “material” breach, also suggesting that strict compliance is not of prime importance because a less than material breach does not trigger the entitlement under cl 19 at all. The indication is less direct than that in DTR Homes Pty Ltd v Mona Homes Pty Ltd, because cl19 is general in its application and termination for breach of an essential term can co-exist with the exercise of the entitlement under cl 19. The provision is far from conclusive, but it suggests that the parties’ concern when entering into the Agreement was with materiality of any breach and remediation of breach, rather than entitlement to terminate if there was not strict performance.
The agreement was an agreement for a joint venture to undertake the Development. Its central objective was the development and sale of part of Koompahtoo’s land. The terms presently in question, concerned with development programs and monthly reporting, banking and spending of money and maintaining proper books, regulated the manner of working to that central objective. Each could be breached in an immaterial way or without significant consequences to the joint venture. While not determinative, this indicated that they were not essential terms, see for example Hong Kong Fir Shipping Co Ltd v Kawasaki Kishen Kaisha Ltd (1962) 2 QB 26.
Formulation of a Development Program before a rezoning was achieved could not meaningfully determine when development consent would be obtained or what the consent would permit, and therefore could not realistically include a timetable for and an envisaged cost of the stages of marketing and sale. Although such non-formulation would be technically contrary to cl 6.2, it could not be said to impact adversely on the conduct or achievement of the objective of the joint venture during the period in question. A cl 12.2 Development Program and cost and revenue budget could be prepared and submitted a week or a few weeks later than the time stipulated in cl 12.2, without cause for concern. Similarly as to a cl 13.2 monthly report; and it may be added that, where by cl 13.2(j) a cl 13.2 monthly report was to include “such other matters as the Management Committee may determine from time to time or as any Venturer may reasonably request from time to time”, it is not easy to see that the joint venturers intended, when entering into the Agreement, that strict compliance with what was then unknown was necessary on pain of entitlement to peremptorily terminate. These were tools in the overall good management of the joint venture, but strict use of the tools could not sensibly be said to have been vital to the parties in achieving the Development, at least unless and until a rezoning was effected. Absent the rezoning, the joint venture was academic.
Financial control was important, through prompt opening and use thereafter of the Joint Venture Account, payment only in accordance with the Approved Development Program and Approved Budget and approved payment guidelines, and keeping proper Books. But breach by failure promptly to open a Joint Venture Account, if there were no funds to go through the account, would not be material; perhaps differing from the trial judge, where the friendly people were apparently content to pay direct, I do not see why it was necessary to have the Joint Venture Account. Any payment by mistake, a payment in an excess of zeal, or a payment informally authorised by the Management Committee although not within the current Approved Budget, would hardly have been considered at the time of entry into the Agreement as a departure from it warranting termination; it would depend on the amount and circumstances of the payment. Even in this important area there could be venial sin as well as mortal sin.
The test in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd, applied in construing the Agreement, requires assessment at the time the Agreement was entered into. The actual breaches found against Sanpine are not a basis for determining essentiality of the terms. I do not think it should be determined that Koompahtoo would not have entered into the Agreement unless assured of strict and literal performance of the terms found by the trial judge to have been breached; they were therefore not essential terms.
The implied obligation to advance the Development diligently and promptly is more arguably an essential term. Diligent and prompt advancement was important, and breach could have significant consequences because of, for example, increased holding and financing costs. However, there could also be breach with relatively slight consequences – there could be a failure to advance the Development by a matter of weeks rather than a matter of months or longer. It is material that the consequences of delay would ordinarily be ascertainable and compensable in damages so that the innocent party would have a remedy for the consequences of breach short of the more extreme step of bringing the joint venture to an end; similarly, the defaulting party could afford the remedy without the joint venture, and its hoped-for profit therefrom, being lost to it. It is to be noted in this context that the trial judge found that Sanpine was not in breach of its obligations to advance the joint venture except with regard to the appointment of Umwelt (see par 50 above). Taking account also of cl 19 of the Agreement, in my opinion, the implied obligation to advance the Development was not an essential obligation.
