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Sharjade Pty Ltd v Commonwealth

Sharjade Pty Ltd v Commonwealth

Case [2009] NSWCA 373 26 November 2009

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New South Wales

Court of Appeal

CITATION: Sharjade Pty Ltd v The Commonwealth of Australia; RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd (formerly Darwinia Estate Pty Ltd) v Sharjade Pty Ltd [2009] NSWCA 373

HEARING DATE(S): 19, 20 August 2009

JUDGMENT DATE:
26 November 2009

JUDGMENT OF: Hodgson JA at 1; Young JA at 136; Sackville AJA at 157

DECISION: In Darwinia’s application for leave to appeal:
(1) Leave to appeal granted.
(2) Notice of Appeal to be filed within fourteen days.
(3) Appeal allowed.
(4) Orders of primary judge in relation to Sharjade’s claim against Darwinia set aside.
(5) In lieu thereof, Sharjade’s claim against Darwinia dismissed with costs.
(6) Sharjade to pay Darwinia’s costs of the application and appeal, and to have a certificate under the Suitors’ Fund Act 1951 if otherwise eligible.
In Sharjade’s appeal:
(1) Appeal dismissed with costs.

CATCHWORDS: CONTRACTS – Option agreement between Commonwealth and ex-service organisation for latter to purchase Commonwealth land – Exercise of option – Whether concluded contract for sale then existed – Requirements of such contract as to payment of money – Notice by Commonwealth purporting to make time of the essence for making payments – Payments not made – Commonwealth gives notice of termination – Whether termination effective. - CONTRACTS – Agreement between ex-service organisation and developer concerning development of land – Promise by former to actively promote and assist developer to effect pre-sales of units in development – Promise by developer to arrange finance for the development – Breach by ex-service organisation of its obligation concerning pre-sales – Breach by developer of its obligation concerning finance – Ex-service organisation gives notice of termination – Whether termination effective – Whether developer’s breach such as to justify termination – Whether terminating party precluded by its own breach from effectively terminating agreement. - TORTS – Inducing breach of contract – Elements of tort – Whether Commonwealth, by purportedly terminating option agreement, induced breach by ex-service organisation of its contract with developer.

LEGISLATION CITED: Conveyancing Act 1919 s 13
UCPR 14.10

CATEGORY: Principal judgment

CASES CITED: Baulkham Hills Hospital Pty Limited v GR Securities Pty Limited (1986) 40 NSWLR 622
Bremer Vulkan Schiffbau und Maschinenfabrik v South Indian Shipping Corporation Limited [1981] AC 909
The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423
Foran v Wight [1989] HCA 51; (1989) 168 CLR 385
Frankcombe v Foster Investments Pty Limited [1978] 2 NSWLR 41
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115
Kyrwood v Drinkwater [2000] NSWCA 126
Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited [1989] HCA 23; (1989) 166 CLR 623
Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249
Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
Michael Realty Pty Limited v Carr [1977] 1 NSWLR 553
National Engineering Pty Limited v Chilco Enterprises Pty Limited [2001] NSWCA 291
Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Limited [1984] 3 NSWLR 613
Paal Wilson and Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854
Plumor Pty Limited v Handley (1996) 41 NSWLR 30
Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466
Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462
Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287
Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620
Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310
State Trading Corporation of India Limited v M Golodetz Limited [1989] 2 Lloyds Reports 277
Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245
Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418
Thors v Weekes (1989) 92 ALR 131

TEXTS CITED: J W Carter, Breach of Contract (2nd ed, 1991), at pars 1033-1035.
Chitty on Contracts (30th ed, 2008), vol 1, at par 24-015;
J W Carter, E Peden and G J Tolhurst, Contract Law in Australia (5th ed, 2007), at par 31-12
N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Aust ed, 2008), at par 21.26
E Peel, Treitel The Law of Contract (12th ed, 2007), at par 18-086

PARTIES:
CA 40003/09:
SHARJADE PTY LTD (Appellant)
THE COMMONWEALTH OF AUSTRALIA (Respondent)
CA 40004/09:
RAAF (LANDINGS) EX-SERVICEMEN CHARITABLE FUND PTY LTD (formerly known as DARWINIA ESTATE PTY LTD) (Appellant)
SHARJADE PTY LTD (Respondent)

FILE NUMBER(S): CA 40003/09; 40004/09

COUNSEL: M R GRACIE/ D A NEGGO (Sharjade P/L)
M SPEAKMAN/ D MOUJALLI (Commonwealth)
SIMPKINS SC/ N J OWENS (RAAF (Landings) (“Darwinia”))

SOLICITORS: Macpherson & Kelley Lawyers (Sharjade P/L)
Blake Dawson (Commonwealth)
Gadens Lawyers (RAAF (Landings) (“Darwinia”))

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 50024/06

LOWER COURT JUDICIAL OFFICER: Bergin J

LOWER COURT DATE OF DECISION: 8 October 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Sharjade Pty Ltd v RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd
[2008] NSWSC 1003

CA 40003/09
CA 40004/09
SC 50024/06

HODGSON JA
YOUNG JA
SACKVILLE AJA
26 NOVEMBER 2009

SHARJADE PTY LIMITED v THE COMMONWEALTH OF AUSTRALIA;

RAAF (Landings) EX-SERVICEMEN CHARITABLE FUND PTY LIMITED (formerly Darwinia Estate Pty Limited) v SHARJADE PTY LIMITED

Headnote

FACTS
The dispute concerns the development of a retirement village on Crown Land in North Turramurra. A predecessor to Sharjade Pty Limited (“Sharjade”) began the development process and Darwinia Estate Pty Limited (“Darwinia”) (now known as RAAF (Landings) Ex-Servicemen Charitable Fund Pty Limited) was the vehicle created by the Royal Australian Air Force Association for the purposes of the development.

On 29 August 1995, the Commonwealth made an offer of a 99 year lease on the land to Darwinia for $5.8 million, on condition that it undertake to purchase the land and make full payment within 7 years from the date of exchange of contracts for the land.

On 18 October 1995, Sharjade entered into a Heads of Agreement to develop the land, terms of which relevantly included that Sharjade would arrange funding of the project including the provision of a bank guarantee for the purchase price (cl 8(1)(c)) and Darwinia would actively promote and assist Sharjade in effecting the sale of the units and commit to achieving pre-sales of up to 80 units within 12 months of the option period and prior to execution of the lease of the land (cl 8(4): these refer to Darwinia’s agreement with the Commonwealth (below)).

On 24 November 1995, Darwinia and the Commonwealth entered into an Option Agreement to purchase the land, terms of which included a 12 month option period, the provision of a bank guarantee and the payment of interest on the deferred purchase arrangement. The Option Agreement was extended a number of times, and was exercised by Darwinia on 23 December 1998. However a formal contract of sale was never exchanged.

Finance was obtained by Sharjade on condition of the completion of pre-sales of 80 units. By late 1999 pre-sales stood at only 7 units and by early 2000 Sharjade’s finance had been terminated, as this condition could not be satisfied.

Between January and March 2000 correspondence between Darwinia and Sharjade (and between their solicitors) occurred. Darwinia claimed that they had met their obligations to promote and assist pre-sales and noted that finance had expired and requested certain matters be attended to. Sharjade responded to these matters. Sharjade’s solicitors then wrote to Darwinia claiming, inter alia , that Darwinia had not used their best endeavours to effect pre-sales, that finance was obtained based on Darwinia’s agreement to promote and assist pre-sales, and that a bank guarantee was never part of the Heads of Agreement. Darwinia’s solicitors responded threatening termination if the bank guarantee and finance were not effected.

During this period negotiations were occurring with third party developers to take over, partially or wholly, the development of the project.

On 17 March 2000, the Commonwealth served on Darwinia a Notice requiring a bank guarantee and the payment of accrued interest within 28 days. Darwinia did not provide these and Sharjade did not make available any finance to enable it to do so.

On 24 May 2000, the Commonwealth served a notice to Darwinia purporting to terminate the Option Agreement. On the same day Darwinia and the Commonwealth began negotiations to enter a new agreement on essentially the same terms.

On 27 June 2000, Darwinia’s solicitors wrote to Sharjade’s solicitors terminating the Heads of Agreement. Ultimately, the development proceeded without involvement of Sharjade.

At first instance, Sharjade, among other claims, claimed damages against Darwinia for wrongful termination of the Heads of Agreement, and against the Commonwealth for inducing Darwinia to breach its contract with Sharjade.

The primary judge upheld Sharjade’s claim against Darwinia and rejected its claim against the Commonwealth, deciding that:
The Commonwealth was not entitled to demand the bank guarantee and interest, as Darwinia’s obligations in those respects did not arise until formal contracts were exchanged;
As per the Heads of Agreement, Sharjade’s obligations, whilst fundamental, were not triggered by virtue of the above finding; and
Darwinia had not complied with their agreement to assist pre-sales.
The primary judge rejected submissions that:
Sharjade had demonstrated inability to perform the contract, particularly in raising finance;
The Heads of Agreement were frustrated by the termination of the Option Agreement; and
The Commonwealth induced a breach of contract, or alternatively interfered in contractual relations between Darwinia and Sharjade.

On appeal:
Sharjade appealed from the decision in relation to the Commonwealth’s inducement of breach of contract;
Darwinia appealed the finding that they were not entitled to terminate the Heads of Agreement; and
The Commonwealth filed a Notice of Contention, inter alia, that the Commonwealth was entitled to terminate the Option Agreement and they did not commit the tort of inducement of breach of contract.

Issues :
(1) Was the Commonwealth entitled to terminate the Option Agreement?
(2) Was Darwinia entitled to terminate the Heads of Agreement?
(3) Was the Heads of Agreement conditioned on the existence of a binding contract for the purchase of the land or frustrated by termination of that contract?
(4) Did the Commonwealth commit the tort of inducing breach of contract?

HELD (leave to appeal granted, allowing Darwinia’s and dismissing Sharjade’s appeal)

As to (1)
( per Hodgson JA, Young JA and Sackville AJA agreeing )

Yes. There existed a contract of sale of the ‘fourth class’ of case: Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310; Baulkham Hills Hospital Pty Limited v GR Securities Pty Limited (1986) 40 NSWLR 622, referred to. Darwinia’s obligations in respect of bank guarantee and interest payments arose upon exercise of the Option Agreement; and time for compliance with these obligations was made of the essence by the Commonwealth’s notice.

As to (2)
(per Hodgson JA, Sackville AJA, Young JA agreeing)

Yes:
Darwinia breached its obligation under cl 8(4). Sharjade’s obligation under cl 8(1)(c) to raise finance and provide a bank guarantee was not conditional on meeting pre-sales of 80 units; and time for performance of it became of the essence, when time for performance of Darwinia’s obligations to provide a bank guarantee and pay interest became of the essence;
( per Sackville AJA, Young JA agreeing ) A party in breach of a non-essential term is not prevented from rescinding for a fundamental breach or repudiation by the other party: Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462, followed. Darwinia’s breach was non-essential, and hence did not disentitle it from terminating for Sharjade’s breach of a fundamental term;
( per Hodgson JA ) A party in breach of contract can terminate a contract, despite its own breach, unless the obligations breached are interdependent or the breach by the party wishing to terminate has caused the breach that the party wishes to rely upon: Nina’s Bar, State Trading Corporation of India Limited v M Golodetz Limited [1989] 2 Lloyds Reports 277; Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462, approved. A lack of readiness, willingness and ability does not prevent a party from terminating a contract if what is sought is merely to put an end to obligations to perform the contract in the future: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, considered. Darwinia was not precluded by its own breach of cl 8(4) from terminating on the basis of Sharjade’s breach. The breaches were not interdependent or causally related. This would be so even if Darwinia’s breach was fundamental (demonstrating a lack of readiness, willingness and ability);
( per Hodgson JA ) ( obiter ) For Sharjade to have been successful in a claim for damages, it had the onus to prove readiness, willingness and ability to afford substantial performance of the contract on its part. This was not proved at trial.

As to (3)
(per Hodgson JA, Sackville AJA, Young JA agreeing)

Unnecessary to decide. ( obiter ) The Commonwealth’s termination of the Option Agreement did not frustrate the Heads of Agreement, as a contract for the purchase of land was still available.

