Trackcorp Adrenalin Pty Ltd v Bathurst Regional Council (No.3)
[2014] NSWSC 690
•30 May 2014
Supreme Court
New South Wales
Medium Neutral Citation: Trackcorp Adrenalin Pty Ltd v Bathurst Regional Council (No.3) [2014] NSWSC 690 Hearing dates: 18-22, 28, 29 November 2013, 26 February 2014 Decision date: 30 May 2014 Jurisdiction: Equity Division Before: Darke J Decision: Further Amended Statement of Claim is dismissed with costs.
Catchwords: CONTRACT - breach - contract permitting plaintiff to hold motor sport event - exclusivity provision - whether defendant breached provision by allowing other promoters to conduct events substantially similar to plaintiff's event - no breach established
EQUITY - remedies - rectification - alleged common intention not established
NEGLIGENCE - existence of duty of care - whether duty owed by one contracting party to another to ensure no breach of exclusivity provision - duty not found to exist
TRADE AND COMMMERCE - representations made in contractual negotiations - whether misleading or deceptive - no misleading or deceptive conduct found - Fair Trading Act 1987 (NSW) s 42
CONTRACT - breach - obligation to hold good faith negotiations - content of obligation - no failure to honestly and genuinely participate in negotiations - no breach established
REMEDIES - restitution - mistake - fees paid in belief that local council was duly authorised to charge the fees - whether council duly authorised to charge the fees - council had authority to charge the fees - mistake not established
LOCAL GOVERNMENT - power of Council to charge fees to hire motor racing circuit - whether only power is given by Part 10 of Chapter 15 of Local Government Act 1993 (NSW) - whether Council had power to charge fees under Chapter 6 of Local Government Act or general power to contractLegislation Cited: Interpretation Act 1987 (NSW) s 50(1)(e)
Fair Trading Act 1987 (NSW) s 42
Local Government Act 1993 (NSW) Part 10 of Chapter 15
Mount Panorama Motor Racing Act 1989 (NSW) s 5Cases Cited: Bush v National Australia Bank Ltd (1992) 35 NSWLR 390
Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Dowling v Dalgety Australia Ltd (1992) 34 FCR 109
McCrohon v Harith [2010] NSWCA 67
McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
United Group Rail Services Limited v Rail Corporation New South Wales (2009) 74 NSWLR 618; [2009] NSWCA 177Category: Principal judgment Parties: Trackcorp Adrenalin Pty Ltd (plaintiff)
Bathurst Regional Council (defendant)Representation: Counsel: G A Sirtes SC, S A Lawrance (plaintiff)
B W Rayment QC, J E Thomson (defendant)
Solicitors: Whittens & McKeough (plaintiff)
McIntosh McPhillamy & Co (defendant)
File Number(s): 2010/76709 Publication restriction: Nil
Judgment
The nature of the claim
In November 2007, the plaintiff ("Trackcorp") entered into a Track Hire Agreement with the defendant ("the Council"). The Agreement concerned the hire by Trackcorp of the Mount Panorama racing circuit in Bathurst for the purpose of conducting certain motor sport events on an annual basis over five years. The Council is the owner of the land upon which the circuit and associated facilities lie.
Trackcorp seeks damages on the basis that the Council breached the exclusivity provision contained in clause 3.4 of the Agreement which provided:
"BRC [the Council] agrees that during the term of this Agreement, the Promoter [Trackcorp] shall be the only event organiser/ promoter to be granted the right to conduct an event at the Circuit which is the same or substantially similar to the Event as negotiated by both parties."
In essence, Trackcorp contends that the Council breached that provision when it permitted an organisation known as Festival of Sporting Cars ("FOSC") to conduct certain events at the circuit each Easter from 2008 to 2010, and when the Council itself conducted, in conjunction with Yeehah Events Pty Ltd ("Yeehah"), certain events at Easter in 2011 and 2012.
In the alternative, Trackcorp contends that clause 3.4 should be rectified in two respects. First, to reflect an alleged common intention that Trackcorp would be the only promoter who had the right to conduct any timed or untimed non-racing event at the circuit catering to the holders of certain motor sport licences; and secondly, to reflect an alleged common intention that the Council would not charge any other event promoter a lower daily track hire fee than that charged to Trackcorp. It is then said that the Council allowed other non-racing events to take place, and charged FOSC and Yeehah track hire fees which were lower than those charged to Trackcorp. Trackcorp seeks damages for breach of the Agreement as rectified.
Trackcorp further claims damages on the basis that the Council breached a duty of care said to be owed to Trackcorp to ensure, amongst other things, that no one would pay less than Trackcorp for track hire, and no one else would be permitted to conduct a non-racing event at the circuit which catered to the holders of certain motor sport licences.
Trackcorp also seeks damages and other relief pursuant to the Fair Trading Act 1987 (NSW) on the basis that the Council, by making various pre-contractual representations (including as to future matters), engaged in conduct which was in contravention of s 42 of that Act.
Trackcorp also alleges that the Council breached clause 3.2 of the Agreement which stipulated, in effect, that if Trackcorp gave notice that it wished to renew the Agreement for a further five years then, during the balance of the term of the Agreement, the Council was obliged to continue to hold good faith negotiations with Trackcorp regarding the track hire fees to apply for the renewed term. Trackcorp contends that the Council failed to negotiate in good faith, and claims damages for losses said to have been sustained as a result of such breach.
Finally, Trackcorp alleges that the track hire fees it paid under the Agreement were paid by it under a mistake. It contends that the Council failed to comply with relevant statutory requirements such that it was not lawfully entitled to charge the track hire fees. Trackcorp contends that it paid the fees under the mistaken belief that the Council was entitled to charge the track hire fees. Trackcorp seeks restitution of the amount of the track hire fees it paid on the basis that such fees were moneys had and received by the Council to the use of Trackcorp.
Background to the Agreement
The genesis of the Agreement lies in amendments made in 2006 to the Mount Panorama Motor Racing Act 1989 (NSW), which increased the maximum number of permitted motor racing meetings at the Mount Panorama circuit from two to five. This meant that, in addition to the established Bathurst 1000 and Bathurst 12 hour events, there was the possibility of up to three further motor racing meetings each year.
The directors of Trackcorp, Mr David Jellins and Ms Amelia Jones, considered that the increase in the permitted number of events at Mount Panorama presented an opportunity for Trackcorp to expand its operations to include an event at that circuit. As at 2006, Trackcorp was already engaged in the business of running and promoting private motor sport events and programmes at various venues throughout Australia, including Eastern Creek and Oran Park in Sydney, and Phillip Island in Victoria. In the latter half of 2006, Mr Jellins and Ms Jones developed a concept for an event to be held at Mount Panorama which would be directed towards car club members and motor sport enthusiasts who held Confederation of Australian Motorsport ("CAMS") Level 2S (L2S) licences, and would have a supersprint theme. An L2S licence issued by CAMS allows the holder to compete in what CAMS describes as non-racing events, but not in what CAMS describes as racing events.
