Stadium Australia Management Limited v Sodexho Venues (Australia) Pty. Limited - [2003] NSWCA 234

No judgment structure available for this case.

CITATION: STADIUM AUSTRALIA MANAGEMENT LIMITED v. SODEXHO VENUES (AUSTRALIA) PTY. LIMITED [2003] NSWCA 234

HEARING DATE(S): 30/04/03

JUDGMENT DATE:
21 August 2003

JUDGMENT OF: Beazley JA at 1; Hodgson JA at 5; McColl JA at 53

DECISION: Leave to appeal refused with costs.

CATCHWORDS: Contract - construction - ambiguous - use of extrinsic materials - relevant extrinsic materials - Arbitration - appeal from decision of arbitrator - finality of arbitral awards

LEGISLATION CITED: Commercial Arbitration Act 1984 s.38
Supreme Court Act s.101(2)(a)

CASES CITED: Codelfa Constructions Pty. Ltd. v. State Rail Authority of New South Wales (1982) 149 CLR 337
Energy Brix Australia Corporation Pty. Ltd. v. National Logistics Co-ordinators (Morwell) Pty. td. [2002] VSC 113
Natoli v Walker (unreported NSWCA 25 May 1994)
Promenade Investments Pty. Ltd. v. State of New South Wales (1992) 26 NSWLR 203
State of New South Wales v Coya (Constructions) Pty. Ltd. (unreported NSWCA 4 August 1995)
Carolan v AMF Bowling Pty. Limited (unreported NSWCA 16 November 1995)

PARTIES :
STADIUM AUSTRALIA MANAGEMENT LIMITED (Appellant)
SODEXHO VENUES (AUSTRALIA) PTY. LIMITED (Respondent)

FILE NUMBER(S): CA CA 40849/02

COUNSEL: P.M. Wood/Dr. A.S. Bell (Appellant)
J.T. Gleeson SC/M.S. Henry (Respondent)

SOLICITORS: Freehills (Appellant)
Blake Dawson Waldon (Respondent)

LOWER COURTJURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 50004/02

LOWER COURT
JUDICIAL OFFICER : McClellan J

- 1 -

CA 40849/02
ED 50004/02

BEAZLEY JA
HODGSON JA
McCOLL JA
21 August 2003

STADIUM AUSTRALIA MANAGEMENT v SODEXHO VENUES

FACTS:

The claimant and opponent were parties to a Catering Deed in respect of catering rights at Telstra Stadium, for a term of ten years. Under the Deed the opponent was obliged to pay a guaranteed catering rights fee, except in circumstances specified in cl. 5.4 of the Deed.

A dispute arose between the parties as to whether the circumstances specified in cl. 5.4 had been satisfied so as to relieve the opponent of its obligation to pay the minimum guaranteed catering fee of $3 million. The resolution of the dispute depended upon the proper construction of the clause.

The claimant argued the clause was ambiguous and that resort could be had to extrinsic material to determine its proper meaning. Mr. Samuels QC, an arbitrator, resolved the matter in favour of the opponent. The claimant was granted leave to appeal to the Supreme Court: Commercial Arbitration Act 1984 s.38, by Bergin J on the basis that, contrary to the findings of the arbitrator, the clause was ambiguous. McClellan J dismissed the appeal on the basis the clause was not ambiguous.

The claimant sought leave to appeal from that decision.

1. Granting leave to appeal would be contrary to the policy underlying s 38 of the Commercial Arbitration Act, that is, to promote finality of arbitral awards even at the price of denying ordinary rights of appeal.

2. Applying the ordinary and natural meaning of the words in cl 5.4 in the context of the deed as a whole, the clause is ambiguous because the phrase has two plausible meanings.

3. Where a clause is not clear it is necessary to have regard to the extrinsic circumstances in which the parties were operating in the context of the transaction. However, internal documents of one of the parties are not relevant extrinsic materials because it evidences only one party’s intentions and not the objective framework in which the document came into existence.
4. Even though the primary judge erred in declining to admit evidence of extrinsic material, the surrounding documents were inconclusive and did not provide any clarity in construing the deed. In circumstances where rectifying the failure to admit the extrinsic material would not assist in determining the meaning of the deed, it was appropriate to give effect to s 38 of the Commercial Arbitration Act and refuse leave to appeal.

5. The clause was not ambiguous and the relevant term in cl 5.4 meant that the guaranteed minimum catering fee would not be payable when any of the relevant matches were not played at the Stadium.

ORDERS:

Leave to appeal be refused with costs.

CA 40849/02
ED 50004/02

BEAZLEY JA
HODGSON JA
McCOLL JA
21 August 2003

STADIUM AUSTRALIA MANAGEMENT LIMITED v. SODEXHO VENUES (AUSTRALIA) PTY. LIMITED

Judgment

1 BEAZLEY JA: I have had the advantage of reading in draft the judgment of Hodgson JA with which I agree subject to the following.