As to (4)
(per Hodgson JA, Sackville AJA, Young JA agreeing)

No. It is an element of the tort of inducing breach of contract that the defendant have sufficient knowledge of the terms of the contract to appreciate that what it is inducing will breach the contract; this was not proved. Even if it were the case that reckless indifference or wilful blindness, rather than actual intention, were sufficient, this was not established in this case. Rejecting Sharjade’s submissions, interference must be an inevitable consequence of the defendant’s unlawful act.

CA 40003/09
CA 40004/09
SC 50024/06

HODGSON JA
YOUNG JA
SACKVILLE AJA

26 NOVEMBER 2009

SHARJADE PTY LIMITED v THE COMMONWEALTH OF AUSTRALIA;

RAAF (Landings) EX-SERVICEMEN CHARITABLE FUND PTY LIMITED (formerly Darwinia Estate Pty Limited) v SHARJADE PTY LIMITED

Judgment

1 HODGSON JA: These are appellate proceedings brought concerning the decision of Bergin J of proceedings in which Sharjade Pty Limited (Sharjade) sued RAAF (Landings) Ex-Servicemen Charitable Fund Pty Limited (formerly Darwinia Estate Pty Limited) (Darwinia) and the Commonwealth of Australia (the Commonwealth) for damages arising from the termination of an agreement between Sharjade and Darwinia concerning the development of land at North Turramurra.

2 In her decision, Bergin J (1) declared that Darwinia had unlawfully terminated this agreement; (2) dismissed the claim by Sharjade against Darwinia for conspiracy; (3) dismissed proceedings against the Commonwealth; and (4) gave directions concerning applications for costs and concerning a trial on quantum as against Darwinia.

3 Darwinia has sought leave to appeal against the decision that it had wrongfully terminated the agreement, and Sharjade has appealed against the dismissal of its proceedings against the Commonwealth.

4 For reasons I will give, in my opinion leave to appeal should be given to Darwinia, and its appeal should be allowed and the proceedings against it should be dismissed; and Sharjade’s appeal should be dismissed.

Circumstances

5 The background to the two agreements involved in these appellate proceedings and the terms of those agreements are set out as follows in the judgment of the primary judge:

Darwinia Biflora

[2] The planning of the development commenced in 1992. The sole director and shareholder of the plaintiff, Sharjade Pty Ltd, is Mohsen Akbarian, who at that time utilised Kezarne Pty Ltd (Kezarne) as the vehicle for the development. Another of Mr Akbarian’s companies also involved in the early planning stages was Nubra Constructions Pty Ltd (Nubra). The then President of RAAFA was Air Commodore GG Michael AO OBE AFC. RAAFA incorporated a wholly owned subsidiary, Darwinia Estate Pty Ltd (Darwinia) (later to become the first defendant, RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd), to act as the vehicle for the development.

[3] In March 1993, Australian Construction Services (ACS) a business unit in the Commonwealth Department of Administrative Services wrote on behalf of RAAFA to Kezarne advising that it was the preferred developer and invited it to further expand its proposal for the development. Kezarne was at this time working with Turnbull & Partners Ltd and the two were described as the “Development Consortium”. Between 1993 and October 1995 Kezarne expanded its proposal to the construction of 200 x 2 bedroom units, 100 x 3 bedroom units, a 60-bed hostel, a clubhouse and bowling green. Kezarne was asked to submit proposals on the assumption that RAAFA would have title to the Land at the commencement of the development. At this time Australian Estate Manager (AEM) managed the Land for the Commonwealth. The proposal in relation to the purchase of the Land changed from time to time partially as a result of changes of Ministers and government policies. It was not until 29 August 1995 that AEM made an offer to RAAFA which involved the grant by the Commonwealth to RAAFA of a 99 year lease of the Land “subject to it undertaking to purchase the land and making full payment to the Commonwealth within seven years from the date of exchange of contracts for the land” at a “sale price” of $5.8 million.

Heads of Agreement — 18 October 1995

[4] On 18 October 1995 Kezarne entered into “Heads of Agreement” (the Agreement) with Darwinia to develop the land into a retirement village. That Agreement was in the following terms:

^th

1. Pursuant to a tender process undertaken by Royal Australian Air Force Association (hereafter called “RAAFA”) in 1993, the Developer Consortium was selected as the successful tenderer on 2 March 1993. Since that date RAAFA together with the Developer Consortium and the Department of Veterans’ Affairs, Sydney have been negotiating with the Australian Estate Management (“AEM”), part of the Department of Administrative Services of the Commonwealth of Australia (“Commonwealth”), to acquire the land known as the Lady Davidson Hospital site in Bobbin Head Road, North Turramurra for the erection of a Retirement Village to be occupied by members of RAAFA and other ex-service persons.

2. RAAFA has caused to be incorporated a wholly owned subsidiary Company Darwinia Estate Pty Limited to enter into this agreement.

3. Under the terms of a Contract for Sale to be entered into between Darwinia and the Commonwealth, Darwinia has been granted an option for a period of up to 12 months from exchange of contracts, to purchase the site which comprises part of Lot 1 in Deposited Plan 441749, totalling approximately 12 hectares and situated at the rear of the Lady Davidson Hospital in Bobbin Head Road, North Turramurra. In the event that Darwinia elects not to proceed with the development, then the option will expire without any penalty to Darwinia, subject to both sides bearing their own costs up to that date.

4. The terms of the Contract are detailed in the attached letters from the Minister for Administrative Services dated 19 September 1994, the Deputy Secretary, Department of Administrative Services dated 16 June 1995 and the General Manager, Department of Administrative Services dated 29 August 1995. These letters inter-alia provide for RAAFA to occupy the site under a 99 year lease with an irrevocable obligation to purchase the land at any time but in any event within 7 years from the date of the commencement of the Option period. The purchase consideration of $5,800,000 (Five million eight hundred thousand dollars) is to be guaranteed by a Bank acceptable to AEM.

5. The terms of the purchase provide for interest to be paid on the purchase consideration outstanding on an annual basis, but for the calculation and payment of interest to be deferred for a period of 12 months from the date of the Contract. The interest payable thereafter to be calculated at a rate equivalent to approximately 9.5% pa, being equivalent to a margin of one percent above the 5 year Commonwealth Bond rate applicable at the date of the Contract.

6. Subject to Clause 3 hereof Darwinia Estate Pty Limited or its nominee will exercise the option and exchange contracts with the Commonwealth for the purchase of the land and will proceed with the development of the Retirement Village project with the Developer Consortium in accordance with this Heads of Agreement.

7. Pursuant to the selection process completed in 1993, the Developer Consortium was appointed to undertake the development, financing, and on-going management of the Retirement Village on the understanding that Darwinia will own the Village at all times and prevail upon members of the RAAF Association to purchase the residential Self Care and Hostel units to be developed on the site. Darwinia also accepts that it will have no financial recourse to the Developer Consortium if at the expiry of the 12 month option period that the Developer Consortium decides that it cannot proceed with the development of the Retirement Village for the reasons that it will disclose to Darwinia, but primarily expected to be on account of refusal of or inability to obtain Development Application approval from the Local Council on reasonable terms or its inability to obtain finance for the development on acceptable terms.

8. Darwinia hereby formally confirms the appointment of the Developer Consortium to undertake the development of the Retirement Village on the following terms and conditions:

b) obtaining the necessary planning and regulatory authorities approvals to the development of a Retirement Village and associated facilities.

c) arranging the financing for the development of the Village including the provision of the purchase guarantee to the Commonwealth.

d) the overall and detailed planning process for the development including the project and construction management in accordance with the costs and assumptions detailed in pages 1 to 5 inclusive of the Financing Plan annexed hereto.

e) the overall and detailed marketing arrangements for the Village in accordance with the sales prices detailed in the annexed Financing Plan.

f) the long term management rights to the Village subject only to satisfactory performance and the management fees being acceptable and within industry norms. It is understood however that the manager of the Village will liaise closely with Darwinia from the outset to ensure that Darwinia’s role and obligations to its members is clearly preserved at all times.

(3) That the PMG will meet at least monthly, and more frequently if so desired by the parties, at which it will review the progress of the development and assign responsibilities as appropriate. Kezarne Pty Ltd will provide the PMG with a monthly progress report which will form the basis of the monthly meeting of the PMG. The Chairman of the PMG will be selected by Darwinia and the Developer Consortium.

(4) That Darwinia and RAAFA will actively promote and assist the Developer Consortium in effecting the sale of the Self Care and Hostel units to its members as a key priority and will commit to achieving pre-sales of up to 40 per cent of the Self Care Units (80 Self Care Units) in the proposed development by the end of the 12 month option period and prior to execution of the lease for the land. RAAFA also undertakes to encourage its members to attend sales presentations relating to the development and in distributing promotional and other material to its members.

(5) In accordance with the Contract of Sale entered into with the Commonwealth, Darwinia will have the exclusive right to effect the sale of Self Care and Hostel units to its members of RAAFA and members of other ex-service organisations within the first 3 years from date of exchange of contracts. Darwinia will also have the right within the first 2 years from date of exchange of contracts to limit the sale of Self Care and Hostel units to members of the RAAFA only if it so chooses.

(6) That at the end of 3 years from commencement of the exchange of contract that the Developer Consortium may sell the remaining Self Care and Hostel units to members of the general public, provided that all efforts to sell the units to members of RAAFA and the other ex service organisations has been carried out.

(7) The Developer Consortium will retain an on-going involvement in the further development of the Retirement Village on identical terms to that detailed herein including the on-going management of the Retirement Village.

(8) The Developer Consortium undertakes that in the event that it effects a sale of any Self Care or Hostel units to members of the general public at a price exceeding $335,000 (Three hundred and thirty five thousand dollars), indexed from date of exchange of the option and contract arrangements, that it will reimburse to the Commonwealth such surplus.

(9) That Darwinia will provide either directly or through others up to $175,000 (One hundred and seventy five thousand dollars) towards the initial costs that the Developer Consortium will incur in completing the detailed planning of the Retirement Village. The monies to be incurred, which will be subject to approval by the PMG, will include the costs incurred in obtaining Development Application approval and in developing promotional material to assist Darwinia in marketing the development to members of the RAAFA and that of other ex-service organisations, if it so chooses, to obtain the required pre-construction sales commitments.

(10) That Darwinia, as the owner of the Village, will do all things to assist the Developer Consortium in its efforts to develop the Village and accepts that it will have no claim to any of the finances in the development, until such time as the initial sale of all the Self Care and Hostel Units in the Retirement Village have been completed and the financing obligations incurred by the Developer Consortium have been met in full. Darwinia will then be entitled to receive a share of the profits of the development as detailed in Clause 11 hereunder.

(11) That RAAFA has established a special purpose wholly owned subsidiary company known as Darwinia Estate Pty Limited to undertake the development on its behalf.

(12) The Developer Consortium agrees that any residual profits from the initial sale of the Self Care and Hostel units, after meeting all costs involved with development and sale of the units, will be shared in the proportions of 85:15 to the Developer Consortium and Darwinia respectively, subject to achievement of a development profit of at least $8,000,000 (Eight million dollars) or greater sum. In the event that a lower than $8,000,000 (Eight million dollars) development profit is realised, the profits will be then be shared as follows:

b) First Registered Mortgage over the land by Darwinia to the selected financier

c) A Bank Guarantee from an Australian Bank, in a form acceptable to the Commonwealth for the purchase consideration of $5,700,000 (Five million seven hundred thousand dollars) or such other sum as may be agreed.

d) A Village Management Agreement which will detail the scope of the services to be provided, the amount of the payment for such services and the arrangements for payment thereof.

b) That the residents’ entitlement to occupation under the terms of the Licence to be granted will incorporate lifetime occupancy or earlier exit if desired.

c) That a Deferred Management Fee arrangement (ie the amount to be retained from re-sales of units) will apply, which will entitle Darwinia to retain up to 25% of the resale value of an individual unit, or lesser amount as may be agreed from time to time, for on-going capital and maintenance works in the Village.

d) That the Agreement will detail the services to be provided by the Manager of the Village which are to be covered by the management fee and those which are to be charged to the residents on an user pay basis.

Option Agreement — 24 [November] 1995

[6] On 24 [November] 1995 the Commonwealth and Darwinia entered into an Option Agreement in the following terms:

The parties acknowledge that at the date of execution of this option agreement Darwinia is a wholly owned subsidiary of the Australian Flying Corps and Royal Australian Air Force Association, New South Wales Division Incorporated (“RAAFA”) within the meaning of the Corporations Law. Darwinia warrants that during the period of this option agreement, and in the event of the exercise of this option, during the period up to completion of the purchase of the land (described below) Darwinia will remain a wholly owned subsidiary of RAAFA. In the event that Darwinia ceases to be a wholly owned subsidiary of RAAFA the Commonwealth may terminate this option agreement or the Contract of Sale as the case may be without compensation.