CAMS is the principal governing body in Australia for motor sport. It has promulgated National Competition Rules ("the Rules") which govern automobile competitions organised under the authority of CAMS. Certain features of the Rules should be noted.
First, the Rules divide competitions into three kinds, namely, International, National, and Club. Different licence requirements apply to the participants in the different kinds of competitions.
Second, distinctions are drawn in the Rules between races, speed events (which include supersprints) and regularity trials. A race may be either a circuit race or a drag race. A circuit race is defined as a competition held on a closed circuit between two or more automobiles running at the same time on the same course, in which the result is determined either by the order in which the automobiles cross the finish line after completing a specified number of laps, or by the distance covered in a specified time.
A speed event is defined as a competition other than a race in which automobiles are timed individually along a defined course greater than 200m in length, and which is determined solely on the basis of the time recorded including any penalties incurred. The term "speed event" specifically includes supersprints. A supersprint is defined in the Rules as a multiple-car speed event, similar to a lap dash, conducted on a permanent sealed circuit in which two vehicles start simultaneously (and may be followed, after a suitable gap, by two other vehicles starting simultaneously). Elapsed times for a lap of the circuit, and not relative positions at the finish line, determine event placings.
A regularity trial is defined as a competition in which each competitor nominates a target time (for completion of a lap of the circuit) and in which the results are determined on the basis of variation from this time. Greater variations incur penalties. The Rules specifically provide that a regularity trial shall not be, or include, a speed event.
Thirdly, the Rules provide that for speed events and for regularity trials, the driver competing must at least have a CAMS L2S licence.
Evidence was given by an expert in the area, Mr Steven Chopping. He was called by the Council. His evidence was not subject to any substantial challenge in cross-examination, and both parties placed some reliance upon his testimony. I accept his evidence. Mr Chopping explained that more onerous licensing requirements exist for race events than for speed events or regularity trials. He further explained that the vehicles which compete in racing events must include safety features which are more comprehensive than those required for vehicles which are allowed to compete in speed events or regularity trials.
Negotiations between Trackcorp and the Council
In July 2006, Trackcorp made contact with the Council to initiate discussions about the holding of an event at the Mount Panorama circuit. Trackcorp's initial point of contact with the Council was Mr Paul Heath, who was employed by the Council as a Director, Business and Economic Development. There was something of a hiatus between July 2006 and February 2007.
On 21 February 2007, Mr Jellins sent an email to Mr Heath requesting that a meeting be arranged to discuss the idea of the "Jim Richards Bathurst Tour" which was envisaged to run over a two day period twice a year. On 7 March 2007, Mr Jellins sent a further email to Mr Heath which referred to a meeting which Mr Jellins had with a Mr Charles Jardine, and stated that Trackcorp was keen to run a two day "Bathurst Tour" in October, after the Bathurst 1000.
Mr Jardine, who was involved with FOSC, had informed Mr Jellins that FOSC was thinking of running "an historic car race meeting" at the Mount Panorama circuit in the early part of 2008.
As it was not possible to stage other events close to the Bathurst 1000, the idea of an October event had to be abandoned. There was then some discussion about an event taking place in December. On 2 April 2007, Mr Heath sent an email to Mr Jellins in the following terms:
"As requested I have attached some information on booking Mount Panorama Racing Circuit with detailed fees and charges which should assist your planning. Please be aware that the 2007/2008 Fees and Charges have not been formally approved by Bathurst Regional Council at this stage but should be very close to the final numbers. For the dates requested, 5/12/07 to 9/12/07, to be held for you I would need to receive a non-refundable booking deposit of $7,500 by 30 April 2007. Until then I will pencil you in as an event which should give you sufficient time to make a firm decision.
Can you provide your proposed Trackcorp event details as soon as possible so we can review as well."
The attached information concerning the booking of the circuit contained the following statement:
"Note: Full circuit hire fee is noted in Council's Fees and Charges, as a minimum of $6,000 per day. This fee is purely for circuit (road only, but not in race trim) with no inclusions.
To hire the full circuit for a motorsport event, involves the full race track set-up, and is subject to a negotiated fee, which is currently $258,000, as resolved by Council in 2005, and subject to CPI adjustment. This has the following inclusions/exclusions: ..."
Numerous specific items which were either included or excluded from the fee were then set out. One of the inclusions was described as "Spectator Areas, Campgrounds as necessary and available, and Carparking."
The material attached to the email included a breakdown of the $258,000 fee. The breakdown was apparently undertaken by reference to various categories of costs, one item of which was described as an "Asset Renewal Contribution" of $50,000. The attached material also included an extract from Council's Statement of Revenue Policy which contained the following statement:
"Full Circuit Closure - actual fees on negotiation
Per day (minimum fee stated) $6,000"
Trackcorp paid the $7,500 booking deposit on 2 April 2007. Also on that day, Mr Jellins sent an email to Mr Heath which included the following:
"As discussed, we are currently looking at a 5 day event along the lines of:
Wed: Orientation, training and Hot Lap sessions;
Thu: Training Track Day for Car Clubs and Hot Lap sessions;
Fri: Training Track Day for Car Clubs and Hot Lap sessions;
Sat: Super Sprints for Car Clubs;
Sun: Super Sprints for Car Clubs"
A "Hot Lap" involves a qualified race driver taking a passenger around the circuit at high speed.
Arrangements were made for a meeting to take place on 3 May 2007 in Bathurst. Trackcorp was represented at the meeting by Mr Jellins, Ms Jones and Ms Katie Iddon who has, since 2006, supplied various services to Trackcorp pursuant to contract. The Council was represented at the meeting by Mr Heath and Mr Simon Rollin, the Major and Special Events Manager. The events of this meeting are of considerable importance to the proceedings. They are dealt with in more detail later in these reasons. It is sufficient to note at this stage that Trackcorp alleges that various statements were made on behalf of the Council at the meeting, and that the statements form part of the basis of Trackcorp's claims for rectification and misleading or deceptive conduct. In particular, it is alleged that Mr Heath gave an assurance that the $258,000 circuit hire fee was "non-negotiable" or "fixed" and further, that no one would pay less than Trackcorp to hire the circuit. It is also alleged that Mr Heath said words to the effect that it was a requirement of the Council that all the events to be held at Mount Panorama were to be unique and not in conflict or competition with each other. Finally, it is alleged that Mr Heath said that the Council was in discussions with Mr Jardine of FOSC who was looking to run "an historic race meeting".
On 4 May 2007, Mr Jellins sent an email to Mr Heath which included the following:
"...