Accordingly, in my opinion Koompahtoo was not entitled to terminate the Agreement for breach of one or more essential terms.
Termination for sufficiently serious breach of intermediate terms
I have adverted to whether the trial judge came to his decision on the basis of termination for sufficiently serious breach of intermediate terms. Sanpine recognised an available view that he had done so, and Koompahtoo obliquely suggested that he had. Other than by its submissions for other purposes as to the seriousness of the breaches, Koompahtoo did not seek to uphold the trial judge’s decision on this basis, and did not include in the notice of contention on which it sought leave to rely a contention ground so directed.
It would not be satisfactory to leave the resolution of the appeal without some attention to termination for sufficiently serious breach of intermediate terms.
In Ankar Pty Ltd v National Westminister Finance (Australia) Ltd Mason ACJ and Wilson, Brennan and Dawson JJ said at 561-2 -
“Since the judgment of Diplock LJ in Hongkong Fir [Hong Kong Fir Shipping Ltd v Kawasaki Kisen Kaisha Ltd (1962) 2 QB 26] it has been recognized in England that a term in a contract may stand somewhere between a condition and a warranty. Such an intermediate or innominate term, it has been held, is capable of operating, according to the gravity of the breach, as either a condition or a warranty. In Hongkong Fir the obligation of seaworthiness was readily classified as innominate because a breach of the obligation might be trivial, making damages an adequate remedy, or grave, in which event it should have effect as a breach of condition. The innominate term brings a greater flexibility to the law of contract, as Lord Wilberforce has remarked on more than one occasion: Reardon Smith Line Ltd v Hansen-Tangen [Reardon Smith Line Ltd v Yngvar Hansen-Tangen (1976) 1 WLR 989]; Bunge Corporation [[Bunge Corpn New York v Tradax Export SA Panama (1981)1 WLE 711]. Although nothing less than a serious breach of an innominate term entitles the innocent party to treat the contract as at an end, the breaches of cll 8 and 9 merit this description.”
Their Honour’s observations were obiter, since they held that the clauses were conditions. They have been regarded, however, as endorsing for Australian jurisprudence the classification of a term as less than an essential term breach of which of itself entitles the other party to terminate the contract, but more than a warranty breach of which only gives an entitlement to damages. Their acceptance was anticipated in, for example, Honner v Ashton at 9490-1 per Mahoney JA and Shevill v Builders Licensing Board at 626 per Gibbs CJ. In the appeal the parties did not question the tripartite classifications noted by the trial judge.
In Carter on Contract at 34-160 the learned author discusses whether the breach of an intermediate term is sufficiently serious to entitle the other party to terminate the contract -
“The criterion to be applied at common law has been stated in various ways, including:
(1)whether the breach frustrates the purpose of the contract;
(2)whether the breach has deprived the promise of substantially the whole benefit of the contract;
(3)whether the breach makes further commercial performance of the contract impossible;
(4)whether the breach is fundamental in character;
(5)whether the breach has produced a ‘fundamentally different’ situation;
(6)whether the breach goes to the ‘root’ of the contract; and
(7)whether the breach causes a total failure of consideration.
As with all metaphors, these descriptions are easier to state than to apply. The actual decision and two quotations from the seminal case, Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, provide a basis for deducing the significant points. Upjohn LJ said:
‘[D]oes the breach of the stipulation go so much to the root of the contract that it makes further commercial performance of the contract impossible, or in other words is the whole contract frustrated? If yea, the innocent party may treat the contract as at an end. If nay, his claim sounds in damages only.
Diplock LJ said:
‘The test … has been stated in a number of metaphors all of which I think amount to the same thing: does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?’
The following propositions can be deduced from these statements.
First, it is the effect of the breach on the contract as a whole which matters: in order for a right to terminate to exist, the performance of the contract must be rendered substantially different from that intended by the parties, as a consequence of the promisor’s breach.
Second, the seriousness of the breach depends not only on the breach itself but also on the consequences of the breach, both actual and foreseeable, for the promisee.