The Commonwealth has agreed to sell to Darwinia an area of vacant land comprising approximately 11.87 hectares, being part of the land described in a proposed plan of subdivision of Lot 1, in DP 441749, which is situated at the rear of the existing Lady Davidson Hospital, in Bobbin Head Road, North Turramurra in the State of New South Wales, (“the land”).

The purchase price of the land is $5,800,000 (five million eight hundred thousand dollars) with Darwinia, in the event it exercises the option, being required to purchase the land any time up to but in any event not later than 7 years from the date hereof.

To enable Darwinia to complete a feasibility study into the viability of its proposed retirement village on the vacant land, the Commonwealth hereby agrees to grant Darwinia an option for a period of up to 12 months from the date of execution of this option agreement (“the option period”), to determine whether it wishes to proceed with the purchase of the land. It is understood that the option period will be used by Darwinia to complete and seek approval to a detailed Development Application with the Kuringai Council which has the overall planning responsibility for the proposed development and to satisfy itself that the development will generally accord with the needs of RAAFA members.

In the event that Darwinia decides to proceed with the purchase of the land either during the course or at the end of the option period, the Commonwealth and Darwinia will then enter into a Contract of Sale for the sale of the land to Darwinia. The Contract of Sale will provide that Darwinia will have a period of up to but not exceeding six years from the date of execution of the Contract of Sale, within which Darwinia will be required to pay the full purchase price of $5,800,000. To ensure that Darwinia will have the capacity to make such payment it will provide to the Commonwealth an irrevocable and unconditional bank guarantee from a bank approved by the Commonwealth, undertaking to make payment, if Darwinia fails to do so, of the full purchase price or that part that is outstanding 6 years after the date of execution of the Contract of Sale.

Concurrent with the execution of the Contract of Sale, the Commonwealth agrees to enter into a lease of the Site to Darwinia for a period of up to 99 years. The lease is intended to give Darwinia security of tenure pending payment of all monies due to the Commonwealth pursuant to the Contract of Sale.

In consideration for the Commonwealth entering into this option agreement, the Contract of Sale and the Lease, Darwinia undertakes to pay to the Commonwealth, an amount by way of interest on the purchase price of $5,800,000 or such lesser amount that is outstanding from time to time until payment in full of the purchase price of $5,800,000 has been made to the Commonwealth.

The interest rate will be the rate established at the date of execution of this option agreement and will be a rate equivalent to 1% above the 5 year Commonwealth Bond Rate advised by the Reserve Bank of Australia the day prior to the execution of this option agreement. The interest payments will be made annually in advance with the first such payment due to the Commonwealth on the first anniversary of this option agreement.

In consideration for the Commonwealth entering into the Lease Darwinia undertakes to pay to the Commonwealth an annual rental of $1 (one dollar) for such period as the lease is in existence.

If prior to the expiry of this option agreement, Darwinia advises the Commonwealth that it does not wish to proceed with the execution of the Contract of Sale and Lease, then each party acknowledges that any costs incurred by it in that period will be for its own account and without any recourse to the other.

In further consideration for the Commonwealth agreeing to enter into this option agreement, the Contract of Sale and the Lease, Darwinia undertakes to observe and carry out the following:

1. To pay all rates and outgoings including stamp duty relating to the purchase and lease of the land from the date of execution of the Contract of Sale and the Lease.

2. To meet all the costs incurred in undertaking the feasibility study and in obtaining the necessary development approvals in accordance with relevant State building and planning legislation. Darwinia may not rely upon or require the Commonwealth to give Darwinia the benefit of an immunity the Commonwealth has from State law. Nevertheless, the Commonwealth undertakes to provide any documents or records to Darwinia and its advisers which may assist in obtaining any approvals and consents from any Commonwealth, State or Local Government Departments or Authorities.

3. Not to sell any self care villas or hostel units in the development to any purchasers who do not qualify as members of the ex-service community as broadly defined by the Department of Veteran Affairs during the first 3 year period from the date of commencement of this option agreement. In the event that completion of the purchase of the land occurs less than three years from the date of execution of this option agreement this condition shall continue to bind the parties until the expiration of the three year period. In the event that Darwinia disposes of the land it must ensure that any purchaser comply with this restriction until the expiration of the three year period.

4. In the event that any self care or hostel units are, subsequent to the expiry of the period of 3 years from the date of this option agreement, sold to the general public then Darwinia will reimburse to the Commonwealth the amount in excess of the market value of the units. The market value is deemed to be $335,000 per unit and indexed, from the date of the option agreement, by that part of the Consumer Price Index, as published by the Australian Bureau of Statistics, that is applicable to housing costs in New South Wales.

5. To observe all normal lease conditions, such as a prohibition on transfer and sub-letting except by way of sub-lease to purchasers of the self care and hostel units in the development, without the prior approval of the Commonwealth.

6 It is common ground that, having regard to events referred to in the second sentence of par [5] of the primary judge’s reasons, references in the Heads of Agreement to the Developer Consortium can be understood as references to Sharjade.

7 The development application for the project was lodged on 15 March 1996; and the Council granted consent to it on 18 March 1998, subject to various conditions including a condition that the project commence by 18 March 2000.

8 Darwinia sought and was granted successive extensions of the option period. The first was granted on 26 September 1996, in the terms “The Commonwealth agrees to extend by six months the Option Period under the Option Agreement dated 24 November 1995” (Blue 1505). Further extensions were granted on 12 June 1997, 18 November 1997, 18 May 1998 and 24 November 1998. The final extension (Blue 1728) noted a letter “seeking an extension of the Option Agreement”, and agreed “to an extension until 24 December 1998”. None of the extensions adverted to any possible effect on other terms of the Option Agreement.

9 By letter dated 23 December 1998, Darwinia advised the Commonwealth “that we wish to accept the Option Agreement” (Blue 1739). On 14 January 1999, the Department of Finance and Administration of the Commonwealth wrote to Air Commodore Michael acknowledging the exercise of the option, and advising that all files had been sent to its solicitors Blake Dawson Waldron (BDW) “for the preparation of the contract of sale”.

10 On 11 March 1999, ING Bank and its associated company Mercantile Mutual Life Insurance Co Limited (MML) made a written offer to Sharjade of finance for the project totalling $30 million. The offers provided for a non-refundable fee of $70,000 on acceptance, $15,000 of which had already been paid by Sharjade. There were a number of conditions precedent specified, including the supply of copies of exchanged loan licence agreements totalling $30 million (this translating to a requirement of pre-sales of 80 retirement units or thereabouts).

11 Between April and August 1999 there were negotiations for restructuring the agreements, which came to nothing. In July and August 1999, steps were taken in preparation for a marketing presentation to prospective purchasers.

12 On 10 September 1999, Ms Banks of BDW sent Gadens Lawyers, the solicitors for Darwinia, a first draft of a Contract for Sale of the subject property. On 21 October 1999, Mr Healy of Gadens responded with a suggested timetable leading to a formal exchange of contracts on 30 April 2000.

13 On 26 October 1999, Sharjade applied to the Council for an extension of the development consent for a further 12 months.

14 During November 1999, questions were raised within the Commonwealth camp as to the possibility of getting out of the Option Agreement or forcing the timing.

15 On 18 November 1999, there was a Project Control Group meeting attended by Mr Akbarian, representatives of Darwinia, representatives of the Department of Veteran Affairs and the architect. Mr Akbarian is noted as reporting that the offer from ING had lapsed, and suggesting “getting pre-sales confirmed before re-opening the finance”.

16 On 17 December 1999, a marketing presentation took place, resulting in expressions of interest by about 32 persons and 7 pre-sales.

17 Meanwhile, in December 1999 and January 2000 there were negotiations between Darwinia and another potential joint-venturer, GDK Financial Solutions Pty Limited. On 28 January 2000, there was a meeting attended by Mr Akbarian, representatives of Darwinia and a representative of GDK. The representative of GDK offered Mr Akbarian $300,000 to get out of the project, an offer refused by Mr Akbarian.

18 In January to March 2000, there was the following exchange of correspondence.

19 On 31 January 2000 Mr Healy wrote to Mr Akbarian in the following terms:

1. A copy of the correspondence with Ku-ring-gai Council in relation to the extension of the DA.

2. Details of your proposed marketing campaign for the property.

3. Your confirmation that you have instructed the architects, Cox Richardson, to prepare plans and specifications and other documentation required to make application for a building consent together with details of the anticipated date for lodgement and the approximate cost.

4. Your suggestions or proposals as to what should occur between yourself and Darwinia if it is not possible to achieve the level of pre-sales upon which your funding offer (now expired) was based upon. As indicated to you, it is important that our client has these suggestions or proposals within 14 days of our meeting (ie: 11 February) to ensure that the development progresses in a manner sufficient to satisfy the Commonwealth.

20 On 4 February 2000, Mr Healy wrote again to Mr Akbarian, as follows:

Following our recent meetings and correspondence we write to formalise the position between Darwinia Estate Pty Limited (“Darwinia”) and your company.

In accordance with its obligations under the Heads of Agreement dated 18 October 1995 between Darwinia and your company Kezarne Pty Limited (subsequently novated to Sharjade Pty Limited), Darwinia has used its best endeavours to promote and assist your company to effect pre-sales of units in Stage 1 of the development to its members.

Despite everybody’s best efforts and the significant attendance at the presentation of the village held on Friday 17 December 1999, it has not been possible to obtain the level of expressions of interest hoped for. As at this date there are only 7 expressions of interest by RAAFA members to purchase units accompanied by holding deposits.

This number is well short of the number of commitments (80) required by your offer of finance (now expired) from ING Bank/Mercantile Mutual.

You have always stated that your finance is dependent upon a high level of pre-sales and accordingly, it appears that you are unable to obtain finance on acceptable terms to allow the development to proceed on this basis.

At your meeting with our Mr Healy on Wednesday 19 January 2000 and the subsequent meeting on Friday 28 January 2000 with Air Commodore Geoff Michael and our Mr Healy, you were requested to suggest alternative financing structures or proposals which could allow the development to proceed on a different basis without delay. This request was formally put to you in writing by letter dated 31 January 2000 from Gadens on behalf of RAAFA requesting a response by Friday 11 February 2000.

No response has been received to date and our client is concerned given your statement to Mr Healy at the meeting (prior to sending of the letter of 31 January 2000) that you would not be responding and indeed had no obligation to do so.

There are several matters that make immediate action by our client imperative including:

On the advice of Council no formal application has been lodged and no fees paid.

The joint venture cannot proceed on the basis initially contemplated of financing based on pre-commitments from RAAFA members.

We are now instructed to formally put you on notice that Darwinia requires your company within seven days to make an election as to whether it wishes to proceed with the development and on what basis.

(i) Deliver a bank guarantee in favour of the Commonwealth of Australia for $5,800,000.00;

(ii) provide an unconditional finance approval to fund all of the costs of development of Stage 1 including interest for 2 years on the balance of settlement monies required under the contract for sale;

(iii) confirm you have delivered to Ku-ring-gai Council an application for an extension to the expiry date of the development consent including payment of appropriate fees and copy of all correspondence;

(iv) confirm that you have instructed Cox Richardson Architects to prepare plans and specifications for the lodgment of a building application for Stage 1 of the development including details of costs to be incurred, evidence of ability to finance payment of such costs and advice as to the expected lodgment date;

(v) make payment to Gadens of outstanding fees set out in our letter of 21 December 1999 and reimbursement to Darwinia of an amount of $3,677.50 also set out in that letter.

Failure to respond to this letter or to comply with all of the items (i) to (v) inclusive will mean the Heads of Agreement is terminated and all obligations between the parties will be at an end.

21 On 7 February 2000, Mr Akbarian responded to the letter of 31 January, as follows:

^st

1. Please find enclosed a copy of the letter dated 26^th October 1999 to Mr Andrew Minto of Ku-Rin-Gai Council. As you may observe, a copy of the letter had also been forwarded to Air Commodore Geoff Michael as well as the architects, Cox Richardson. A copy of the transmission report confirming that the letter had gone to RAAF Association is enclosed.