We have deferred the idea of running a race meeting in the first year and we will be structuring our programme around corporate hospitality and club level events ranging from orientation and training through to passenger hot laps and full club Super Sprints.
It would be great to start knocking the agreement into shape so please send over what you have. We would be looking for a minimum 5 year term contract with an option to renew. Naturally, we would also be looking for some comfort and protection in terms of keeping our event unique in the Bathurst calendar."
Mr Rollin sent various booking forms to Trackcorp which contained some standard terms and conditions, but it is apparent that the parties intended to have a specific agreement prepared. On 7 May 2007, Mr Jellins sent an email to Mr Rollin which detailed a further refinement of the timetable for the proposed five day event. The first two days were described as a "Drive Event", and the final three days were described as a "Sprint Event". The email also stated that in addition to those events, Trackcorp would be running hot laps and demonstration laps at various times throughout each of the days, except for the final day which was to be devoted to Super Sprint events.
In June 2007, Trackcorp submitted an application to CAMS for an Event Organising Permit. The event type was described on the application form as "various speed events and Super Sprint". On about 25 June 2007, Trackcorp commenced accepting applications for entry into the event. The standard entry fee for the Drive Bathurst component was $3,400, and $5,600 for the Sprint Bathurst component, although discounts were available for early entry. $950 was payable immediately upon application.
On 24 August 2007, Mr Jellins sent various documents to Mr Heath, including an Event Business Plan. The business plan, which had been submitted as part of the application to CAMS, contained an overview of the event. The Drive Bathurst 2007 event was described as a "5 day invitation only" event comprising two separate events, namely, Drive Bathurst and Sprint Bathurst. Specifically, the business plan provided:
"Drive Bathurst will run over 2 days (12 - 13 December) and offers a unique opportunity for participants to learn to drive this legendary circuit at their own pace (non-competitive format) whilst still enjoying spirited driving.
The focus will be on circuit orientation and training, progressing through speed-limited sessions, and culminating in non-speed limited sessions on the final day.
...
Sprint Bathurst will run over three days (14 - 16 December) and has been designed with the dedicated club sprinter in mind.
The format will include circuit orientation, training sessions and speed-limited practice sessions, before moving to timed practice on the second day. Participants will then be seeded based on recorded practice times and a full Super Sprint will be run on the final day.
Under the heading "The Event Format", the business plan further provided:
"In allowing greater access to the Mount Panorama Circuit, it is the stated aim of the Bathurst Regional Council ("BRC") that each year they must have their own unique selling proposition. Agreements are already in place for two annual race meetings - one with AVESCO for the V8 Supercars, the other for the Bathurst International Motor Festival (a joint venture of the BRC). Each of the existing agreements places limitations on other race formats.
Motorsport includes activities other than racing, and the cornerstone of motorsport in Australia is the club level competitor. Each year many of the CAMS permitted events that take place are not race meetings but Super Sprints and the like, supported and attended by club competitors. Most CAMS members do not own race cars or hold racing licences, but they are just as competitive and committed to their sport as their circuit racing counterparts and the paid professionals.
In acknowledging all of these factors, the Organisers believe that the most appropriate format for a new event at Mount Panorama is a Super Sprint.
...
The financial resources needed to stage an event at this venue are significant. The hire charges levied by BRC include a base charge of approximately $258,000 to close the road and set up the circuit.
...
The quantum of the base charge, in conjunction with the projected track density, is such that it is not commercially viable to hire the circuit for short periods of time. The entry fees that would result would in all likelihood be prohibitive."
Under the heading "Competitor Interest", the business plan included the following:
"DRIVE BATHURST 2007 is certainly a commercial venture, but it is one that directly targets the club level competitor. For a new event to gather sufficient support to succeed, it must have a point of difference, should ideally cater to as wide an audience as possible and yet still maintain a certain sense of unattainability or exclusivity. By its very nature, a full circuit event at Mount Panorama that is not a race and is open to L2S licence holders delivers all these factors."
Under the heading "Local Community", the business plan refers to an agreement reached between Trackcorp and the Council concerning "resident access breaks" during the event. These are periods which allow access to the track to residents who live on properties within the circuit. There were to be three such breaks each day.
Also on 24 August 2007, Mr Heath sent a draft Heads of Agreement to Mr Jellins for his review. The draft agreement provided for the holding of a motor sport event as more fully described in an attached Schedule of Activities and which was defined as "the Event". The draft Heads of Agreement did not include any provision for exclusivity. The draft included a document headed "Full Track Set-up Costs for Motorsport" which was said to embody the Council's 2007/2008 fees and charges which were not available earlier in the year. The document included a figure of $277,177.63 for the total track hire fee (as compared to the earlier figure of $258,000).
On 21 September 2007, Mr Jellins sent an email to Mr Rollin announcing that the five day Drive Bathurst 2007 event (to be held 12 - 16 December 2007) had been approved by CAMS. A media release was attached.
On 10 October 2007, Mr Jellins sent an email to Mr Heath indicating that Trackcorp's lawyer was making some amendments to the draft Heads of Agreement, and that some clarification was sought concerning the "full track set-up costs". On the following day, Mr Heath sent an email to Mr Jellins which included the following:
"As per the HOA, the "FULL TRACK SET-UP COSTS" to TRACKCORP are $277,177.63. We also discussed a small reduction in year 1 as this is a 5 year contract. I can confirm for Year 1 only, I will reduce the overall "FULL TRACK SET-UP COSTS" to TRACKCORP by $30,000 making the total amount payable in Year 1 to $247,177.63. Years 2 - 5 will be at the scheduled rate which generally increases by CPI each year."
Mr Heath's email also referred to the need for Trackcorp to pay the balance of the 50% deposit by early the following week. In an email sent in response, Mr Jellins indicated that Trackcorp's understanding was that the reduction discussed was due to an acknowledgement that Trackcorp would not be utilising all of the facilities, and therefore the reduction "would apply in perpetuity". The email further stated that Trackcorp was looking for a minimum 5 x 5 year contract but would be reluctant to commit to such a term "in the absence of a more compelling deal - i.e. scheduled rate which generally increases by CPI each year".
Also on 11 October 2007, Mr Jellins sent an email to Mr Heath with an attached marked-up Heads of Agreement from Trackcorp's lawyer, Mr Tony Clarke. Mr Jellins stated that Mr Heath and he should try to discuss the matter on 15 October 2007, in advance of a meeting scheduled to take place in Bathurst on 17 October 2007.
The draft Heads of Agreement put forward by Trackcorp made no changes to the Schedule of Activities which described the Event. Amongst the numerous amendments which were made was the inclusion of an exclusivity provision in the following terms:
"3.5 BRC agrees that during the term of the Agreement, the Promoter shall be the only event organiser/ promoter to be granted the right to conduct an event at the Circuit which is the same or substantially similar to any part or all of the Event. This is an essential term."