2 For my part, I do not consider that the Deed is ambiguous and I agree with the reasoning of McClellan J in this regard.

3 However, for the reasons expressed by Hodgson JA I agree that this Court should give effect to the policy of s.38 of the Commercial Arbitration Act 1984.

4 It follows, as proposed by Hodgson JA that I consider that leave to appeal should be refused and the claimant should pay the opponent’s costs.

5 HODGSON JA: On 29 August 2002, McClellan J in the Commercial List of the Equity Division dismissed an appeal from an award made under the Commercial Arbitration Act 1984 by the Honourable Gordon Samuels AC CVO QC on 4 January 2002. The claimant Stadium Australia Management Limited (SAM) seeks leave to appeal from that decision.

CIRCUMSTANCES

6 SAM is the manager of Telstra Stadium, formerly known as Stadium Australia (the Stadium). The opponent Sodexho Venues (Australia) Pty. Limited (Sodexho) is a catering company. Sodexho (then called Gardner Merchant (Venues) Australia Pty. Limited) entered into a deed dated 23 September 1996 with SAM for an effective term of ten years, with options to extend for two further terms of ten years, to provide catering at the Stadium. Because of the level of trading which Sodexho has experienced, a dispute arose between the parties as to the obligations of Sodexho under cl.5.4 of the deed to pay a minimum catering rights fee. It was that dispute which went for arbitration before Mr. Samuels, who resolved the matter in favour of Sodexho.

RELEVANT PROVISIONS OF DEED

7 Clause 1.1 of the deed contains definitions, the ones most relevant for this matter being the following:

"Catering Rights Fee" means the fee referred to in clause 5.1 and set out in Schedule 1;

"Catering Services" means the provision (including Vending) of food, beverages, tobacco products and any other goods or services included in the Catering Services under clause 4.2(b) or (c) to patrons at the Stadium and all necessary storage, preparation, serving and supporting and ancillary services;

"Event" means a use of the Stadium for a sporting, cultural or entertainment activity such as a football match, concert or theatrical production, recital, performance, ceremony or any similar activity;

"External Catering" means preparation of food and beverages at the Stadium by the Caterer for supply to premises external to the Stadium Precinct and unrelated to the Stadium;

"Function" means a use of the Stadium infrastructure for a conference, exhibition, trade show, seminar, banquet, private party, meeting, convention, assembly or similar activity, but does not include an Event;

"Gross Revenue" means all amounts paid or payable to or on account of or at the direction of the Caterer for food, beverages, tobacco products and any goods or services included in the Catering Services under clause 4.2(b) or (c), sold or provided by the Caterer or in any way connected with the provision of Catering Services. External Catering or otherwise under this deed and includes the value of any Contra received by the Caterer, valued by reference to what would otherwise be the actual purchase cost to the Caterer of the Contra, but excludes any goods and services tax or similar retail turnover tax or government impost which may be imposed on retail sales and also excludes Non-assessable Revenue;

"Premier League" means
(a) matches in the New South Wales Rugby League Premiership Finals Series;
(b) State of Origin Matches; and
(c) Test Matches,
and includes any equivalent matches that replace or succeed those matches;

8 Parts 3, 4 and 5 of the deed are in the following terms:

Part 3
Objectives
3.1 Mission Statement
The parties agree that the common objective in relation to Catering Services at the Stadium is to provide patrons of the Stadium, whether they be in public areas, corporate suites, corporate boxes, or any other areas, with menus and services which exceed the highest standard of other equivalent sporting venues within Australia (whether international or interstate) at prices which are designed to encourage return patronage to the Stadium and its outlets and to maximise financial returns and economic viability of the Stadium for all stakeholders.