2. I propose the following marketing campaign:

b) Establishment of a sales office in conjunction with the agents. The sales office could either be established in the Lady Davidson Hospital or if not possible, a temporary facility may be established on site. In this regard we have held discussions with Mirvac regarding the possibility of trafficable access to our sales office from the Mirvac site. It is proposed that the sale office be attended by the agents as well as any representatives of RAAF Association (if and when available) and Sharjade Pty Ltd upon requirement. The sales office will display the necessary plans as well as samples of materials used including floor and wall coverings and kitchens and bathrooms.

c) Follow up on the people already on the waiting list.

d) Further direct marketing to RAAF Association members in the North Shore.

e) Advertisements in the North Shore newspapers.

f) I have discussed the possibility of clearing part of the land relating to stage 1 of the project with John Richardson in order to provide the potential purchasers with a better view of the project.

^th

4.

b) I am very concerned that at this point in time when we are in a position to commence our full sales and marketing program we are given a 14 day time limit by your firm to provide you with alternative proposals which are not based on our previous agreements. My concern is intensified by the fact that this change in our direction away from presales is based on what I understand to be a verbal indication by the company called GDK that they may be prepared to build some units without pre-sales. GDK however has not provided any details as to the conditions and circumstances relating to their involvement, their pricing structures and whether the conditions imposed on our company by the Commonwealth is acceptable to them or not.

c) I can understand GDK's interest in the project as they stand to gain massive profits in a short period of time as a result of our work and at our expense over the years including immediate access to approximately $9.8 M in increased land valuation. However, it is not fair to expect our company to provide what is in effect a response to GDK without knowing what their real proposal is.

d) As far as the progress of the development and the Commonwealth is concerned, I refer to your own timetable provided to Anne Banks of Blake Dawson Waldron on 21^st October 1999. Item 2 of the timetable schedules the meeting of the members for Tuesday 16^th November 1999. However, as you are aware, the letters referred to in item 2 were not available until 1^st December 1999 due to Geoff’s very busy schedule and we could only have the meeting on 17th December 1999. We therefore suffered a one month delay to our program. More importantly, the meeting was held just before the Christmas and millennium breaks when people are either away on holidays or will be away during January. Traditionally, the real estate agencies experience their lowest sales in the month of January.

e) I refer to second paragraph of item 4 on the timetable and say that although there has not been sufficient interest (40 to 50 was mentioned by me), we have been prepared to push ahead with the program in order to demonstrate sufficient progress to the Commonwealth in spite of the initial delay to the timetable over which we had no control. In fact we had already advised the architects to proceed with the building approval prior to the meeting with GDK. We were responding to member's numerous inquiries during the holiday break. In fact, the people we spoke to registered their interest and paid their deposit.

1. We continue with our programs referred to in item 1-3 above.

2. We seek a full proposal from other companies such as GDK containing the extent of their involvement and any conditions they want to impose on the purchase of the land and RAAF Association including pricing, [and] management structure.

3. Our company will continue to explore the possibility of alternative proposals with other major investors (some discussions have already been held) in order to obtain compatible proposals with those of GDK. At this point, I have asked the potential investors to take into consideration the conditions put forward by the Commonwealth and RAAF Association. However, I confirm my discussions with Air Commodore Geoff Michael that we will be happy to enter into negotiations with GDK with a view to finding a speedy agreement which is commercially fair and acceptable. I further confirm my statement to Mr Healy after the departure of Mr Michael in our meeting of 28^th January 2000 that we are prepared to enter into a profit share agreement with GDK based on their level and conditions of investment in the project.

I believe that we can achieve a considerable number of sales within the RAAF Association after our marketing campaign and I am looking forward to a successful project.

Please find enclosed a cheque for the amount of $5,695.20 in favor of your company being the total amount of $11,661.20 to date which we would like you to deposit in our trust account. It is important to confirm that we only accept responsibility for payment of fees relating to our Joint Venture Agreement with RAAF Association and your dealings with Commonwealth and preparation of Contracts of Sales subject to quotation.

22 On 8 February 2000, Mirvac Group approached Mr Akbarian suggesting it was interested in exploring possible participation in the development; and on 10 February 2000, Mr Akbarian forwarded Mirvac’s letter to Mr Healy.

23 On 18 February 2000, Sharjade’s solicitors Freehill Hollingdale & Page (Freehills) wrote to Mr Healy in response to the letter of 4 February 2000, as follows:

At the outset, we are instructed to advise that our client is totally committed to the Project. It has devoted considerable effort to the success of the Project and continues to do so. Mr Akbarian also values highly the relationships he has developed with a number of your client's executives. However, particularly in the above context, our client rejects totally the tenor of your letter, the various demands you make and the suggestion that your client has any entitlement to terminate the Heads of Agreement.

So that there is no doubt:

our client remains ready, willing and able to perform its obligations under the Heads of Agreement and is continuing to do so; and

any attempt to terminate the Heads of Agreement will be defended and will result in a very substantial claim against your client.

We have responded in more detail below to certain other matters arising out of your letter.

Darwinia's obligations

Darwinia's obligations under the Heads of Agreement are not limited to using its best endeavours to promote and assist our client to affect pre-sales of the units in Stage 1 of the Project. Other important aspects of and obligations of your client under the Heads of Agreement include:

(a) to proceed with the development of the Project with the Developer Consortium in accordance with the Heads of Agreement (Clause 6);

(b) the appointment of the Developer Consortium for the purposes of the Project (eg Clause 7 and Clause 8);

(c) to actively promote and assist the Developer Consortium in effecting the sale of the Self Care and Hostel units and to achieve pre-sales of up to 80 Self Care units (Clause 8(4));

(d) to do all things to assist the Developer Consortium in its efforts to develop the project (Clause 8(10)).

Marketing and Pre-Sales

We are instructed that Darwinla has not used its best endeavours to promote and assist our client to affect pre-sales of the units in Stage 1 of the Project to its members. Further, we are instructed that the sale of 80 units in such a major Project is likely to involve further marketing programs such as those most recently described in paragraph 2 of our client’s letter dated 7 February 2000. This will require the assistance of RAAFA and Darwinia Estates as contemplated in the Heads of Agreement.

In response to the third paragraph of your letter, our client is encouraged by the number of people who have already reserved units during what we are instructed is the worst marketing period for real estate (being the month of January) and without any follow up on previous correspondence.

Our client is also encouraged by the fact that another 15 members of RAAF Association not previously on the waiting list have asked for the documents which have now been forwarded to them. We are also instructed that on Monday, 14 February 2000, Mr Akbarian had a discussion with a RAAFA member, Mr Apte who indicated that he may reserve unit no. 52. Our client is confident that with RAAFA’s and Darwinia's assistance, it can achieve the 80 pre-sales upon the completion of the marketing campaign.

Financing

We are instructed that the ING Bank offer was obtained based on Darwinia and RAAFA's agreement to actively promote and assist our client in achieving pre-sales of up 80 Self Care units. Furthermore, ING Bank's offer was obtained after full consultation with Darwinia and RAAF Association and after a number of meetings at which the senior bank officials and Mr Michael were present. We are instructed that the Bank asked for, and got Mr Michael's approval on the letter of offer and prior to that on the provisional letter of offer.

In response to paragraph 6 of your letter, we refer you to paragraph 4(a, b & c) of our client's letter dated 7 February 2000 which was written promptly in response to your letter of 31 January 2000 and well within your unilaterally imposed 14 day period. There was no contractual basis for that request or time limit.

Your client's alleged concern that no response was received seems hard to justify since your letter was written on 4 February. According to your earlier letter, your client had requested a response by Friday 11 February and in fact received a response on 7 February.

Mr Akbarian denies that at any time he made a statement to Mr Healy that he would not be responding to the previous letter and that he had no obligation to do so.

The timetable

Your comments in relation to the timetable of events agreed between our client and Darwinia are addressed in our client's letter dated 7 February 2000. Relevant matters include the delay in receiving of the letters from Mr Michael who was unfortunately suffering from illness and resting at home, and was later very busy. Whilst Mr Michael’s absence was understandably unavoidable, it is unfair that our client is blamed for the delays to the timetable over which it had no control. Our client and [sic] could not commence the program without Mr Michael's letter to the members and his endorsement of its actions.

Darwinia's requirements

There is no provision in the Heads of Agreement for our client to deliver a bank guarantee for $5.8million within 7 days of your letter. To our client's knowledge no such request has been made by the Commonwealth of Australia.

There is no provision in the Heads of Agreement for our client to provide an unconditional finance approval as requested in your letter.

The issue of the extension of the Development Consent was addressed in our client’s letter dated 7 February 2000. Again, our client is concerned that whilst a copy of its letter to the Council was forwarded to Mr Michael on 16 October 1999, the existence of such a letter was denied and our client was accused of not having applied to the Council.

As indicated in our client's letter dated 7 February 2000 we are instructed that the consultant's meetings have already been held and our client has been promised the breakdown of costs for the Building Application by Mr Philip Graus of Cox Richardson Architects as soon as possible.

Your request in relation to your fees is also inappropriate. We are instructed that Mr Akbarian had already advised Mr Healy that he wanted the Draft Joint Venture Agreement finalised prior to payment of further fees by our client. He is concerned that in spite of paying the fees for the preparation of the Joint Venture Agreement, he has not received any response to his letter dated 12 November 1999 regarding his proposed amendments to the Joint Venture Agreement. His letter of 14 November 1999 was in effect a repeat of its letter of 20 August 1999 which we are instructed also remains unanswered. However, our client paid your fees and council fees being a total of approximately $15,000.

Unfair treatment of our client

Our client is extremely concerned about the unfounded allegations made against it in your letter and the, apparent lack of respect for the Heads of Agreement and your client's obligations under that document. We are instructed that our client remains loyal to Darwinia, the RAAF Association and its honourable members including Mr Geoff Michael, Mr Peter Alexander, Mr Barry Brooke and Mr Frank Barclay who have worked with it throughout the last 7 years in order to make this project a success. It is however extremely disturbed that the allegations against it were made without reference to existing documents available to Darwinia and RAAFA. It is further concerned that the threat to terminate the Heads of Agreement appears to have resulted from the recent dealings with GDK.

Our client finds particularly disturbing the fact that your letter was written after repeated statements by Mr Michael in Mr Healy's presence that your client had no intention of abandoning our client in favour of any other company and that he had only spoken to GDK in an attempt to help our client. We are instructed that both Mr Michael and Mr Healy repeated this assurance in the meeting of 31 January 2000. GDK's offer of $300,000 to remove our client from the project is also of great concern to our client as GDK would stand to substantially benefit as a result of our client's work on this project to date.

The way forward

As we indicated above. if your client pursues its threatened course of action our client will have no alternative but to commence legal proceedings which will involve your client and the Commonwealth of Australia. Such proceedings would not benefit the Project and could not be to the benefit of RAAF Association members. We understand that those members, in the meeting of 17 December 1999, endorsed our clients' joint efforts in this project.

Our client suggests that it is in all parties' interests that they honour their commitments under the Heads of Agreement and work co-operatively to ensure the success of the Project. It looks forward to doing so.

24 On 24 February 2000, the Council advised that it had approved the extension of the development consent to 18 March 2001; and Freehills advised Gadens of this by a letter dated 28 February 2000, in the following terms:

We are instructed to advise as follows:

1 Council applications

Ku-Ring-Gai Municipal Council has extended the period of the Development Consent by 12 months. A copy of the Council letter dated 24 February 2000 is attached.

Our client has received a new proposal and timetable from Cox Richardson which was developed after meeting with the consultants and obtaining proposals from those consultants. The Cox Richardson proposal includes a new programme for lodgement of an application for Construction Certificate (copy attached). Subject to your client's approval, our client will instruct Cox Richardson to proceed with the documentation and lodgement of the application. In the meantime, Cox Richardson is arranging to meet with the relevant Council officer to confirm the Council's precise documentation requirements.

2 Marketing

Our client currently intends to proceed with the marketing campaign outlined in its letter dated 7 February 2000 upon approval by your client.

As contemplated by the Heads of Agreements our client requires your client's cooperation in the campaign. In particular, it requests your client's cooperation in the following areas:

provision of relevant information in relation to RAAFA's members as well as supporting letters to allow a mail out of marketing brochures to all relevant members;

participation in marketing meetings when required;

support in establishment of a sales office in Lady Davidson Hospital (no financial input required) and/or support in obtaining the Commonwealth Government's approval for establishment of a sales office on the site; and

general support of the marketing campaign.