Clause 4.2.1, which referred to a negotiated fee as per an attached schedule, was amended to add an exception so that Trackcorp would not be liable for the fees to the extent that any individual facility or service referred to in the schedule was not reasonably required by Trackcorp for the conduct of the event. The schedule itself was amended so that it was, in effect, left blank.
On 12 October 2007, Mr Heath sent an email to Mr Jellins in relation to the draft which had been submitted. The email noted a number of points of concern. These included the provisions dealing with exclusivity and the schedule of fees. Relevantly, the email stated:
"Clause 3.5 Exclusivity. I understand what you are trying to achieve but this could be difficult as we already have other events committed which have hot laps, driver training and whilst I am keen to have all events fundamentally different, this may become a point of contention which we have resisted with other events wanting something similar.
...
Clause 4.2.1 Schedule of Fees. The fees were not designed to be unbundled but provided that way so that an understanding could be gained as to why the fees are of that magnitude as previously discussed. I will provide you with a new schedule format to avoid this potential confusion."
The email also raised the issue of payment of a 50% deposit, which was stated to be now due. It was further stated that if the parties were unable to complete the transaction by the end of 17 October 2007 (the day of the proposed meeting between the parties), then the event would be cancelled.
It appears that there were telephone discussions between Mr Heath and Mr Jellins on either 15 or 16 October 2007. An email from Mr Heath to Mr Jellins on 16 October 2007 refers to a telephone hook up in which the Council agreed to track hire fees of $247,178 for year 1, with the fees for years 2 to 5 to be subject to increases in accordance with the CPI. Later on that day, Mr Jellins sought confirmation that the figures for track hire were GST inclusive. Later still on 16 October 2007, Mr Jellins sent Mr Heath a further draft Heads of Agreement which was apparently Mr Jellins' attempt to address Mr Heath's concerns about the earlier draft. This draft contained an exclusivity clause in the following terms:
"3.5 BRC agrees that during the term of the Agreement, the Promoter shall be the only event organiser/ promoter to be granted the right to conduct an event at the Circuit which is the same or substantially similar to the Event."
Clause 4.2.1 was amended in this latest draft to remove the exception which Trackcorp had earlier suggested.
Mr Jellins, Ms Jones and Ms Iddon travelled to Bathurst on 17 October 2007 to meet with Mr Heath. As is the case with the meeting of 3 May 2007, the events of this meeting and a later meeting held on the same day with the General Manager of the Council, Mr David Sherley, are of considerable significance to the proceedings. Trackcorp alleges that in the earlier meeting, Mr Heath gave assurances to the effect that no one else would be permitted to conduct an event such as Trackcorp's event (which was stated to be an event catering to L2S licence holders), and that no other promoter would pay less than Trackcorp for the hire of the track. As for the later meeting, Trackcorp alleges that it received similar assurances from Mr Sherley. It is also alleged that Mr Sherley stated, in effect, that the resident access requirements for Trackcorp's event would be the same as the requirements applicable to the Bathurst 1000 and the Bathurst 12 hour events. Again, these meetings will be dealt with in further detail later in these reasons.
Following the meetings on 17 October 2007, Trackcorp paid the balance of 50% deposit (being the sum of $119,839). It did so upon the basis that the Council agreed that such sum was fully refundable in the event that the Heads of Agreement was not executed within 7 days.
Later on 17 October 2007, Mr Heath sent an email to Mr Jellins which attached what was described as a final draft of the Heads of Agreement for Mr Jellins' review. The email refers to amendments made "as per our discussion this morning".
This draft made a further change to the exclusivity provision. The provision was now in the following terms:
"3.5 BRC agrees that during the term of the Agreement, the Promoter shall be the only event organiser/ promoter to be granted the right to conduct an event at the Circuit which is the same or substantially similar to the Event as negotiated by both parties."
A new Schedule of Fees was included. Under the heading "Schedule of Negotiated Fees (including GST)", the fee for each of the five years of the agreement was set out, commencing with $247,178 for the first year. It was also noted in the schedule that whilst CPI increases of 3.5% per annum had been assumed, the fees for the following years would be based on the actual movement of the CPI.
On the following day, Mr Jellins sent an email to Mr Heath in which he stated that the agreement "now looks fine to me", and that he had sent it to Mr Clarke for a final look. It is not clear whether any further changes were suggested by Trackcorp at that stage. However, on 22 October 2007, Mr Heath sent an email to Mr Jellins which attached what was described as a "final version" for Mr Jellins' review. This version was now in the form of an Agreement rather than a Heads of Agreement and a number of consequential changes were made. Otherwise, the final version was substantially in the form of the draft which had been sent to Mr Jellins on 17 October 2007.
Some further amendments were made to the draft on 24 October 2007. Some of those were suggested by Mr Clarke including changes to the option contained in clause 3.2. The option was now expressed as an option to renew the Agreement for a further five annual Events. A provision was added requiring the Council to hold good faith negotiations with Trackcorp regarding the track hire fees to apply in respect of any renewed term. No amendments were suggested in relation to the exclusivity provision or the provision dealing with the circuit hire fees.
On 25 October 2007, Mr Heath sent an email to Mr Jellins which attached an electronic copy of the Agreement as signed by the Council. Hard copies of the Agreement were to be posted to Trackcorp, who were requested to sign the copies and return one to the Council. In fact, the Agreement as signed by Trackcorp was not sent to the Council until 7 November 2007. It was received by the Council on 9 November 2007.
In the meantime, there was further communication between Mr Heath and Mr Jellins on various issues including the question of resident access breaks. Mr Jellins, in an email sent on 29 October 2007, stated that he thought there was to be "one resident break over lunch as per other events run over the full Mount Panorama Circuit". In reply to that email, Mr Heath seemed to suggest that he had a different understanding, but in any case, he stated that to remove the morning and afternoon breaks might result in a "strong resident backlash which may also impact on the issuing of your permit". Presumably, that is a reference to the permit which is required under s 5 of the Mount Panorama Motor Racing Act to authorise the Council to hold a meeting for motor racing and associated events.
Mr Jellins indicated to Mr Heath that he was happy to discuss the issue, but pointed out that officials of the Council (including Mr Sherley) kept telling Trackcorp "not to offer anything different to the other events". Mr Jellins also expressed a concern that additional breaks would impact upon the commercial viability of the event.
On 1 November 2007, Mr Heath sent Mr Jellins draft documents which dealt with proposed resident access breaks, and information to be provided to the residents. These documents provided for three access breaks per day (totalling 65 minutes) and for the circuit to be otherwise closed from 7:30am (except for the final day when it was to be 8:30am) until 6:45pm (except on the final day when it was to be 7:00pm). Various changes or refinements to these documents appear to have been discussed between the parties in November 2007, but there does not appear to have been any departure from the position that there would be three resident access breaks per day.