Part 4
Obligations of SAM
4.1 Grant of Catering Rights
SAM grants to the Caterer the sole and exclusive licence to provide Catering Services:
(a) subject to Part 17 of this deed, at the Stadium during the Opening Term;
(b) subject to clause 4.7 and Part 17 of this deed, in the Stadium Precinct on Event Days during the Opening Term where attendance at the relevant Event is expected to exceed 5000 people;
(c) at the Stadium during the Commercial Term; and
(d) subject to clause 4.7, in the Stadium Precinct on Event Days during the Commercial Term where attendance at the relevant Event is expected to exceed 5000 people.
4.2 Limit to Catering Rights
(a) The rights granted to the Caterer are limited to the provision of Catering Services.
(b) The Caterer may not provide any other goods or services to patrons at the Stadium without the prior approval in writing of SAM. SAM may give or withhold its approval in its absolute discretion, and its approval may be limited to a specific period or periods or part or parts of the Stadium or subject to other conditions.
(c) SAM may not require the Caterer to provide other goods or services to patrons at the Stadium unless the Caterer agrees to do so.
4.3 Access and unrestricted use
Subject to the provisions of this deed and to any right of SOCOG, OCA or any other Olympic Body during the Term SAM must, pursuant to the Non-exclusive Licence, allow the Caterer to have access to and unrestricted use and occupation of the Designated Areas and of all other areas of the Stadium necessary to enable the Caterer to perform its obligations under this deed.
4.4 Event Day Obligations
SAM must take all reasonable steps to maximise usage of the Stadium for Events that will attract the maximum number of patrons.
4.5 Function Day Obligations
(a) SAM will be responsible for and entitled to control the Function bookings register, which will be maintained, amongst other things, in order to avoid double-booking of Functions and interference with Events and for coordination of ancillary services which are the responsibility of SAM. The Caterer is entitled to have access to the Function bookings register (whether by electronic means or otherwise) at all times but is not permitted to make any changes to or insert any entries in the Function bookings register.
Subject to clause 20.2, the Caterer is responsible for all other administrative aspects of Functions
4.6 Changes to Designated Areas
SAM must consult with the Caterer if there are any material changes proposed to the Designated Areas shown in Annexure A and SAM will use its reasonable endeavours to cause Multiplex to consult with the Caterer in relation to such changes.
4.7 Catering in Stadium Precinct
(a) Where SAM is permitted to carry on a food or drink business in the Stadium Precinct pursuant to clause 14.22 of the Project Agreement, the Caterer may provide Catering Services in the Stadium Precinct in the manner permitted by OCA subject to payment by the Caterer of any fee payable to OCA in respect of the food or drink business.
(b) Pursuant to clause 14.22(a) of the Project Agreement, the Caterer may erect, and provide Catering Services in, hospitality tents on the south-western quadrant of the Stadium Precinct on any day on which there is an Event at the Stadium at which it is expected that daily attendances will exceed 5,000 (excluding days of the Royal Easter Show) for the use of Stadium patrons in accordance with the Development Approval (as defined in the Project Agreement).
(c) Where the Caterer provides Catering Services under sub-clause 4.7(b) it must, in addition to paying the Catering Rights Fee to SAM, pay to OCA a fee equal to 5% of the Gross Revenue derived from the provision of Catering Services in the south-western quadrant of the Stadium Precinct

9 It was common ground that the effect of cl.5.2 in this case was that the guaranteed amount for the relevant year (2001) was $3 million.

10 Part 10 of the deed deals with capital improvements and extensions; and cl.10.4 is in the following terms:

11 Part 11 is in the following terms:

Part 11
Catering in Other Facilities
11.1 Caterer not to compete
Subject to the provisions of clause 15.1, the Caterer must not, without the prior written approval of SAM which may not be unreasonably withheld, directly or indirectly provide or be engaged or involved in the provision of Catering Services at any other sporting, entertainment or cultural facility in the Homebush Bay area, with the exception of any such facility operating at the date of this deed, the Olympic Village and the RAS Showground, during the Term and any extension of the Term pursuant to clause 2.2.

12 Part 15 is in the following terms:

13 Part 17 deals with Olympic periods; and cl.17.3 is in the following terms:

14 Part 18 deals with major cultural event periods; and cl.18.1 is in the following terms:

15 Part 20 deals with the marketing and promotion of event days and function days.

16 Part 24 is headed “Undertaking, Disclosure & Guarantee”; and cls.24.1 and 24.2 are in the following terms:

17 Schedule 1 provides for the calculation of catering rights fees. In respect of gross revenue from catering services (excluding gross revenue from external catering and from the provision of catering at cost) the schedule provides for a percentage of 10% up to $20 million, rising progressively to 20% for over $29 million. The schedule also provides for a catering rights fee of 3% of gross revenue from external catering.

18 It was common ground that cls.24.1 and 24.2 means that material in the applicant’s tender is incorporated into the deed. The most important relevant material is that contained in a Schedule R entitled “Projected Catering Rights”. That material is in the following terms:

19 Clause 7.02 of the Invitation to Tender, referred to in Schedule R, is in the following terms:

EVENT SCHEDULE	EVENT DAYS PER ANNUM	ATTENDANCE PER EVENT DAY	ATTENDANCE PER ANNUM
*Rugby League*
State of Origin	1	80,000
International	2	45,000
Grand Final	1	80,000
Preliminary Final	1	60,000
Other Semi Finals	2	40,000
Club Matches	22	25,000
Total Rugby League	30	940,000
*Rugby Union*
SANZAR Tests (Australia v. NZ, South Africa	2	80,000
Other International (Australia v. Northern Hemisphere touring team)	1	50,000
International Provincial Championship (“Super 12”)	5	42,000
Total Rugby Union	8	420,000
*Soccer*
Internationals	6	25,000
Total Soccer	6	150,000
*Concerts*
Major Concerts (e.g. U2, Madonna, Rolling Stones)	3	70,000
Other non-sporting events	2	30,000
Total Non-Sporting Events	5	270,000
TOTAL STADIUM USAGE	49	1,780,000 Note: No forecasts of prospective non-event functions in exhibition revenues have been established as Tenderers are requested to prepare their own revenue targets.