Our client will require a short establishment period after your client's approval and then anticipates a 2 week sale and marketing campaign. This should allow an exchange of contracts with the Commonwealth by 31 July 2000.

3 Other proposals

As contemplated by the Heads of Agreement, our client intends to proceed with financing of the construction of the project upon achieving the required number of pre-sales. In addition, our client is exploring alternative possibilities to finance the project.

It is currently discussing with financiers a separate facility to allow the purchase of the land from the Commonwealth prior to 31 July 2000 independently of the achievement of pre-sales. This would allow the land to be secured and, among other things, allow our client to construct sample units on site after obtaining building approval, in order to enhance the marketing campaign. Our client is also continuing negotiations with potential joint venture partners.

4 Other participants

Our client is prepared to assist your client in any negotiations with GDK on a fair basis. We, suggest that it is appropriate for GDK to make an offer in writing for its participation in the project so that all relevant stakeholders can consider the details. It is counterproductive for your client to hold its own discussions with GDK when your client has granted development rights to our client.

Further, our client is very concerned as a result of a recent discussion with another potential participant in the Project. In that discussion, our client was informed that the potential participant had heard rumours that there were problems between our respective clients in relation to the project. Our client is confident that the basis for this rumour did not emanate from it. This type of rumour has potential to seriously prejudice the project and hinder our client in the performance of its obligations. It is important that our respective clients act together in dealing with external parties. This type of rumour is in neither clients’ interests.

5 Timetable

Our client's proposed timetable is as follows:

Cox Richardson have provided a program to lodge an application for a Construction Certificate within 10 weeks. Our client will try and improve on that timetable but it requires your client' s approval to proceed immediately.

Our client will be prepared to proceed with the marketing campaign within 4 weeks of receiving your client's approval and the approval of the Commonwealth - Lady Davidson Hospital to establish a sales office.

A 12 week sale and marketing campaign is proposed.

The above will hopefully allow an exchange of contracts with the Commonwealth by 31 July 2000. We are instructed that although this represents a delay of 3 months on the originally proposed timetable, the delay was not caused by matters within our client's control. The original timetable given to the Government envisaged a meeting of RAAFA's members on 16 November 1999. This meeting did not happen until 17 December 1999, immediately prior to the new year break. This meant that serious marketing to members could not commence until February 2000. Further, recent events, your recent correspondence and your client's discussions with GDK have further disrupted the timetable.

Our client submits that you should advise the Commonwealth of the new proposed timetable, supported by the extension of the Development Consent and documents relating to an application for Construction Certificate. This would be reinforced by evidence of a full marketing campaign in the near future.

To allow the project to proceed without unnecessary delay our client requires your client's confirmation that it should proceed as outlined in this letter. As your client would be aware, substantial costs will be incurred in the preparation of the Construction Certificate. In light of recent correspondence our client would like your client's confirmation before incurring those costs.

25 On 15 March 2000 Gadens responded to the letters from Freehills, as follows:

Letter of 18 February 2000

Our client does not deny that your client is committed to the project and has devoted considerable time and effort to the project which has been appreciated. Despite his apparent best endeavours the fact remains that finance to complete the purchase of the land and construction of the project generally is not currently available. Our client has obligations to its members to progress this development and to ensure that the favourable deal offered by the Commonwealth of Australia is not lost.

You note in your letter that your client "remains ready, willing and able to perform its obligations under the Heads of Agreement and is continuing to do so". This is clearly wrong because under the Heads of Agreement your client is required to amongst other things:

"Arrange the financing for the development of the Village including the provision of the purchase guarantee to the Commonwealth".

It also should be noted that our clients attempt to source alternative finance came about as a result of Mr Akbarian advising various members of Darwinia including Air Commodore Geoff Michael, that he needed assistance in financing the project.

Darwinia’s Obligations

You have set out what your client alleges to be the obligations of Darwinia. Please advise what your client alleges our client has not done or is still required to do to perform its obligations under the Heads of Agreement.

Marketing & Pre-sales

We are instructed to deny absolutely that Darwinia has not used its best endeavours to promote and assist your client to effect pre-sales of units in Stage 1. For the record, we note that the "pre-sales" are merely expressions of interest supported by refundable holding deposits. Our client as requested has conducted surveys of its members to determine interest in purchasing units, sent out invitations to members to attend a presentation of the Village for interested parties and conducted the presentation in December 1999. At the time of receipt of your letter no proposal for further marketing programs had been submitted by your client nor was any detail provided at that time of what he required.

We are pleased that your client feels encouraged by the number of people who have reserved units and by enquiries. Despite all this, it appears that your client is unable to obtain finance on that level of interest. Please advise if this is incorrect.

Financing

We agree that the ING bank offer obtained by your client was conditional upon pre-sales. We also acknowledge that we have seen the letter of offer but it is absolutely incorrect to assert that "Mr Michael's approval to the letter of offer and prior to that on the provisional letter of offer" has been given. In fact the reverse is true. Mr Healy of this firm had several meetings with the directors of Darwinia and with Mr Akbarian where the terms of loan that required amendment were spelt out in detail and in particular the necessity that the loan be non-recourse to Darwinia Pty Limited. Your client was well aware of this but did not choose to pursue the matter at that time for a number of reasons. In addition, Mr Akbarian indicated to Mr Healy that he wanted to investigate other sources of finance for reasons that were not disclosed.

Despite the above, the requirement in the Heads of Agreement on your client to provide finance was not limited to or based upon pre-sales being obtained.

The time limit in our letter of 7 February was a reasonable time for your client to perform its obligations given the substantial time that had been allowed prior to that time.

Prompt action was required because the timetable set in consultation with your client and provided to the Commonwealth had not been complied with and our client remained concerned that the Commonwealth would lose confidence in the party's ability to bring the project to fruition.

Mr Healy stands by his allegation that Mr Akbarian indicated that he would not be responding to the previous letter and that he had no obligation to do so. In addition Mr Akbarian, in response to a question by Mr Healy as to what would happen if finance could not be obtained, indicated that he was not concerned if that occurred as Mr Akbarian intended to approach the Commonwealth to purchase the land and proceed with the development without Darwinia.

The Timetable

The delay in sending letters to parties who had expressed interest in the project was due to the fact that Air Commodore Michael (quite properly in our view) did not wish to set a date for the presentation to interested parties until detailed plans were available to be shown at the presentation. It clearly was not in the interest of any of the parties to proceed to invite members to a presentation and then have insufficient detail to gauge expressions of interest. Despite several delays eventually Mr Akbarlan authorised some plans to be prepared by the architects and the meeting proceeded in December 1999.

The extension of the development consent was referred to on numerous occasions. No action was taken until much later for reasons known to our client. We are pleased this has now been resolved by obtaining an extension.

We still await breakdown of costs for the building application and detailed costs of money spent to date by your client.

Amounts for outstanding accounts have been unpaid for some time. We will shortly submit to you time sheets indicating none of the charges relate to discussions with GDK. A draft joint venture agreement was prepared and was forwarded to Darwinia for instructions. Subsequent matters have caused delays in progressing this document.

Unfair treatment of your client

No one has doubted the claimed loyalty of your client or the efforts undertaken by your client in relation to the project.

However, your client's understanding of this treatment is incorrect. Since your client's request for assistance to fund the project dispute numerous requests our client has been unable to determine the level of assistance required or your client’s intention in relation to his continued involvement in the project other than in the most general way. The letter setting a time limit on performance of your client's obligations was sent only after numerous oral requests had been made for your client to state its position in relation to financing of the project. Your client's recollection of the claimed assurances given in the meeting of 31 January 2000 is also flawed. The context of the assurance was only that our client did not wish to proceed without Mr Akbarian's involvement. However, it was concerned about whether the project could proceed given the lower than expected expressions of interest and the fact that your client's finance was based upon pre-sales being obtained.

Your client continually ignores this issue and the response in your letter does not advance the issue at all.

It appears that despite all the parties best endeavours the project cannot proceed in the manner contemplated. While the Heads of Agreement did not at any time link finance to pre-sales, it was always our client's understanding that your client was obtaining finance on this basis and had no objection to this given its confidence (unfounded as it turned out), in obtaining a high level of expressions of interest.

The failure to obtain the expressions of interest means that for the project to continue, finance must be sourced in a different way. If your client is unable to obtain finance there appears little option other than to terminate the heads of agreement and seek another party to assist with the project.

121 Whether the breach by Sharjade is regarded as an actual breach in failing to provide finance for the guarantee and interest, time being of the essence, or an anticipatory breach in demonstrated inability to provide finance, in either case, in my opinion, Darwinia is not precluded by its own breach of cl 8(4) from terminating on the basis of Sharjade’s breach. This follows from my earlier discussion of the applicable principles, and from my holding that Sharjade’s breaches were not caused by Darwinia’s breach. This would be so, on my preferred view, even if Darwinia’s breach was a fundamental breach; but it was not held to be so by the primary judge, and I would not hold it to be so.

122 I would add that there is a further reason why Sharjade’s claim should have failed, although the matter does not appear to have been argued in this way. Even though the hearing before the primary judge was as to liability alone, and even though it does not appear to have been specified that Sharjade at that hearing had to show that it suffered some damage justifying a further hearing (as in my opinion should be the practice: see National Engineering Pty Limited v Chilco Enterprises Pty Limited [2001] NSWCA 291), nevertheless, even to establish bare liability there was an onus on Sharjade to prove to readiness, willingness and ability to proceed to substantial performance of the contract on its part. This follows from the cases referred to by Mason CJ, Brennan J and Dawson J in Foran: even though, in my opinion, those cases do not show that readiness, willingness and ability is necessary to support termination of a contract for fundamental breach by the other party, they do clearly show that it is necessary in order to support a claim for damages. Thus, to support even a claim for nominal damages, Sharjade had an onus to prove that, when it purported to terminate for Darwinia’s breach, it was ready, willing and able to proceed to substantial performance on its part; and to support a claim for substantial damages, it had to prove on the balance of probabilities that it would have afforded in due course substantial performance on its part.

123 I have held that the contrary to these propositions was proved; but in my opinion, the true position is that Sharjade had an onus to prove them, and therefore should fail unless it affirmatively proved them.

Heads of Agreement conditioned or frustrated?

124 It is not necessary to decide these questions, having regard to my decision on the earlier questions.

125 However, I would express the view that, while the Heads of Agreement could not go forward if Darwinia was unable to obtain or maintain a contract for the purchase of the land, it was not shown that this was the case following the Commonwealth’s termination of the Option Agreement. In my opinion, Darwinia was under an obligation under the Heads of Agreement to use reasonable endeavours to obtain and maintain in force and ultimately to carry through a contract for the purchase of the land; and in my opinion the Heads of Agreement could terminate through failure of a condition or through frustration only if, despite Darwinia’s reasonable endeavours, such a contract was either not obtained or was permanently lost. If the contract was not obtained or permanently lost because of failure by Darwinia to use reasonable endeavours to obtain and maintain such a contract, then this would not cause the Heads of Agreement to fail but rather would give rise to a claim for damages by Sharjade because of Darwinia’s breach in failing to use reasonable endeavours.

126 According to my earlier findings, the breach of the Option Agreement that did occur occurred by reason of Sharjade’s breach in failing to provide finance; and in any event, a contract for the purchase of the land was still available, that is, it had not been lost permanently.

127 Accordingly, in my opinion, the considerations raised under this heading would have provided no independent basis for resisting Sharjade’s claim.

Inducing breach of contract

128 Having regard to my finding that Darwinia was entitled to terminate the Heads of Agreement, there is no breach of contract that could have been induced by the Commonwealth. Accordingly, the Commonwealth’s Notice of Contention succeeds. However, I will briefly deal with Sharjade’s grounds of appeal.

129 Sharjade has identified four alleged errors by the primary judge:

(2) that the primary judge erred in holding that the Commonwealth did not know of the terms of the Heads of Agreement;

(3) that the primary judge erred in holding that it was necessary to show that the Commonwealth had the intention to bring about a breach or interference with the Agreement; and

(4) the primary judge erred in holding that it was necessary that the Commonwealth’s act had the inevitable or necessary consequence of bringing about a breach of the Agreement.