On 4 December 2007, a permit was issued under s 5 of the Mount Panorama Motor Racing Act authorising the Council to conduct motor racing events/practice and associated events on the circuit between 12 and 16 December 2007.
The inaugural Trackcorp event took place between 12 and 16 December 2007. Subsequent Trackcorp events were held in December 2008, November 2009, November 2010 and November 2011.
Negotiations between FOSC and the Council
During much of 2007, the Council was in negotiations with FOSC as well as Trackcorp in relation to the staging of events at Mount Panorama. In a report by Mr Heath to the Council in June 2007, a proposed FOSC event was described in the following terms:
"This event is working with car clubs to promote club level racing together with developing driver skills to ensure safe racing and the opportunity for club members to race under full racing conditions. No other organisation is providing this facility to car clubs and offering the opportunity to race competitively at the world famous Mount Panorama Racing Circuit in Bathurst."
On 20 June 2007, the Council resolved to authorise Mr Sherley to enter into Heads of Agreement for three new events at the circuit, including the events to be conducted by Trackcorp and FOSC. It appears that a Heads of Agreement was entered into between the Council and FOSC on about 13 September 2007. That document contained a Schedule of Activities which relevantly describe the FOSC event in the same terms as Mr Heath described it in his earlier report to Council. The document also contained a schedule of proposed fees over the five year term of the agreement. As was the case with Trackcorp, the fees proposed to be charged were lower than those which Council stated by reference to "full track set-up costs". The fees escalated throughout the five year term. The total of the fees payable over the five years was similar to the total of the fees payable by Trackcorp throughout the five year term of its agreement. It should be noted, however, that the FOSC event was a seven day event.
Subsequently, the Council and FOSC entered into a track hire agreement which is structured similarly to the agreement entered into with Trackcorp. This agreement was evidently prepared prior to Easter 2008 when the first FOSC event was held, although it does not appear to have been signed by the Council until July 2008. I nonetheless infer that the 2008 event, and the subsequent FOSC events, were all governed by the terms of the track hire agreement. The agreement contains an exclusivity clause which is in the same terms as that found within the Trackcorp agreement. The Schedule of Activities, which describes the FOSC Event, is in a form somewhat different to that which was attached to the Heads of Agreement. The event was described in the following terms:
"The event will comprise of two parts and both are being managed by the Festival of Sporting Cars (FOSC) as the promoter.
One event to be known as Celebration of Motor Sport is working with car clubs and their associates to promote club level racing together with developing driver skills to ensure safe racing and the opportunity for club members to race under full racing conditions. No other organisation is providing this facility to car clubs and offering the opportunity to race competitively at the world famous Mount Panorama Racing Circuit in Bathurst.
The pitt/paddock area at Mount Panorama will see many car clubs mount a substantial display of their cars.
In addition, FOSC have as their major sponsor Mercedes-Benz who will be using four days of the seven day track time for their own activities as follows:
Mercedes-Benz will utilise Mt Panorama and nearby facilities for the purpose of launching and introducing the Mercedes-Benz Car Group product range as exclusive drive experiences to our AMG customer base as well as programs for the Mercedes-Benz Young Licence Drivers and Active Safety Experience programs in line with our global brand requirements.
Product presentations to motoring media and Mercedes-Benz Dealer network conference requirements will also be accommodated both on track and at the Resort facilities."
Further dealings between Trackcorp and the Council concerning resident access and track hire fee
On 8 February 2008, Mr Heath sent an email to Mr Jellins and Ms Iddon in relation to "Residents Issues". Mr Heath indicated that the Council was in the process of developing a policy as to resident access during motor racing events. The draft policy, as it would have applied to the Trackcorp event, provided for a one hour break at lunch time and a thirty minute break each morning and afternoon. These breaks were longer than those which occurred during the recently conducted event. The draft policy also provided for the circuit to close at 8:30am rather than 7:30am each day, and re-open at the earlier time of 5:30pm each day. Mr Heath appreciated that such a policy might impact upon Trackcorp's event and he sought feedback from Trackcorp about the draft policy. Trackcorp, in its response, stated that the event requires eight hours of track availability in each of its five days.
At about this time, Trackcorp became aware of information which suggested that the track hire fee payable for the forthcoming FOSC event was in the order of $190,000. Trackcorp also became aware, through a media release issued by FOSC, that FOSC intended to include "regularity events" in its programme. Regularity events, as noted earlier, are not regarded by CAMS as racing events, and are open to the holders of L2S licences. Trackcorp was sufficiently concerned by these developments that it consulted its solicitor, Mr Clarke. A draft email, to be sent to the Council, was prepared by Mr Clarke, but was not in fact sent. However, Trackcorp subsequently made complaints to the Council about the events staged by FOSC.
The development of the resident access policy continued throughout 2008. On 7 July 2008, Mr Jellins, in response to a further draft of the policy (which also stipulated that the circuit must re-open by 5:30pm for resident access), stated that Trackcorp could work within a 7:30am to 5:30pm timeframe "provided that the fee charged to us is adjusted accordingly".
The issue was further discussed at a meeting held on 22 July 2008 attended by Mr Jellins and Ms Iddon and representatives of the Council including Mr Robert Roach. Mr Roach was the Director, Corporate Services and Finance. A memorandum prepared by Mr Roach for Mr Sherley suggests that, at the meeting, Trackcorp stated that it required eight hours of clear track time each day, was opposed to any resident access breaks apart from one hour at lunchtime, and wanted the track hire fee to be reduced to $229,200 (the amount which FOSC was to pay for its event in 2009).
On 21 August 2008, the Council informed Trackcorp that it had resolved to reduce the track hire fee for year 2 of the contract from $255,829 to $223,850 "based on a track availability" time of 35 hours over a 5 day period. That is, the circuit would be available each day between 8:30am and 5:30pm, with three resident access breaks having a total duration of two hours. Trackcorp was requested to advise if the proposed variation was acceptable to it.
A meeting was held on 9 September 2008 between Ms Iddon and Mr Roach. At that meeting, Ms Iddon expressed Trackcorp's dissatisfaction with the resident access policy and the adequacy of the proposed reduction in the track hire fee. On 11 September 2008, Mr Roach sent a letter (incorrectly dated 11 August 2008) to Ms Iddon in which it was indicated that the circuit would be available each day between 7:30am (rather than the previously advised 8:30am) and 5:30pm, with three resident access breaks having a total duration of two hours. The letter further indicated that the track hire fee for the 2008 event would be $223,850, of which 50% needed to be paid by 19 September 2008, and the balance 30 days prior to the commencement of the event. A track hire fee of $223,850 was subsequently paid by Trackcorp for its 2008 event.