20 It was contended for Sodexho, and disputed by SAM, that this cl.7.02 was also incorporated into the deed. Of some relevance to this contention is a disclaimer contained at par.2.18 of the tender document, in the following terms:

21 The essential issues between the parties concern the interpretation of cl.5.4; and the question was whether it applied when any of the relevant matches were not played at the Stadium, or only where none of the relevant matches were played. It is common ground that, in 2001, some but not all of the Premier League matches and Premier Union matches were played at the Stadium. If the clause is interpreted as applying when any of those matches are not played, then Sodexho would be relieved of having to pay the guaranteed minimum amount; whereas if the words are interpreted as applying only when none of the relevant matches are played, the guaranteed minimum applies. The decision of Mr. Samuels, effectively upheld by the primary judge, was that the former interpretation was correct.

SURROUNDING CIRCUMSTANCES

22 It was contended for the claimant that evidence of surrounding circumstances was admissible to assist in the construction of the deed, because the wording of the deed was ambiguous. The opponent submitted that the primary judge was correct to hold that reference to surrounding circumstances was not necessary; but submitted that, even if reference could be made to surrounding circumstances, these circumstances supported the decision of the primary judge.

23 The applicant contended that the evidence established at least the following surrounding circumstances:

24 The opponent did not substantially dispute those circumstances, but submitted that there were other relevant circumstances, in particular arising out of tender documents and associated correspondence. The opponent submitted that these documents showed that the $3 million minimum guaranteed catering fee was proposed on the basis of projections that approximately 1,780,000 patrons would attend event days at the Stadium each year and generate catering revenue of $26,283,093.00; and that, at the time the parties executed the deed, their best estimate was that patrons attending events would generate 68.74% of gross catering revenue and that patrons attending Premier League and Premier Union matches would account for 45.5% of this.

25 On the other hand, the claimant relied on a document written by the opponent to the claimant, dated 10 May 1996, which contained the following statement:

Gardner Merchant confirms that Guaranteed Minimum Catering Rights for Year One will be $3 million. We understand that this is in excess of that sought by the underwriters to the Australia Stadium 2000 project. Gardner Merchant would be prepared to further increase the Guaranteed Minimum Catering Rights once we receive clarification in respect of the type of undertaking Australia Stadium 2000 would be prepared to give regarding Projected Event (sic) and Patronage levels.

26 The matter of the minimum guarantee was further dealt with in a supplementary submission by the opponent, apparently dated 29 May 1996, as follows:

Minimum Guarantee
Gardner Merchant has proposed $3 million as a minimum guarantee. Based on the projected attendance figures quoted in the Invitation to Tender and the proposed Catering Rights, revenue would need to fall by 29% to $27 million before the minimum guarantee would be invoked.

In the event however, that the usage of AS2000 is significantly less than that indicated in the Invitation to Tender, Gardner Merchant would reserve its right in the contract negotiations to protect itself and its shareholders from factors and causes clearly outside its control or responsibility. On the other hand, utilisation above that projected or an increase in the capacity of the facility allowing for enlarged corporate catering and public areas would result in a higher return in Catering Rights as per the proposed schedule.

27 The claimant also sought to rely on some internal documents of the opponent, namely what appear to be sensitivity analyses, one of which could be read as suggesting that the opponent accepted that the minimum guarantee would apply even in certain unfavourable scenarios. In my opinion, it is plain that this material is not relevant to the question of construction: it evidences only one party’s “intentions, aspirations or expectations”, and not “the objective framework of facts” within which the deed came into existence: Codelfa Constructions Pty. Ltd. v. State Rail Authority of NSW (1982) 149 CLR 337 at 352. I will not consider it further.

DECISION OF ARBITRATOR

28 The reasons for the arbitrator’s decision are substantially given in the following paragraphs from his decision:

There was discussion of whether the language of clause 5.4 should be regarded as presenting an ambiguity so as to authorise the admission of extrinsic evidence to resolve it. In the event that it does, the Caterer cross-claims for rectification. I do not myself regard the clause as ambiguous, or as susceptible of more than one meaning, considered in the context of the deed as a whole, including those documents incorporated in it by reference. Hence I need not consider the cases, or the material tendered as evidence of surrounding circumstances external to the deed itself.

It is always legitimate, and indeed necessary, when construing one part of an agreement, to consider the contractual setting in which it is placed. It appears from that context that the work which the exception has to do is to relieve the Caterer from payment of the guaranteed amount in the case which the exception contemplates. The catering rights fee, and the guaranteed amount, are payable out of gross revenue, a return critically dependent upon patronage, and thus upon the number and character of events and functions held at the Stadium. A significant element in that return must be the playing of Premier League and Union matches which, from the definitions in clause 1.1, are the most important encounters in each code and thus those matches likely to attract the largest crowds. It seems to me, therefore, that the exception focuses upon the state of affairs at the Stadium, and the circumstances which might there arise in which the capacity of the Caterer to pay the guaranteed amount might be adversely affected.