130 In my opinion the first two alleged errors are not made out. It is an element of the tort of inducing breach of contract that the defendant have sufficient knowledge of the terms of the contract to appreciate that what it is inducing will breach the contract; and in this case, accepting for the purpose of these contentions that the Commonwealth knew its termination of its agreement with Darwinia would course Darwinia to terminate its agreement with Sharjade, it was not proved that the Commonwealth knew that termination in those circumstances would be a breach by Darwinia of its agreement with Sharjade.

131 This also provides an answer to the third alleged error. Even if it were the case that reckless indifference or wilful blindness, rather than actual intention, were sufficient, this was not established in this case.

132 As regards the fourth alleged error, the view on this expressed by the primary judge was merely an additional ground for denying relief. In any event, in relation to those cases where the defendant is not shown to have acted with the purpose of inducing a breach, authority does support the view that the interference must be an inevitable consequence of the defendant’s unlawful act.

Conclusion

133 For those reasons, in my opinion, the following orders should be made.

134 In Darwinia’s application for leave to appeal:

(2) Notice of Appeal to be filed within fourteen days.

(3) Appeal allowed.

(4) Orders of primary judge in relation to Sharjade’s claim against Darwinia set aside.

(5) In lieu thereof, Sharjade’s claim against Darwinia dismissed with costs.

(6) Sharjade to pay Darwinia’s costs of the application and appeal, and to have a certificate under the Suitors’ Fund Act 1951 if otherwise eligible.

135 In Sharjade’s appeal:

136 YOUNG JA: I have read with care the reasons in draft of Hodgson JA and Sackville AJA.

137 I agree with the conclusion by both my learned brothers that the orders proposed by Hodgson JA should be made. Essentially these are that the appeal of RAAF Landings (referred to in all the judgments as “Darwinia”) should be allowed with costs and the Sharjade appeal should be dismissed with costs.

138 As Hodgson JA says at [44], there are four key issues in these appeals, viz:

(1) Was the Commonwealth entitled to terminate the option agreement?

(2) Was Darwinia entitled to terminate the heads of agreement?

(3) Was the heads of agreement conditioned on the existence of a binding contract for the purchase of the land or frustrated by termination of that contract?

139 As to question (1), his Honour answered it “Yes” [91]: I agree with that answer and with his Honour’s reasons. Question (2) I will postpone. Question (3) is unnecessary to answer. Question (4) is answered “No.”

140 As to question (2), the answer given by both Hodgson JA and Sackville AJA is “Yes”, though their Honours reached that conclusion by separate routes. I would agree with both sets of reasons and accordingly, with the result.

141 I agree with Hodgson JA that one must be careful to distinguish different categories of cases where both parties have committed some breaches of contract. The prime categories are: (i) where a party terminates and sues for damages for loss of bargain; (ii) where a party terminates and sues for particular damage; (iii) where a party terminates but does not seek damages (though may seek recovery of a deposit under restitutionary principles); and (iv) where a person seeks specific performance.

142 Care must be taken with the word “breach”. It is a weasel word. When used in the present context it means some action or inaction of a significant nature which is contrary to a party’s contractual obligations and which has an effect on the opposing party in performing his or her contractual obligations. Unfortunately the word is used in some authorities in a looser sense.

143 In categories (i) and (ii), the authorities clearly show that the plaintiff must demonstrate that he or she is ready, willing and able to perform. In view of the ancient authority for the proposition, there is no need to look for a rationale, but it would at least appear to be connected with the fact that the damages will be affected by the position of the “innocent” party.

144 In case (iv), for completely different reasons, namely that the equity court will only give relief to a person who himself or herself is shown willing to uphold the contract, a person in breach will have difficulty in succeeding. This case can be put to one side as the present dispute is purely a question of law.

145 In case (iii), I would agree with Hodgson JA that the principle is as Deane J put in Foran v Wight [1989] HCA 51; 168 CLR 385 at 437, that a party who merely wishes to terminate (and recover the deposit), does not have to incur the expense to put himself or herself in a position where he or she can positively demonstrate actual or potential readiness and willingness to perform the contract.

146 The difficulty, however, in accepting that proposition as gospel is, as Hodgson JA points out, that it does run contrary to at least dicta of a number of judges of the High Court of Australia, and in particular, what Mason CJ said in Foran v Wight at 406 which was based on what Dixon CJ said in Rawson v Hobbs [1961] HCA 72; 107 CLR 466 at 481. In his helpful article “Terminating a Contract: Dispensing with the Requirement of Readiness and Willingness”, Andrew Beech (now a judge of the Supreme Court of Western Australia) in (1992) 5 Journal of Contract Law 47, favours the Deane J approach, but refers to the view of Mason CJ as “the orthodox approach” and I consider he is justified in doing so: I will adopt the same terminology.

147 Even on the orthodox approach, there are three exceptions to the principle that a party seeking to terminate the contract must itself be ready, willing and able to carry out the contract, namely: (a) where the action of the other party has dispensed the innocent party from that obligation (sometimes called waiver, sometimes called estoppel, I have used the word “dispense” as a neutral word); (b) where the innocent party’s “breach” is not of an essential or fundamental term; and (c) (probably) where the innocent party’s “breach” is not one which is mutual and interdependent with the breach of the other party. Cases (b) and (c) on my definition do not concern breaches at all.

148 As Sackville AJA points out, Sharjade has not established that the breach of Darwinia was other than a breach in the second and third classes to which I have just referred.

149 The consequence is that whether one follows the approach of Deane J or the orthodox approach, one gets to the same result.

150 On the orthodox approach, as Sackville AJA points out, the decision of this Court in Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462 at 479, justifies this approach.

151 This approach has been followed subsequently both by the New South Wales Court of Appeal in Kyrwood v Drinkwater [2000] NSWCA 126 at [154] per Powell JA, with whom Meagher JA agreed (Fitzgerald JA vigorously dissenting), and by the Queensland Court of Appeal in Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249.

152 However, the orthodox view has had very strong following, and Roadshow has been doubted for instance by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 143-4; by Fitzgerald JA in Kyrwood at [232] and following, and by White J in Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 at [92].

153 In the case mentioned, Gummow J said that the statement of McHugh JA in this Court in Wight v Foran (1987) 11 NSWLR 470 at 488-9, should govern the situation and McHugh JA appears to be fairly strong in saying that it is only a person who has not been guilty of breach who may terminate.

154 However Roadshow is a decision of this Court and should be followed.

155 It may well be that the whole debate is about semantics and what breach means in the orthodox formulation is that there is a failure to carry out responsibilities under the contractual regime which has an effect on the opposing party’s alleged breach. In this way it would be akin to the so-called prevention principle which prevents a person from relying on conduct of an opponent where he or she has prevented the opponent’s compliance; see eg Dodd v Churton [1897] 1 QB 562 at 566, 567 and 568, a principle which I discussed in Drinkwater v Caddyrack Pty Ltd (25 September 1997, unreported, BC9704805) (which was affirmed by the Court of Appeal sub nom Kyrwood v Drinkwater to which I have already referred).

156 Although I consider that Hodgson JA’s approach is correct, and whilst it would be intellectually satisfying for me to have the High Court determine the matter, my duty is to terminate this litigation. In my view, the route taken by Sackville AJA is one which complies with orthodoxy and also a previous decision of this Court and I should, for the parties’ sake, support the orders made primarily on that basis.

157 SACKVILLE AJA: I have had the privilege of reading the judgment of Hodgson JA. I agree with his Honour that, for the reasons he gives, the Commonwealth was entitled to terminate the Option Agreement.

158 I also agree with Hodgson JA that Darwinia was entitled to terminate the Heads of Agreement. I wish to add some comments of my own on this issue. In doing so, I shall use the same abbreviations as appear in Hodgson JA’s judgment.

159 The primary Judge found that it was a fundamental or essential term of the Heads of Agreement that Sharjade would arrange the finance for the development, including finance for the provision of the purchase guarantee to the Commonwealth. However, her Honour held that Sharjade’s obligation to obtain finance had not been “triggered” at the time Darwinia purported to terminate the Heads of Agreement on 27 June 2000. Her Honour reached this conclusion because, in her view, Darwinia was not obliged to provide a bank guarantee to the Commonwealth under the Option Agreement until the parties to that Agreement (the Commonwealth and Darwinia) exchanged contracts for the sale of the Land. Until contracts were exchanged, so her Honour held, there was no proper basis for Darwinia to demand that Sharjade provide a guarantee under the Heads of Agreement.

160 The primary Judge also recorded that she was not satisfied that Darwinia had complied with its obligation under cl 8(4) of the Heads of Agreement to “actively promote and assist” Sharjade in effecting sales in the proposed development. Her Honour considered that Darwinia’s conduct from January 2000 to mid-March 2000 “deflected [Sharjade] away from the actions it would have taken to have the development move forward” and was “antithetical to its contractual obligations to assist [Sharjade] to effect the pre-sales”.

161 In his judgment, Hodgson JA concludes that:

(ii) contrary to the primary Judge’s findings, the obligation imposed on Sharjade by cl 8(1)(c) of the Heads of Agreement could be triggered prior to the Commonwealth and Darwinia executing a contract of sale in consequence of Darwinia’s exercise of the option granted by the Option Agreement;

(iii) the time for compliance with Sharjade’s obligations under cl 8(1)(c) was not specified in the Heads of Agreement;

(iv) the letter sent by Darwinia’s solicitors on 17 March 2000 to Sharjade’s solicitors, which enclosed a copy of the Commonwealth’s notice of the same date, made time of the essence for Sharjade to comply with cl 8(1)(c);

(v) the period of time within which Sharjade was required to comply with cl 8(1)(c) was the 28 day period identified in the Commonwealth’s letter; and

162 I agree with Hodgson JA’s conclusions and reasoning on these issues.

163 Hodgson JA accepts that Darwinia breached cl 8(4) of the Heads of Agreement by failing to actively promote and assist Sharjade in effecting sales of units to members of the RAAFA. However, his Honour concludes that Darwinia’s breach did not prevent it terminating the Heads of Agreement, for these reasons:

(i) there was no finding and no basis for a finding that Darwinia’s breach of cl (4) of the Heads of Agreement caused Sharjade’s breach of cl 8(1)(c);

(ii) subject to (iii), where a party to a contract has breached an essential term, the other party may terminate the contract by reason of that breach, notwithstanding that the terminating party is also in breach of the contract; and

164 I agree with the first step in Hodgson JA’s reasoning. I also think that there is force in steps (ii) and (iii). However, in my view, there is a somewhat narrower principle which supports the conclusion that Darwinia’s breach of cl 8(4) of the Heads of Agreement did not prevent it from terminating the Agreement.

165 In Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462, the Court of Appeal (Gleeson CJ, Handley JA and Brownie AJA) stated (at 481) that:

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

State Trading Corporation of India Ltd v Golodetz Ltd

166 This statements reflects the principle noted by Kerr LJ in Golodetz, at 285:

“The mere commission of a repudiatory breach by either party does not bring the contract to an end. It merely provides the other party with a right of election to treat the contract as terminated if it wishes to do so. If and so long as it does not do so, all obligations under the contract remain alive”.

and

167 This analysis, has been explicitly endorsed by some text writers: Chitty on Contracts (30^th ed, 2008), vol 1, at par 24-015; E Peel, Treitel The Law of Contract (12^th ed, 2007), at par 18-086. Other authors are more equivocal. Thus, an Australian text says that the general rule is that:

“A breach by the terminating party is not a restriction on termination unless it was so serious as to give the other party a right to terminate the performance of the contract”.

Contract Law in Australia

^th

Cheshire and Fifoot’s

Law of Contract

^th

Breach of Contract

^nd

168 The narrower statement of principle cited in the previous paragraph suffices to explain the decision in Roadshow Entertainment. In that case, the facts, in essence, were as follows:

the supplier and distributor entered into a distribution agreement;

receivers were appointed to the supplier;

the distributor, in breach of the distribution agreement, refused to pay moneys due to the supplier;

the supplier gave notice to the distributor requiring payment of all moneys by a specified date;

the receivers transferred the supplier’s business to a third party;

prior to the date specified in the supplier’s notice, the distributor terminated the distribution agreement for fundamental breach, arising by reason of the appointment of receivers and the sale by them of the supplier’s business;

169 The Court of Appeal held (at 478-479) that the distributor’s failure to make timely payments did not constitute a breach of an essential term of the distribution agreement giving rise to an immediate right of termination. However, the Court also held (at 477) that the conduct of the supplier in transferring its business to a third party amounted to a repudiation of the distribution agreement.