Other events held at the Mount Panorama circuit
The inaugural FOSC event was held over seven days between 17 and 23 March 2008. As noted earlier, Trackcorp complained to the Council about the FOSC event. In particular, Trackcorp claimed that as the event included regularity events (which are open to the holders of L2S licences) it was in conflict with the exclusivity provision in the Agreement. This concern was first raised with the Council during a meeting held in Sydney on 8 May 2008.
By that time, Ms Iddon had ascertained, from the published results for the "Celebration of Motor Sport" component of the 2008 FOSC event, that of the 44 timed sessions, 7 (approximately 16%) were regularity events open to L2S licence holders, and of the 445 competitors, 128 (approximately 29%) were participants in the regularity events. The "Celebration of Motor Sport" component comprised three out of the seven days for the FOSC event. The other four days were taken up with activities associated with Mercedes-Benz, a sponsor of the event.
In late 2008, FOSC was experiencing difficulties in obtaining similar sponsorship for its 2009 event. On 18 November 2008, FOSC proposed that their agreement with Council be varied to provide, in respect of 2009 only, for a four day event and a reduced circuit hire fee. The Council did not agree to a reduction of the fee. As far as the evidence reveals, the 2009 FOSC event was in fact conducted over three days at Easter (10, 11 and 12 April 2009). Unlike the inaugural FOSC event, a car manufacturer sponsor was not able to be secured.
Ms Iddon ascertained from the published results that, on this occasion, of the 35 timed sessions, 11 (approximately 31%) were regularity events open to L2S licence holders, and of the 412 competitors, 170 (approximately 41%) were participants in the regularity events. Trackcorp expressed its concerns to the Council about the "ever-morphing" FOSC event, and its effect upon Trackcorp's own event, at a meeting with Mr Roach on 24 September 2009.
In late 2009, FOSC made it known that it was intending to include a six hour regularity event as part of its 2010 event. This fact was brought to the attention of Council by Trackcorp. Mr Roach thought that such an event appeared to be outside the scope of the event as described in the FOSC agreement (the stated aim of which was to promote club level racing), and may also be "in conflict" with other endurance events conducted at the circuit, namely, the Bathurst 1000 and the Bathurst 12 hour. There was some discussion between the Council and FOSC on this issue, and legal advice was obtained by both sides. There was no immediate resolution of the issue. It seems that a decision was made within the Council not to support the holding of a six hour regularity event or the obtaining of a permit for such an event. Mr Roach conveyed that information to Trackcorp at a meeting held on 8 December 2009. On that occasion, Ms Iddon again expressed concern at the extent to which the FOSC event involved regularity events.
At about that time Ms Iddon also expressed concern to Mr Roach about the involvement of Porsche Cars Australia in the proposed six hour event. She stated, in an email to Mr Roach dated 15 December 2009, that this "directly conflicts with our contract with BRC". Mr Roach reviewed the Agreement with the assistance of Council's lawyers and could not discern any such conflict. In a further email sent to Mr Roach on 21 December 2009, Ms Iddon emphasised Trackcorp's concern that no action was being taken to prevent the marketing of the six hour event, including the involvement in such event of Porsche Cars Australia, when "over 35% of all Drive Bathurst competitors are Porsche owners". On 19 January 2010, Ms Iddon sent a further email to Mr Roach. This email contained, amongst other things, a detailed argument as to how the inclusion by FOSC of regularity events undermines Trackcorp's event which is aimed at club level competitors who hold an L2S licence.
At that stage the issue of the six hour event had still not been resolved as between the Council and FOSC. However, in the latter part of January 2010, after the Council had stated that FOSC had failed to show how it was going to stage an event which was in accordance with its contractual obligations, FOSC informed the Council that it would not be proceeding with the six hour regularity event.
On 9 March 2010, in the course of discussions which followed between FOSC and the Council, the Council indicated its willingness to vary the agreement "to permit club racing for a period of 5 days" from 2 April 2010 to 6 April 2010 in accordance with a programme which had been attached to an updated business plan which had recently been received. This plan (which was an attachment to an email dated 4 March 2010)
does not seem to be in evidence. The Council further stated, at that time, that it did not accept that "V8 Hotlaps" or "V8 Drives" (which were scheduled to take place on 31 March 2010 and 1 April 2010) were within the scope of the contract.
On 16 March 2010, FOSC sent a letter to the Council which stated that FOSC agreed to the variation which was described in Council's earlier letter. The FOSC letter then went on to state that the V8 Hotlaps and V8 Drives would not be part of the upcoming event and that, instead of those activities, some driver training and instruction activities were proposed for 31 March 2010 and 1 April 2010.
On 17 March 2010, the solicitors for the Council sent a letter to FOSC in which it was stated that Council rejected the asserted entitlement "to change the character of the event from 3 days of racing with 4 days of promotional activity to 7 days of club racing (or 5 days of club racing and 2 days of V8 Drives and other ill-defined activities)". It was pointed out that barely 2 weeks before the event was due to commence, the parties appeared to be at an impasse. The letter continued:
"Rather than allow this difficulty to require the cancellation of the whole event, we are instructed to formally propose an interim compromise resolution applicable to this one occasion only and without affecting in any other way the rights and obligations of the parties under the contract. Our client is prepared for the 2010 Easter event to proceed for Club Racing for a period of 5 days according to the program for Friday 2 April 2010 to Tuesday 6 April 2010 inclusive as attached to the updated Business Plan."
It appears that the 2010 FOSC event in fact proceeded on that basis.
On 26 March 2010, one week before the scheduled commencement of the FOSC event, Trackcorp commenced these proceedings by the filing of a Summons. Declarations were sought to the effect that the regularity aspects of the proposed FOSC event were substantially similar to the Event as identified in the Agreement between Trackcorp and the Council. Interlocutory relief was claimed against the Council in relation to those proposed activities. Affidavits sworn by Mr Jellins and Ms Iddon were served in support of the relief claimed. Amongst the affidavits served by the Council in relation to the application for interlocutory relief was an affidavit sworn by Mr Jardine of FOSC. Included in that affidavit was a statement that the FOSC event "does not include any supersprint element". The application for interlocutory relief was ultimately not pursued by Trackcorp.
The 2010 FOSC event took place over five days from 2 - 6 April 2010. The event comprised two parts, each of two and half days duration. The first, called "Mount Panorama - The Way It Was", was largely aimed at historic cars and mainly consisted of racing events, although some regularity events were also included. The second, "Car Clubs of Australia Regularity Festival', consisted, as its name suggests, of a series of regularity events.
The evidence is not clear as to how many regularity events took place as part of the "Mount Panorama - The Way It Was" section of the 2010 event. An event programme suggests that out of 38 events, 10 (approximately 26%) were to be regularity events. The published results in evidence show that at least eight regularity events were involved in this part of the 2010 event. Presumably, all of the events in the "Car Clubs of Australia Regularity Festival" were regularity events.