Hence, in my view, the exception applies, and the guaranteed amount is not payable, when the class of activities in question, namely, "All matches played in Sydney" satisfies the negative description, "are not played at the Stadium".

DECISION OF BERGIN J

29 The appeal from the decision of the arbitrator to the Supreme Court was regulated by s.38 of the Commercial Arbitration Act 1984, which is in the following terms:

30 The application for leave to appeal was dealt with by Bergin J, and her decision to grant leave to appeal was supported by reasons, which included the following:

54 I am of the view that the whole of the Deed and the context in which cl 5.4 is found leads to an irresistible conclusion that both parties' interests were being protected by the promise to pay the Guaranteed Amount and the circumstances in which it would not be paid. I am also of the view that the Arbitrator fell into error in finding that the Deed and the context in which clause 5.4 is found rendered the clause susceptible to only one meaning. I am of the view that the Arbitrator's finding that the clause was not ambiguous was a manifest error of law.

55 Mr Gleeson SC submitted that, if I reached this conclusion, I would not grant leave to appeal unless I was satisfied that the plaintiff had made out a case that the result would be different if the Arbitrator took into account the evidence of surrounding circumstances. Although Mr Kelly SC submitted that this is not a requirement on the plaintiff he did not object to the tender of that material before me on the alternative basis that if I was satisfied that his client was required to satisfy the test, his client had done so.

56 In the circumstances of this case I am not convinced that I am required to assess the evidence that was not assessed by the Arbitrator for the purpose of concluding that the outcome would be different if he had assessed it. Such a process may be more attractive if the exercise of discretion to grant leave depended upon reviewing the evidence that the Arbitrator had taken into account but had reached a conclusion that was to be attacked in the appeal. Having said that, in any event it seems to me that if it is appropriate to review that evidence, the proposed test is a (sic) too stringent. I am of the view that a more appropriate test to apply would be whether such material may lead to a different result. I will therefore express a view in respect of that matter notwithstanding that I am not satisfied that I need to do so.

57 The evidence to which the Arbitrator did not have regard includes a Business Plan prepared by the plaintiff in which the defendant was given notice that the plaintiff did not expect to enter into any formal hirer agreements until "much closer to the commencement of the commercial operations of the Stadium". It also includes a document prepared by the defendant entitled "Project Summary". That document referred to the projections of Events and the Annual attendances at those Events. There is also reference to the defendant's capacity to "operate Function services throughout the year" and to discussions which were "underway to reconfigure the pitch to incorporate facilities for Australian Rules Football and possibly cricket" with the statement that the addition of these events would "increase the financial returns".

58 The Project Summary also contained presentation documents that include one entitled "Stadium Activities" listing Rugby League, Rugby Union, Football, Outdoor Concerts, Australian Football League and Corporate Functions. This document also includes the statements: "there is a huge following of Rugby League in Sydney which is helped by the fact that Australia are currently the world champions" and "all international matches in NSW for each sport will be played at the new stadium". In contrast to this statement the Deed defines Premier League as the Premiership Finals series, State of Origin matches and Test matches and Premier Union as matches played by the NSWRU Senior Representative Team against other National or Provincial Senior Representative Teams and Test matches (cl 1.1).

61 These documents provide available evidence that the defendant contemplated that there may well be no Rugby but that there would still be the obligation to pay the minimum guarantee. That is a very different circumstance to the contemplation that if only one Rugby match was played elsewhere the guarantee would not be payable. That is a circumstance that may lead to a different construction of clause 5.4.

I note that the documents referred to in pars.[59] and [60] of this judgment are the same as those referred to in par.[23] of my judgment, and which I consider to be irrelevant to the question of construction.

DECISION OF McCLELLAN J

31 The appeal itself was heard by McClellan J, who took a quite different view from that of Bergin J, as shown by the following paragraphs of his judgment:

30 In my opinion, the meaning of cl 5.4 is plain. The construction of the clause contended for by SAM erroneously emphasises the words "all of those played in Sydney are not played at the Stadium", without recognising that the reference to "all of those played" is a reference to the class or category of matches which is earlier identified in the clause. That a class is being referred to is apparent from the use of the word "of", by which the class or category is introduced. Once this is recognised, it follows that, of that class of match, all of those played in Sydney must be played at the Stadium, if the guarantee is to operate. As that event has not occurred but rather, some of the relevant matches have been played elsewhere in Sydney, the obligations in cl 5.2 and 5.3 have been released.

31 The purpose of cl 5.4 is to allocate the risk between the parties, if there is a failure to achieve the contemplated levels of expenditure by patrons, as a result of less than anticipated attendances at the Stadium. The agreement provides that if attendances fall below the required level and revenue is depressed, Sodexho will nevertheless have to pay a guaranteed fee for the right to provide the catering services. To this extent, Sodexho carried the risk that the projected attendances at the Stadium will be met. However, the acceptance of this risk by Sodexho is underwritten by the understanding that the major football matches played in Sydney will be played at the Stadium. It is the responsibility of SAM to provide those matches.