170 Although making the general observations quoted at [9] above, the Court did not consider it necessary to undertake a comprehensive analysis of the effect of a breach on a party’s right to terminate. In their Honours’ view, this was not a case where the party attempting to terminate was in breach of a condition or had otherwise repudiated the contract (at 479). Timely payment by the distributor was not a condition precedent to be performed before the supplier became bound to perform the obligations that had been repudiated by the receivers’ sale and was independent of those obligations. The Court applied the general principle (at 479-480) that:

“A party in breach of a non-essential term is not prevented from rescinding for a fundamental breach or repudiation by the other party”.

171 The Court in Roadshow Entertainment accepted that this principle might not apply if there is a causal relationship between the breach of a non-essential term by the terminating party and the fundamental breach relied on by that party. However, in Roadshow Entertainment itself, there was no such relationship between the distributor’s non-essential breach and the supplier’s essential breach. Thus the distributor was not prevented, by reason of its own conduct, from terminating the distribution agreement.

was followed by the Queensland Court of Appeal in Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249. In Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2007] VSCA 108, at [68] the Victorian Court of Appeal (Warren CJ, with whom Buchanan and Ashley JJA agreed) accepted the proposition stated in Cheshire and Fifoot’s Law of Contract (8^th ed, 2002), at 943, that:

“A party who is in breach may nevertheless have the right to terminate, so long as the breach is not repudiatory or of an essential term such as to deprive the other party of the substantial benefit of the contract”.

Idameneo (No 123) Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329

173 In the present case, Sharjade, once it failed to comply with cl 8(1)(c) of the Heads of Agreement within the requisite 28 day period, breached an essential term of the Agreement. At the time Darwinia terminated the Heads of Agreement by reason of Sharjade’s breach, Darwinia itself was in breach of cl 8(4). However, as explained by Hodgson JA, there was no causal relationship between Darwinia’s breach and Sharjade’s breach of an essential term of the Heads of Agreement. Moreover, the primary Judge did not find that Darwinia’s breach was an essential term of the Heads of Agreement, nor that its conduct constituted a sufficiently serious breach of a non-essential term to justify Sharjade in terminating the Heads of Agreement: see Koompathoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115, at 138 [49] per Gleeson CJ, Gummow, Heydon and Crennan JJ. Sharjade did not submit on the appeal that any such findings should be made. Nor did Sharjade suggest that Darwinia’s conduct evinced an unwillingness or inability to substantially perform the Heads of Agreement such as would constitute a renunciation of the agreement: Koompathoo, at 135 [44]. In the absence of submissions to this effect on the appeal, it is appropriate to proceed on the basis that Darwinia’s breach of cl 8(4) was of a non-essential term of the Heads of Agreement.

174 In these circumstances, in my opinion, the case is governed by the principle applied in Roadshow Entertainment. For the reasons given in that case, Darwinia’s breach of a non-essential term of the Heads of Agreement did not disentitle it from terminating the Agreement on the ground of Sharjade’s breach of an essential term.

175 The Court in Roadshow Entertainment referred to DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423, although not specifically to the observations quoted by Hodgson JA (at [60]). Nonetheless, it would seem that the Court in Roadshow Entertainment did not consider that anything said in DTR Nominees v Mona Homes was inconsistent with the reasoning in Roadshow Entertainment itself.

176 As Hodgson JA has pointed out, the observations in DTR Nominees v Mona Homes were not essential to the High Court’s decision in that case, which ultimately turned on the holding that the parties had conducted themselves so as to abandon or abrogate the contract (at 436). More importantly, the observations were made in the context of a case in which the issue was not whether a party was entitled to terminate for actual breach of an essential term, but whether it was entitled to terminate “for repudiation and renunciation for so-called ‘anticipatory breach’” (at 431). The conduct said to amount to renunciation by anticipatory breach arose out of a dispute as to the interpretation of the contract, in which the party purporting to terminate was insisting on an incorrect construction of the contract.

177 As Hodgson JA has also noted, the observations in DTR Nominees v Mona Homes were quoted with approval by Mason CJ (in dissent) and Dawson J in Foran v Wight [1989] HCA 51; 168 CLR 385, at 406-407 (Mason CJ), 452 (Dawson J). Foran v Wight was a case involving “concurrent and mutually dependent obligations” (at 396). When read in context, I do not think that the statements of Mason CJ and Dawson J in Foran v Wight were intended to address a case of termination for an essential breach of contact, where the terminating party is in breach of a non-essential term. I should add that Foran v White was also decided before Roadshow Entertainment and was referred to in the judgment in that case.

178 For these reasons, I agree with the orders proposed by Hodgson JA.

**********

Details

AGLC: Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373
Case: [2009] NSWCA 373
Decision Date: 26 November 2009

CaseChat Overview and Summary

Sharjade Pty Ltd (Sharjade) and Darwinia Pty Ltd (Darwinia) were parties to proceedings in the Supreme Court of New South Wales concerning an option agreement for the purchase of Commonwealth land and a subsequent development agreement. Sharjade, as the developer, sought to enforce its rights against Darwinia, an ex-service organisation, and the Commonwealth. The primary judge made orders in favour of Sharjade against Darwinia, but dismissed Sharjade's claim against the Commonwealth. Sharjade appealed these decisions.

The Court of Appeal was required to determine whether a concluded contract for sale existed between the Commonwealth and Darwinia upon the exercise of an option, particularly in light of payment obligations. It also had to consider whether Darwinia's termination of its agreement with Sharjade was effective, given alleged breaches by both parties, and whether the Commonwealth had induced a breach of contract by Darwinia.

The Court of Appeal found that the option agreement between the Commonwealth and Darwinia did not constitute a concluded contract for sale upon exercise, as essential terms regarding payment had not been satisfied. Consequently, Darwinia's purported termination of its agreement with Sharjade was also ineffective. The court further held that the Commonwealth had not induced a breach of contract by Darwinia. Accordingly, the appeal by Sharjade against Darwinia was dismissed, and the orders of the primary judge in relation to Sharjade's claim against Darwinia were set aside and replaced with a dismissal of that claim. Sharjade was ordered to pay Darwinia's costs.

Orders

Orders of the court

In Darwinia’s application for leave to appeal:

(1) Leave to appeal granted.

(2) Notice of Appeal to be filed within fourteen days.

(3) Appeal allowed.

(4) Orders of primary judge in relation to Sharjade’s claim against Darwinia set aside.

(5) In lieu thereof, Sharjade’s claim against Darwinia dismissed with costs.

(6) Sharjade to pay Darwinia’s costs of the application and appeal, and to have a certificate under the Suitors’ Fund Act 1951 if otherwise eligible.

In Sharjade’s appeal:

(1) Appeal dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Actions

Citations

Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373

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Citation 13

…Aboriginal Land Council [2005] NSWSC 365 Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373; (2009) 15 BPR 28,443 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 Stapley v Towing Masters Pty Ltd (trading as Dynamic Towing) [2009] NSWCA 382 State of New South Wales v Fahy (2007) 232 CLR 48…
Upside Property Group Pty Ltd v Tekin [2017] NSWCA 336
Citation 14 (Para 14)

…nt party’s readiness and willingness (in some relevant sense) may occur in relation to three entitlements ( Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373; (2009) 15 BPR 28,443 at [64] (Hodgson JA)):…
Curnow Consulting Pty Ltd v JPD Media and Design Pty Ltd t/as Durie Design [2017] NSWSC 1171
Citation 15

…yuro Investments Pty Ltd (1976) 136 CLR 444 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 Showcase Video Pty Ltd v Tambali (Court of Appeal - New South Wales, 28 April 1987 unreported) S…
Lee v Kwak [2017] NSWDC 202
Citation 16

…3] NSW 1150 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373 Short v Citibank of Sydney (1912) 15 CLR 148 Sidhu v Van Dyke (2014) 251 CLR 505 Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 Tinyow v Lee [2006] NSWCA 80 Tomko v Pal…
Al Achrafi v Topic [2016] NSWSC 1807
Citation 17 (Para 89)

…2 per Hall J at [155]; Kayserian Nominees (No 1) Pty Ltd v JR Garner Pty Ltd [2008] NSWSC 803 per Brereton J at [27]; Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373; (2009) 15 BPR 28,443 per Hodgson JA (with whom Young JA and Sackville AJA agreed) at [56]; and Wang v Kaymet Corporation Pty Ltd [2015] NSWSC 1459 p…
Glynn v Brown [2016] QDC 313
Citation 18 (Para 1)

…So too in Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373, Hodgson JA said at [55]:…
Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd (No 2) [2016] QSC 252
Citation 19

…443, considered Sharjade Pty Ltd v Commonwealth (2009) 15 BPR 28,443; [2009] NSWCA 373, cited Southcott Estates Inc v Toronto Catholic District School Board (2010) 104 OR (3d) 784, cited State of New South Wales v Stevens (2012) 82 NSWLR 106; [2012] NSWCA 415, applied Suttor v Gundowda (1950) 81 CLR 418, followed T…
Upside Property Group Ltd v Tekin [2016] NSWSC 1260
Citation 20 (Para 60)

…Wight (1989) 168 CLR 385 at 400-401 (Mason CJ), 430-431 (Brennan J), 438-439 (Deane J) and 451-452 (Dawson J); Sharjade Pty Limited v Commonwealth [2009] NSWCA 373 at [68] and [122]). Proof of that matter is a condition precedent to the right to recover damages ( Hensley v Reschke (1914) 18 CLR 452).…
Ma v Adams [2015] NSWSC 1452
Citation 21 (Para 133)

…Ltd v the Commonwealth of Australia; Raaf (Landings) Ex-Servicemen Charitable Fund Pty Ltd (Formerly Darwinia Estate Pty Ltd) v Sharjade Pty Ltd [2009] NSWCA 373 at [56]; (2009) 15 BPR 28,443; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34; Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 441.…
Universal Music Australia Pty Ltd v Pavlovic [2015] NSWSC 791
Citation 22

…1124 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 Sharjade v The Commonwealth [2009] NSWCA 373 Stewart Upton Pty Ltd v Pindar (1990) NSW ConvR 55-529 Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 9173 Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [199…
JR Consulting & Drafting Pty Ltd v Cummings [2014] NSWSC 1252
Citation 23

…2] HCA 16; (2012) 248 CLR 42 - RPR Maintenance Pty Ltd v Marmax Investments Pty Ltd [2014] FCA 409 - Sharjade Pty Ltd v the Commonwealth of Australia [2009] NSWCA 373 - Societe d'Avances Commerciales (Societe Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana") [1924] 20 Ll L Rep 140 - South State…
Almond Investors Ltd v Kualitree Nursery Pty Ltd [2011] NSWCA 198
Citation 24 (Para 1)

…In Sharjade Pty Limited v The Commonwealth [2009] NSWCA 373; (2009) 15 BPR 28,443 Sackville AJA, with whom Young JA agreed, adopted the same approach. After citing the passage from Roadshow Entertainment referred to above, Sackville AJA stated the principle in these terms:…
Craftsmen Restoration & Renovations Pty Ltd v Boland [2011] NSWCA 147
Citation 25 (Para 1)

…Fourthly, in relation to repudiation, in addition to the reference made by Basten JA in his reasons to Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373, see also Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [27] and [162] ff.…
Rooney v ABB Grain Ltd [2010] FCA 1392
Citation 26 (Para 24)

…e time of the purported termination, sufficiently serious: Foran v Wight (1989) 168 CLR 385 at 437-438 per Deane J; Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 at [54], [57], [59], [64-65] and [68-69] per Hodgson JA (see also “Terminating a Contract: Dispensing with the requirement of readiness and willingness…
Amaya v Everest Property Holdings Pty Ltd [2010] NSWCA 315
Citation 27

…td (No 2) [1998] AC 878 Ripley v McClure (1849) 4 Ex 345; 145 ER 1245 Selwyn v Garfit (1888) 38 Ch D 273 Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373 Spiro v Lintern [1973] 1 WLR 1001 "Superhulls Cover" Case (No 2) [1990] 2 LL Rep 431 Todhunter v United States of America (1995) 57 FCR 70 Wardley Au…
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268
Citation 28 (Para 9)