Third, the assessment of the consequences of the breach is essentially a factual matter on which opinions are likely to differ. The promisee bears the onus of proof.
Fourth, there is a link with the doctrine of frustration in that, in commercial contracts at least, the degree of seriousness required is the same as that applied under the doctrine of frustration.” (citations and other footnotes omitted)
Without repetition, what I have already said in these reasons causes me to conclude that circumstances justify a finding of a sufficiently serious breach to found termination on the basis of breach of an intermediate term of the Agreement have not been demonstrated.
The result
The separate question should have been answered, no. Had that been the answer, orders would not have been made that Sanpine’s proceedings be dismissed and that it pay Koompahtoo’s costs; directions would have been given for the continuance of the proceedings to their conclusion.
I therefore propose the following orders -
1.Refuse leave to rely on contention ground 1 and grant leave to rely on contention ground 2 as stated in these reasons: dispense with filing of the notice of contention.
2. Appeal allowed.
3.Set aside orders 1 and 2 made by Campbell J on 22 April 2005 and the orders made on 31 March 2006, and in lieu thereof order that the question be answered no and that the first and second defendants pay the plaintiff’s costs of the hearing of the separate question.
4.Remit the proceedings to the Equity Division for directions for their continuance.
5.Respondent pay appellant’s costs of the appeal and have a certificate under the Suitors Fund Act if otherwise qualified.
TOBIAS JA: I agree with Giles JA.
BRYSON JA: I am indebted to Giles JA for his Honour’s careful and full statement and review of the acts and events, and for his references to and consideration of decisions of the High Court of Australia which have stated circumstances in which repudiation occurs. Difficulty in attributing Campbell J’s conclusion to some one or other of the formulations in which those circumstances have been stated is not an indication of error. The authorities do not speak with uniformity or precision, and this is an indication that they are not expounding something which is precise.
Whether or not there has been a repudiation is a conclusion based on the application to the facts of each case of a standard which has not been, and I think cannot be formulated precisely or exhaustively. As with other legal standards, repudiation calls for judicial decision on whether conduct has passed a boundary although the precise location of the boundary is not clear. In many cases an allegation of repudiation can be disposed of readily but the present case, relating to complex events extending over some years, required the detailed address to the facts and the overall judgment on them which Campbell J gave, and his judgment should receive consideration on appeal similar to that given to a decision of a primary judge on application of the standard of care in negligence.
Although it is Campbell J’s conclusion, not mine, which governs unless error is shown, I comment that observance of obligations relating to the Development Program, Monthly Reports, opening and dealing with the Joint Venture Account and maintaining proper books and records had importance for Koompahtoo which went far beyond informing and satisfying the minds of current office-holders of Koompahtoo. What happens in a complex development project extending over many years should be clearly known and clearly recorded for reasons relating to Koompahtoo’s interests the importance of which will present themselves from time to time in many contexts over many years, including taxation contexts and as in this case in litigation. It was always certain that there would be changes of office-holders, and what was known to office-holders in the past, but was not recorded, is lost to later office-holders, and to other persons (exemplified by the Administrator) who do not participate in the informal arrangements and exchanges of information. Plainly Campbell J accorded a very high value to compliance with these obligations: I regard this as fully justified.
The deficiency to Koompahtoo’s contractual entitlement was very great, and very important. No legitimate commercial venture can flourish without observing ordinary reasonable practices for handling money, banking it, keeping records and being able to account. Acquiescence by office-holders of Koompahtoo in departures from contractual provisions indicates how great was Koompahtoo’s need of Sanpine’s expertise and contractual compliance: their acquiescence was not a contractual variation, and it cannot be an excuse.

In my respectful opinion the circumstances which Campbell J found and recapitulated at para [369] were a full and clear basis on which the conclusion that there had been a repudiation was open. In my opinion no error appears and Campbell J’s decision should be affirmed.
I see no need to address Koompahtoo’s Notice of Contention.
In my opinion the Court of Appeal should dismiss the appeal with costs.
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LAST UPDATED: 02/11/2006