In addition, the published results suggest that many of the regularity events were not conducted as proper regularity events, but were instead, in substance, supersprints. Many of the events are actually described in the results as supersprints, and do not include nominated lap times. Moreover, some other events, despite being described as regularity events, do not appear to be events where times were nominated. The nomination of lap times by competitors is central to the concept of a regularity event. The aim of participants in such an event is to complete laps in a time as close as possible to the nominated time. Consistency, not speed itself, is rewarded. Finally, some of the results indicate that even in events where times were nominated, many participants either failed to so nominate a time, or nominated an unrealistically high or low time, thus revealing that the participants were not at all concerned about achieving consistency with a nominated time.
It is the Council's position that it did not approve or otherwise sanction FOSC to conduct supersprint events. Evidence was given by Mr Rayner, a Council employee who was the manager of the circuit. He had a supervisory role in relation to events run at the circuit. Mr Rayner deposed that he thought that the regularity events on the programme for the 2010 FOSC event were all conducted in a manner consistent with being regularity events. Mr Rayner's evidence was not challenged. Neither was there any challenge to Mr Roach's evidence that the Council did not give FOSC any approval to conduct supersprints. Moreover, Mr Chopping gave evidence to the effect that whilst race officials who are responsible to CAMS, such as stewards and time keepers, might be expected to know if a regularity was in fact being conducted as a supersprint, a track owner would not be expected to have any records of nominated lap times. Finally, there was evidence that the Council subsequently relied on the allegedly irregular manner in which the regularity events were conducted in 2010 to justify its termination of the FOSC agreement. In these circumstances I conclude that the Council did not give any approval to FOSC to conduct supersprints at the circuit.
Following the 2010 FOSC event, discussions resumed between FOSC and the Council concerning their contractual position. In the course of those discussions, Council sought details of what FOSC proposed for its 2011 event. Little or no progress was made in the discussions. At one stage mediation was considered, and some further discussion occurred. However, on 8 July 2010, FOSC stated in a letter that if the issues between the parties were not clarified satisfactorily by 19 July 2010 then "FOSC will be in no position to take up its contractual rights in 2011".
In September 2010, FOSC indicated that it was "presently programming our Easter 2011 meeting for another venue, and strict deadlines apply", and further "that it would not be taking up its contractual right in relation to Easter 2011". On 7 October 2010, the Council served notices on FOSC calling upon it to remedy various alleged breaches or anticipatory breaches of the agreement. On 16 November 2010, the Council served notices of termination of the agreement.
On 2 December 2010, it was announced that agreement had been reached for a new event, known as the Bathurst Motor Festival, to be conducted by Yeehah in conjunction with the Council over Easter 2011, in place of the FOSC event.
The Bathurst Motor Festival Event was conducted over four days between 22 and 25 April 2011. This occurred pursuant to an agreement between the Council and Yeehah dated 20 April 2011. Clause 2.1 of the agreement provided:
"2.1.1 The parties agree to conduct the Event under the terms of this Agreement.
2.1.2 The motor sport event shall comprise racing of automobiles identified by CAMS as the following:
(a) 1st Category Racing Cars
(b) 2nd Category Sports Cars
(c) 3rd Category Touring Cars
in a program of races which shall be approved by the Management Committee.
2.1.3 The motor sport event shall not include endurance racing.
2.1.4 The motor sport event may include such other activities ancillary to motor sport as approved by the Management Committee including without limitation automobile display, "show and shine", Hot Laps and Modern Regularity."
The event programme for the festival reveals that numerous races were scheduled to occur over the first 3 days. Some regularity events were also scheduled on those days. The fourth day was to involve "V8 Race Experience Activity". According to Ms Iddon, that meant Hot Lap activities. Ms Iddon ascertained, from the published results, that of the 37 timed sessions over the first three days, 10 (approximately 27%) were regularity events open to L2S licence holders, and of the 247 competitors, 83 (approximately 34%) were participants in the regularity events.
A further Bathurst Motor Festival was held in 2012. The event programme shows a schedule of events of a similar character to the events conducted over the first three days of the 2011 festival. There were no Hot Lap activities in 2012.
Did the Council breach clause 3.4 of the Agreement?
Clause 3.4 of the Agreement provides:
"BRC [the Council] agrees that during the term of this Agreement, the Promoter [Trackcorp] shall be the only event organiser/ promoter to be granted the right to conduct an event at the Circuit which is the same or substantially similar to the Event as negotiated by both parties."
The promise by the Council is that no other event organiser or promoter will be granted the right to conduct an event which is the same or substantially similar to "the Event as negotiated by both parties". "The Event" is the defined term given in clause 2.1 of the Agreement to the expression "a motor sport event at Mount Panorama to be known as driveBathurst and sprintBathurst events as more fully described in the attached Schedule of Activities (contained in Schedule 2)". However, in clause 3.4, the parties have not employed that defined term on its own, but have added to it the words "as negotiated by both parties".
Mr Sirtes SC, who appeared with Mr Lawrance for Trackcorp, submitted that those additional words had the consequence that the Event for the purposes of clause 3.4 was not confined to the Event as described in the Schedule of Activities, but extended more broadly to the Event which was actually agreed upon by the parties in their negotiations.
Mr Rayment QC, who appeared with Mr Thomson for the Council, submitted that the Event "as negotiated by both parties" consisted of the Event as described in the Schedule of Activities with the additional component of Hot Laps sessions which the parties had specifically agreed in their negotiations would be included in the Event. Mr Rayment suggested, by reference to evidence given by Mr Jellins in cross-examination on this topic, that there was common ground on this matter. However, Mr Jellins' understanding is not determinative, and I understood Trackcorp's submission concerning the construction of the expression to have been somewhat broader.
In any case, it is my view that the expression "the Event as negotiated by both parties" encompasses the motor sport event comprising the combination of activities the parties agreed would form part of the Event which Trackcorp is entitled, by clause 3.1 of the Agreement, to stage each year throughout the term of the Agreement.
In circumstances where the description of the Event contained in the Schedule of Activities is not expressed in exhaustive terms, "the Event as negotiated by both parties" is broad enough to capture activities, not specifically mentioned in the Schedule, which the parties have nonetheless agreed would form part of the Event. However, "the Event as negotiated by both parties" does not in my view extend to any activities unless the parties have agreed that such would form part of the Event which Trackcorp had the right to stage. The mere fact that the Event or parts of it may have been described or referred to in the course of the parties' negotiations in a particular way does not mean that such descriptors themselves form part of the Event which Trackcorp had the right to stage. If that were the case, a large degree of imprecision would be introduced into the concept of "the Event as negotiated by both parties". It is unlikely that the parties would have intended such an outcome, given that the concept was intended to be the benchmark against which other events would need to be compared for the purposes of clause 3.4. The operation of the clause would be problematic if the nature of "the Event as negotiated by both parties" had to be discerned from the myriad of communications about the proposed event, both written and oral, which passed between the parties in the course of their negotiations for the Agreement.