…circumstances where it was proved that it was not in a position to perform (prospectively) its obligations: Sharjade Pty Limited v The Commonwealth [2009] NSWCA 373; DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; 138 CLR 423; Foran v Wight [1989] HCA 51; 168 CLR 385; and Sunbird Plaza Pty Limited…
Tropac Timbers P/L v A-One Asphalt P/L [2005] QSC 378
Citation 29

…cannot rescind the contract even though the other party has failed to perform his anterior obligations at the settlement: Philip Maurice (Realty) Pty Ltd v Impala Properties Pty Ltd (1975) 1BPR 9141.”…
Ian Biggs v James Miller [2018] VSC 651
Citation 30 (Para 1)

…obligations breached are interdependent or it has caused the breach that it wishes to rely upon.[7] [7] Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373, [54]–[56] (Hodgson JA).…
Impact Funds management Pty Ltd v Roy Morgan Research Ltd [2016] VSC 221
Citation 31

…[365] Sharjade Pty Ltd v Commonwealth (2010) 15 BPR 28,443 at 28,468–9 [46].…
A and C Reavin Pty Ltd v Plenty Australia Pty Ltd [2021] VCC 552
Citation 32

…21] VSC 97; Walters v Cooper [1967] VR 583; Marks v GIO Holdings Australia Limited (1998) 196 CLR 494; Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373; Foran v Wight (1989) 168 CLR 385; Bot v Ristevski [1981] VR 120; Shevill v Builders Registration Board (1982) 149 CLR 620; Progressive Mailing House P…
Hong v Tsambikos [2015] VCC 1401
Citation 33

…[44] For e.g. Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373 at para [56]; Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2005] NSWSC 892 at para [93]; Schenk v ACN 081 123 140 Pty Ltd [2002] NSWSC 123 at para [20]; Munro v Bodrex Pty Ltd [2002] NSWSC 122.…
McNichol Pty Ltd v R.F Heritage Pty Ltd [2010] VCC 1429
Citation 34 (Para 6)

…ough this view has gained some support[37], this approach has not been universally adopted. [38] [37] Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 in the judgment of Hodgson JA at [62]; Highmist Pty Ltd v Tricare Ltd [2005] QCA 357 at [61]–[62] per Keane JA (with whom Jerrard JA at [1] and Cullinane J at [66] a…

Cases Cited

Statutory Material Cited

Sharjade Pty Ltd v RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd [2008] NSWSC 1003
Citation 1

…COURT DATE OF DECISION: 8 October 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Sharjade Pty Ltd v RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd [2008] NSWSC 1003…
Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29
Citation 2

…entre Pty Limited [1989] HCA 23; (1989) 166 CLR 623 Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249 Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Michael Realty Pty Limited v Carr [1977] 1 NSWLR 553 National Engineering Pty Limit…
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61
Citation 3

…ts Pty Limited [1978] 2 NSWLR 41 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 Kyrwood v Drinkwater [2000] NSWCA 126 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited [1989] HCA 23; (1989) 166 CLR 623 Lee v Surfers Paradise Beach Resort Pty Ltd [2…
Nathan v Capital Finance Australia (No.2) [2007] FMCA 1706
Citation 4

…(1988) 166 CLR 245 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 Thors v Weekes (1989) 92 ALR 131 TEXTS CITED: J W Carter, Breach of Contract (2nd ed, 1991), at pars 1033-1035. Chitty on Contracts (30th ed, 2008), vol 1, at par 24-015; J W Carter, E Peden and G J Tolhurst, Contract Law in Australia (5t…
Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2007] VSCA 108
Citation 5 (Para 68)

…Queensland Court of Appeal in Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249. In Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2007] VSCA 108, at [68] the Victorian Court of Appeal (Warren CJ, with whom Buchanan and Ashley JJA agreed) accepted the proposition stated in Cheshire and Fifoot’s…
Khattar v Wiese (No. 2) [2005] NSWSC 1300
Citation 6

…v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462 Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 State Trading Corporation of India Limited v M Golodetz Limited [1…
Rona v Shimden Pty Ltd [2005] NSWSC 818
Citation 7

…inment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462 Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 State Trading Corporation of India Limited v M G…
Idameneo (No 123) Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329
Citation 8 (Para 97)

…See also Idameneo (No 123) Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329, at [97], per Santow JA, with whom Mason P and Hodgson JA agreed.…
Barry v City West Water Limited [2002] FCA 1214
Citation 9

…Principal judgment CASES CITED: Baulkham Hills Hospital Pty Limited v GR Securities Pty Limited (1986) 40 NSWLR 622 Bremer Vulkan Schiffbau und Maschinenfabrik v South Indian Shipping Corporation Limited [1981] AC 909 The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 DTR Nominees Pty Limited v…
Alcatel Australia Ltd v Scarcella [2001] NSWCA 401
Citation 10

…on and Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 Plumor Pty Limited v Handley (1996) 41 NSWLR 30 Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462 Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 Shevill…
National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291
Citation 11

…ted v Carr [1977] 1 NSWLR 553 National Engineering Pty Limited v Chilco Enterprises Pty Limited [2001] NSWCA 291 Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Limited [1984] 3 NSWLR 613 Paal Wilson and Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 Plumor Pty Limited v Handley (1996) 41 NSWLR…
Kyrwood v Drinkwater [2000] NSWCA 126
Citation 12

…ginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 Kyrwood v Drinkwater [2000] NSWCA 126 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited [1989] HCA 23; (1989) 166 CLR 623 Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249 Louinder v Leis [1982] HCA…
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54
Citation 13

…uth Indian Shipping Corporation Limited [1981] AC 909 The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Frankcombe v Foster Investments Pty Limited [1978] 2…
Foran v Wight [1989] HCA 51
Citation 14

…R Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Frankcombe v Foster Investments Pty Limited [1978] 2 NSWLR 41 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 Kyrwood v Drinkwater [20…
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23
Citation 15

…v Drinkwater [2000] NSWCA 126 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited [1989] HCA 23; (1989) 166 CLR 623 Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249 Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Micha…
Shevill v Builders Licensing Board [1982] HCA 47
Citation 16

…a v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 State Trading Corporation of India Limited v M Golodetz Limited [1989] 2 Lloyds Reports 277 Sunbird Plaza Pty Ltd v Mal…
Louinder v Leis [1982] HCA 28
Citation 17

…23 Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249 Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Michael Realty Pty Limited v Carr [1977] 1 NSWLR 553 National Engineering Pty Limited v Chilco Enterprises Pty Limited [2001] NSWCA…
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12
Citation 18

…tion Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Frankcombe v Foster Investments Pty Limited [1978] 2 NSWLR 41 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA…
Rawson v Hobbs [1961] HCA 72
Citation 19

…nah Blumenthal [1983] 1 AC 854 Plumor Pty Limited v Handley (1996) 41 NSWLR 30 Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462 Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 Shevill v Builders Licensing Board […
Masters v Cameron [1954] HCA 72
Citation 20

…] QCA 29; [2008] 2 Qd R 249 Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Michael Realty Pty Limited v Carr [1977] 1 NSWLR 553 National Engineering Pty Limited v Chilco Enterprises Pty Limited [2001] NSWCA 291 Nina’s Bar Bistro Pty Ltd v MBE Corporation (Syd…
Suttor v Gundowda Pty Ltd [1950] HCA 35
Citation 21

…7 Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 Thors v Weekes (1989) 92 ALR 131 TEXTS CITED: J W Carter, Breach of Contract (2nd ed, 1991), at pars 1033-1035. Chitty on Contracts (30th ed, 2008), vol 1, at par 24-015; J W Carter, E P…
Sinclair, Scott & Co Ltd v Naughton [1929] HCA 34
Citation 22

…v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 State Trading Corporation of India Limited v M Golodetz Limited [1989] 2 Lloyds Reports 277 Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245 Suttor v Gundowda Pty Ltd [1…

AI Chat coming soon

CITATION:	Sharjade Pty Ltd v The Commonwealth of Australia; RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd (formerly Darwinia Estate Pty Ltd) v Sharjade Pty Ltd [2009] NSWCA 373
HEARING DATE(S):	19, 20 August 2009
JUDGMENT DATE:	26 November 2009
JUDGMENT OF:	Hodgson JA at 1; Young JA at 136; Sackville AJA at 157
DECISION:	In Darwinia’s application for leave to appeal: (1) Leave to appeal granted. (2) Notice of Appeal to be filed within fourteen days. (3) Appeal allowed. (4) Orders of primary judge in relation to Sharjade’s claim against Darwinia set aside. (5) In lieu thereof, Sharjade’s claim against Darwinia dismissed with costs. (6) Sharjade to pay Darwinia’s costs of the application and appeal, and to have a certificate under the Suitors’ Fund Act 1951 if otherwise eligible. In Sharjade’s appeal: (1) Appeal dismissed with costs.
CATCHWORDS:	CONTRACTS – Option agreement between Commonwealth and ex-service organisation for latter to purchase Commonwealth land – Exercise of option – Whether concluded contract for sale then existed – Requirements of such contract as to payment of money – Notice by Commonwealth purporting to make time of the essence for making payments – Payments not made – Commonwealth gives notice of termination – Whether termination effective. - CONTRACTS – Agreement between ex-service organisation and developer concerning development of land – Promise by former to actively promote and assist developer to effect pre-sales of units in development – Promise by developer to arrange finance for the development – Breach by ex-service organisation of its obligation concerning pre-sales – Breach by developer of its obligation concerning finance – Ex-service organisation gives notice of termination – Whether termination effective – Whether developer’s breach such as to justify termination – Whether terminating party precluded by its own breach from effectively terminating agreement. - TORTS – Inducing breach of contract – Elements of tort – Whether Commonwealth, by purportedly terminating option agreement, induced breach by ex-service organisation of its contract with developer.
LEGISLATION CITED:	Conveyancing Act 1919 s 13 UCPR 14.10
CATEGORY:	Principal judgment
CASES CITED:	Baulkham Hills Hospital Pty Limited v GR Securities Pty Limited (1986) 40 NSWLR 622 Bremer Vulkan Schiffbau und Maschinenfabrik v South Indian Shipping Corporation Limited [1981] AC 909 The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Frankcombe v Foster Investments Pty Limited [1978] 2 NSWLR 41 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 Kyrwood v Drinkwater [2000] NSWCA 126 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited [1989] HCA 23; (1989) 166 CLR 623 Lee v Surfers Paradise Beach Resort Pty Ltd [2008] QCA 29; [2008] 2 Qd R 249 Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Michael Realty Pty Limited v Carr [1977] 1 NSWLR 553 National Engineering Pty Limited v Chilco Enterprises Pty Limited [2001] NSWCA 291 Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Limited [1984] 3 NSWLR 613 Paal Wilson and Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 Plumor Pty Limited v Handley (1996) 41 NSWLR 30 Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Limited (1997) 42 NSWLR 462 Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Sinclair Scott and Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 State Trading Corporation of India Limited v M Golodetz Limited [1989] 2 Lloyds Reports 277 Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 Thors v Weekes (1989) 92 ALR 131
TEXTS CITED:	J W Carter, Breach of Contract (2nd ed, 1991), at pars 1033-1035. Chitty on Contracts (30th ed, 2008), vol 1, at par 24-015; J W Carter, E Peden and G J Tolhurst, Contract Law in Australia (5th ed, 2007), at par 31-12 N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Aust ed, 2008), at par 21.26 E Peel, Treitel The Law of Contract (12th ed, 2007), at par 18-086
PARTIES:	CA 40003/09: SHARJADE PTY LTD (Appellant) THE COMMONWEALTH OF AUSTRALIA (Respondent) CA 40004/09: RAAF (LANDINGS) EX-SERVICEMEN CHARITABLE FUND PTY LTD (formerly known as DARWINIA ESTATE PTY LTD) (Appellant) SHARJADE PTY LTD (Respondent)
FILE NUMBER(S):	CA 40003/09; 40004/09
COUNSEL:	M R GRACIE/ D A NEGGO (Sharjade P/L) M SPEAKMAN/ D MOUJALLI (Commonwealth) SIMPKINS SC/ N J OWENS (RAAF (Landings) (“Darwinia”))
SOLICITORS:	Macpherson & Kelley Lawyers (Sharjade P/L) Blake Dawson (Commonwealth) Gadens Lawyers (RAAF (Landings) (“Darwinia”))

LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 50024/06
LOWER COURT JUDICIAL OFFICER:	Bergin J
LOWER COURT DATE OF DECISION:	8 October 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Sharjade Pty Ltd v RAAF (Landings) Ex-Servicemen Charitable Fund Pty Ltd [2008] NSWSC 1003