32 Having regard to the proportion of the anticipated revenue which will be generated by those matches, if only one of either the Premier League matches or Premier Union matches played in Sydney is played at the Stadium, the effect upon revenue will be very significant. I have identified the possible outcome earlier in these reasons. Even the loss of one of those matches, particularly a Rugby Union International or State of Origin Rugby League match, may have a significant impact. In my opinion it would not make sense, in the context of this arrangement, for Sodexho to be relieved of the guaranteed fee only in the event that all of the particular class of Premier rugby matches are not played at the Stadium.

33 Having regard to my conclusion, it is unnecessary to consider the effect of documents which were generated during the negotiations for the agreement and which, it is submitted, could inform the proper construction of cl 5.4.

GROUNDS OF APPEAL

32 The claimant seeks leave to appeal on the following grounds:

1 McClellan J erred in construing clause 5.4 by relying on extrinsic evidence, namely a pre-contractual document titled "Australia Stadium 2000: Invitation to Tender for Exclusive Catering Services at Homebush Bay" in circumstances where His Honour declined to consider the extrinsic evidence tendered by the appellant on the basis that the clause was not ambiguous and, therefore, no extrinsic evidence was admissible.

2 McClellan J erred in failing to hold that upon the proper construction of clause 5.4 of the Stadium Catering Deed made between the parties and dated 23 September 1996 the minimum payment obligations of the respondent apply except when, in a "Guaranteed Year", all "Premier League" and "Premier Union" matches which are played in Sydney are not played at the Stadium.

3 McClellan J erred in holding that:
"In my opinion, the meaning of cl 5.4 is plain. The construction of the clause contended for by SAM erroneously emphasises the words "all of those played in Sydney are not played at the Stadium", without recognising that the reference to "all of those played" is a reference to the class or category of matches which is earlier identified in the clause. That a class is being referred to is apparent from the use of the word “of”, by which the class or category is introduced. Once this is recognised, it follows that, of that class of match, all of those played in Sydney must be played at the Stadium, if the guarantee is to operate. As that event has not occurred but rather, some of the relevant matches have been played elsewhere in Sydney, the obligations in cl 5.2 and 5.3 have been released."

4 McClellan J ought to have given the words used in clause 5.4 of the Deed their ordinary and natural meaning in the context and sequence in which they appear and, in that way, upheld the construction of clause 5.4 contended for by the appellant.

5 In the alternative, McClellan J erred in holding that "the meaning of clause 5.4 is plain" and should have found that the construction contended for by the appellant was open on the face of the instrument and resolved the resulting ambiguity in favour of the construction contended for by the appellant by:
(a) having regard to evidence of surrounding circumstances; and/or
(b) applying the principles set out in Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99 and Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310.

6 McClellan J erred in failing to give any, or any adequate, reasons for his determinations referred to in paragraphs 3 and 5.

7 McClellan J erred in dismissing the appeal and ordering the appellant/plaintiff to pay the respondent's/defendant's costs.

33 The application for leave to appeal has been argued on the basis that, if leave is granted, the appeal will be decided without further argument. Leave to appeal is required, because of the provisions of s.101(2)(a) of the Supreme Court Act, according to which leave is required in relation to appeals from “a judgment, order or determination in proceedings in the Court under the Commercial Arbitration Act, 1984”.

SUBMISSIONS

34 Mr. Wood for the claimant submitted that leave to appeal should be granted. He submitted that the construction preferred by the primary judge was attended by serious doubt, having regard to the ordinary and grammatical meaning of the words, the structure of cl.5.4 and the context of cl.5.4. Next, there was the conflict between two first instance judges. Third, there were the significant financial consequences of the decision, amounting to something of the order of $2 million in a single year, in a contract for a period of ten years with two ten-year options. He submitted that this Court should adopt the approach of the Victorian Court of Appeal in Energy Brix Australia Corporation Pty. Limited v. National Logistics Coordinators (Morwell) Pty. Limited [2002] VSCA 113, where that Court considered that the conventional test for leave to appeal was appropriate in relation to an appeal from a single judge hearing an appeal from the Victorian Commercial Arbitration Act, which relevantly was in the same terms as the New South Wales Act.

35 Turning to the argument on the appeal, Mr. Wood submitted that there were errors by the primary judge in that he did not start with the words of the clause; he relied on extrinsic material although he had said that extrinsic material was irrelevant; and he made reference to commercial considerations in ways not justified by the material.

36 Mr. Wood submitted that the primary judge failed to take account of the following matters. First, cl.5.4 was an exception from an obligation accepted by the opponent, so should less readily be interpreted in favour of the opponent. Next, there were five other revenue sources available to the opponent: functions (cl.4.5), recognised as potentially providing up to 47.12% of revenue; external catering (cl.15.1(a)); catering for the Olympics (cl.17.3); catering in the Stadium precinct (cl.4.1(d), cl.4.7); and major cultural events (cl.18). Thirdly, he submitted that the primary judge failed to have regard to the commercial reality, that if all Premier League and Premier Union matches were played at the Stadium, there was no need for a guaranteed minimum because there would be a virtual certainty that the minimum would be exceeded. Protection to the opponent was given by the claimant’s promise to use its best endeavours to maximise use of the Stadium (cls.3.1, 4.4, 17.3, 20.2(d)). In this context, the loss of just one Premier League and/or Premier Union match was of no consequence.

37 Mr. Gleeson SC for the opponent submitted that leave should not be granted. He submitted that to grant leave would be contrary to the policy underlying s.38 of the Commercial Arbitration Act, that is, to promote finality of arbitral awards even at the price of denying ordinary rights of appeal: Natoli v. Walker NSWCA 26/5/94 at 2, 21-2; Promenade Investments Pty. Limited v. State of New South Wales (1992) 26 NSWLR 203 at 221G; State of New South Wales v. Coya (Constructions) Pty. Limited NSWCA 4/8/95 (BC 9505126 at 25). Next, the decision of the primary judge was correct; or at worst, the proposition that the primary judge misconstrued the deed was merely arguable: Carolan v. AMF Bowling Pty. Limited NSWCA 16/11/95 (BC 9501771). Next, Mr. Gleeson submitted there was no substantial or clear injustice to the claimant, and there was no issue of principle involved. Finally, he submitted that if leave were granted, the Court of Appeal would have to deal with extensive extrinsic evidence, determining what documents were admissible and what inferences should have been drawn, which was inappropriate in such a case.

38 Turning to the appeal, Mr. Gleeson submitted that cl.5.4 meant that the claimant had to achieve a specified outcome (the playing of all Premier League and all Premier Union matches at the Stadium) before it had the benefit of the guaranteed minimum; and in those circumstances, it had that benefit, even if all other sources of revenue failed, and whatever the actual return should be from those events.

39 Mr. Gleeson submitted that this was supported by other clauses of the deed. The length of the term in cl.2.1 suggested that it was unlikely that the protection from the minimum guarantee working hardship would be illusory. Clause 4.4 reflected the reality that the responsibility for attracting events was with the claimant (and cf. cl.20.1). Clause 4.5 indicated that the opponent had some responsibility in respect of functions, so that it was reasonable that it should have some relief if the patronage of events was less than anticipated (cf. cls.20.2-20.5). It was unreasonable to suppose that the minimum guarantee would apply even if there were only one Premier League and one Premier Union match. Clause 10.4 reflected the parties’ intention that if, by reason of the claimant’s conduct, the minimum guarantee would cause hardship, the opponent should have relief. Clause 15.1 confirmed that external catering was not expected to be significant.

40 Mr. Gleeson submitted that cl.7.02 in the tender documents must be treated as incorporated into the deed, because this was necessary in order to understand Schedule R and its effect. Clause 7.02 was a plain indication of the expectation of the parties as to the patronage of the Stadium, and gave an indication of the role in that patronage to be played by Premier League and Premier Union matches.

41 If, contrary to the opponent’s submissions, it was appropriate to refer to the circumstances surrounding the entry in the deed, these circumstances in fact supported the interpretation adopted by the primary judge. In particular, the circumstances supported the view that it was unrealistic to suppose the parties intended that, if only 82,000 of the predicted 810,000 attendance for Premier League and Premier Union matches occurred, the minimum guarantee should still apply.

42 In reply, Mr. Wood pointed out that, if there were any Premier League or Premier Union matches, the high probability was that it would be at least those attracting more than 40,000, this being the capacity of other grounds in the Sydney area. Accordingly, the realistic expectation, if there were to be any Premier League and any Premier Union matches, was an attendance of at least 265,000 for Premier League and at least 210,000 for Premier Union.

DECISION

43 On the question of leave, the factors identified by Mr. Wood are supportive of the grant of leave; and in my opinion, the view of the primary judge that the meaning of cl.5.4 was clear, so that reference to circumstances was unnecessary, would mean that his decision was attended by appropriate doubt. On the other hand, in my opinion the policy of s.38 is still operative, as supported by the decisions of Promenade Investments and Coya; so I find it appropriate to consider further the question of whether there was error in the result before finally determining the question of leave.

44 In my opinion, there was error by Mr. Samuels and by the primary judge in their view that cl.5.4 bears the meaning they preferred so clearly as not to require reference to surrounding circumstances. Grammatically, in cl.5.4 the words “all … are not” could mean either “none are” or, on the other hand, “not all are” or “some are not”. Whichever of those alternatives it does mean, plainly it could have been expressed more clearly by adopting the words I have used; so there is no force in an argument that it must be one of these meanings because the other could have been clearly expressed. That argument equally applies to both meanings.

45 Furthermore, in my opinion, the context of cl.5.4 in the deed itself, in the overall provisions of the deed, do not help to choose between the two possibilities. It is true, as submitted by Mr. Wood, that there are other possible sources of income, so that the view that the minimum guarantee should apply so long as there are some Premier League and some Premier Union matches played at the Stadium, has some force; and there is also some force in the submission that if all Premier League and all Premier Union matches are played at the Stadium, then it is likely that the catering fees would in any event exceed the guaranteed minimum.

46 On the other hand, in my opinion it is not possible to say with any assurance that, if all those matches were played, there would be no need of the guarantee, without much more extensive knowledge of relevant figures and clearer knowledge of the expectations of the parties. The length of the term does mean that the guarantee and the exception are meant to be of substantial benefit to both parties, without providing much further guidance. The sole responsibility of the claimant for events, and the partial responsibility of the opponent for functions, is itself somewhat two-edged: it could support the view that the opponent expected to produce substantial revenue for itself for functions, and rely only partly on events in respect of which sole control was on the claimant; and it could also support the view that it was in respect of events that the opponent needed protection that was substantial and not illusory.

47 I accept that cl.7.02 in the tender material is to be treated as part of the deed, at least as a qualification to the opponent’s undertaking in cl.24.2 and Schedule R. It is not an independent promise by the claimant. In my opinion, cl.7.02 may be treated as an indication of the commonly-known expectations of the parties, and as such it gives some support to the view that there was expectation of significant revenue from functions within the opponent’s control, so that the loss of one or two Premier League or Premier Union matches would not justify relief from the guarantee. On the other hand, it also gives some support to the view that it would be unreasonable that the guarantee should continue to apply even if there were no more than one Premier League and one Premier Union match.

48 Because there is no clarity or certainty without reference to the surrounding circumstances, it is I think necessary to have regard to the surrounding circumstances. However, the surrounding circumstances do not in fact add any clarity to the situation. They do no more than reflect much the same considerations that are already suggested by the deed itself, and do so inconclusively.

49 Accordingly, my opinion is that both Mr. Samuels and the primary judge were in error in saying there was no need to look at the matrix or surrounding circumstances; but it is also my opinion that the matrix does not assist in construing the deed.

50 The effect of granting leave from the decision of the primary judge would be that this Court would consider what is the true construction of cl.5.4, with the assistance of detailed consideration of the matrix, in circumstances where my opinion is that detailed consideration of the matrix would not throw any significant light on the question. Thus, this Court would be reviewing the decision of the arbitrator, where the very error supposed to justify consideration of the matter by this Court was the arbitrator’s view that it was not necessary to look at the matrix.

51 In circumstances where I am of the view that the matrix does not in any event help, I think the appropriate course is to give effect to the policy of s.38 of the Commercial Arbitration Act, and refuse leave to appeal.

52 Accordingly, the order I propose is that leave to appeal be refused with costs.

53 McCOLL JA: I agree with Hodgson JA.

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Last Modified: 08/28/2003

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Citations

Stadium Australia Management Limited v Sodexho Venues (Australia) Pty Limited [2003] NSWCA 234

Cases Citing This Decision

0

Cases Cited

6

Statutory Material Cited

2

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36

Currie v Glen [1936] HCA 1

CITATION:	STADIUM AUSTRALIA MANAGEMENT LIMITED v. SODEXHO VENUES (AUSTRALIA) PTY. LIMITED [2003] NSWCA 234
HEARING DATE(S):	30/04/03
JUDGMENT DATE:	21 August 2003
JUDGMENT OF:	Beazley JA at 1; Hodgson JA at 5; McColl JA at 53
DECISION:	Leave to appeal refused with costs.
CATCHWORDS:	Contract - construction - ambiguous - use of extrinsic materials - relevant extrinsic materials - Arbitration - appeal from decision of arbitrator - finality of arbitral awards
LEGISLATION CITED:	Commercial Arbitration Act 1984 s.38 Supreme Court Act s.101(2)(a)
CASES CITED:	Codelfa Constructions Pty. Ltd. v. State Rail Authority of New South Wales (1982) 149 CLR 337 Energy Brix Australia Corporation Pty. Ltd. v. National Logistics Co-ordinators (Morwell) Pty. td. [2002] VSC 113 Natoli v Walker (unreported NSWCA 25 May 1994) Promenade Investments Pty. Ltd. v. State of New South Wales (1992) 26 NSWLR 203 State of New South Wales v Coya (Constructions) Pty. Ltd. (unreported NSWCA 4 August 1995) Carolan v AMF Bowling Pty. Limited (unreported NSWCA 16 November 1995)
PARTIES :	STADIUM AUSTRALIA MANAGEMENT LIMITED (Appellant) SODEXHO VENUES (AUSTRALIA) PTY. LIMITED (Respondent)
FILE NUMBER(S):	CA CA 40849/02
COUNSEL:	P.M. Wood/Dr. A.S. Bell (Appellant) J.T. Gleeson SC/M.S. Henry (Respondent)
SOLICITORS:	Freehills (Appellant) Blake Dawson Waldon (Respondent)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	ED 50004/02
LOWER COURT JUDICIAL OFFICER :	McClellan J