In assessing whether any breach of clause 3.4 has occurred, it is necessary to compare the Event as negotiated by both parties with some other event conducted at the circuit by some other organiser or promoter. The critical question is whether that other event is the same as or substantially similar to the Event as negotiated by both parties. The whole of each relevant event must be considered in making the comparison. I reach that conclusion based on the language of the clause, without resort to the circumstance that the parties rejected a clause which was directed to a comparison with "any part or all" of the Event (cf Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352-3 per Mason J).
The events about which Trackcorp complain are not said to be the same as the Event as negotiated by both parties; they are said to be substantially similar to the Event as negotiated by both parties. Nevertheless, the whole of clause 3.4 must be kept in mind.
It is necessary to construe the language used by the parties in the context in which it appears. Here, the words "substantially similar to" are used in conjunction with "the same as". In my view, the words "substantially similar to", as used in clause 3.4 of the Agreement, ought be construed as meaning in substance similar to albeit not the same as the Event as negotiated by both parties. I consider that when the words are read in the context of clause 3.4 and the Agreement as a whole, the degree of similarity called for should be regarded as considerable or large (see Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 138-139 per Lockhart J). A comparison between two events, each viewed as a whole, is called for. The question then is whether the events, so viewed, are in substance similar to albeit not the same as each other. It is not enough that there are similarities between the events, or even that the similarities themselves might be described as being substantial or of substance.
Trackcorp's submissions in this context placed some emphasis on the stated aims of Trackcorp in holding the Event. Reference was made to the opening sentence of the Schedule of Activities which is in the following terms:
"The aim of the event is to give experienced club competitors and motor sport enthusiasts the opportunity to receive expert instruction from well-known and respected race champions and then drive on the full Mount Panorama Circuit."
Reference was also made to the business plan which Trackcorp provided to the Council. This plan included references to the event being one which "directly targets the club level competitor", and stated that due to its very nature being "a full circuit event at Mount Panorama that is not a race and is open to L2S licence holders", it had a point of difference, it catered to as wide an audience as possible, and it maintained a certain sense of unattainability or exclusivity.
Trackcorp's submissions were formulated in various ways, but its essential position was that clause 3.4 prevented the Council from permitting another promoter to hold a non-racing event at the circuit which was open to the holders of L2S licences, yet the Council did just that in permitting FOSC and later Yeehah to conduct regularity events. It was put that the FOSC and Yeehah events were substantially similar to the Event as negotiated by both parties within clause 3.4 because "an essential aspect of each of them was that it provided an opportunity for non-expert drivers in unmodified vehicles to compete on the Mount Panorama track", and that there is an obvious similarity between supersprints and regularity events.
The Council submitted that there was no breach of clause 3.4 in circumstances where the FOSC and Yeehah events were mainly racing events, and no part of Trackcorp's event involved either racing events or indeed regularity events. Reference was also made to Mr Chopping's evidence to the effect that it was not uncommon for club level race meetings to have regularity events included in the programme.
Insofar as the material in the business plan is concerned, it was put by the Council that such material (e.g. that Trackcorp's event was open to L2S licence holders) does not so much describe the event itself as indicate why Trackcorp thought the event would attract interest amongst members of car clubs.
It is clear that FOSC was granted the right by the Council to conduct events at the circuit over Easter in 2008, 2009 and 2010, and Yeehah was granted the right by the Council to conduct events at the circuit over Easter in 2011 and 2012. No point was raised that the grant of the right to conduct the 2008 event may have occurred prior to the making of the Agreement between the Council and Trackcorp. Moreover, it may be accepted (leaving aside the allegedly de facto supersprints conducted by FOSC in 2010) that the events which were in fact conducted by those promoters were permitted by the Council. The Council did not contend to the contrary. The Council may be taken (whether pursuant to the signed agreements with the promoters, or pursuant to variations of such agreements) to have granted those promoters the right to conduct those events. Accordingly, it is necessary to compare those events with "the Event as negotiated by both parties" within the meaning of clause 3.4.
The Event as negotiated by both parties is primarily described in the Schedule of Activities attached to the Agreement. It describes a five day event broken into two components, driveBathurst (two days) and sprintBathurst (three days). Drivers could participate in either or both components. The first component is an "untimed and non-competitive event" where the focus is upon participants obtaining professional instruction on how to drive the circuit, and the opportunity to do so at speed. The focus of the second component is upon supersprints. It involves circuit orientation, training sessions and speed-limited practice sessions on the first day, timed practice sessions on the second day, then full supersprint events on the final day. Both components of the Event were to be supplemented by Hot Laps sessions. It may be accepted that the Event, so comprised, was, as stated by Trackcorp, aimed at club level competitors including the holders of L2S licences.
The FOSC event is described in the Schedule of Activities attached to the track hire agreement entered into between the Council and FOSC in 2008. It is a seven day event. It also consists of two components. The first component, which occupies three of the days, is stated to be for car clubs and their associates and is broadly described as an event which promotes club level racing and the development of driver skills, and the opportunity for club members to race on the Mount Panorama circuit under full racing conditions. It was also envisaged that the event would involve car clubs mounting displays of their cars. The second component, which occupies the other four days, involves the major sponsor of the event, Mercedes-Benz, conducting various promotional activities, including driving and safety programmes. This second component was not run in either 2009 or 2010.
The Yeehah event, as described in the agreement between the Council and Yeehah dated 20 April 2011, was an event comprising various racing events (other than endurance racing) in a programme of races approved by a Management Committee, and "such other activities ancillary to motor sport" as may be approved by the Management Committee. The programmes for the Yeehah events of 2011 and 2012 (which I infer were approved by the Management Committee) provide for a four day event in 2011 and a three day event in 2012. In each year, numerous racing events were to be held over a three day period, and a number of regularity events were scheduled to occur on those days as well. In 2011, the fourth day was devoted to Hot Laps activities.
Trackcorp's central complaint is that the FOSC and Yeehah events included regularity events, which, like supersprints, are not classified as races, and are open to the holders of L2S licences driving vehicles which do not have to be heavily modified. I have referred earlier in these reasons to the evidence which shows the extent to which regularity events formed part of the FOSC and Yeehah events (see paragraphs 69, 71, 81, 88 and 89 above).
Between 2008 and 2010, the number of regularity events, and the proportion of the FOSC event which consisted of regularity events, increased. In 2010, approximately one quarter of the events in "The Way It Was" section were regularity events, and all of the "Regularity Festival" section was to consist of regularity events. Viewed broadly, more than half of the 2010 event consisted of regularity events. The earlier FOSC events and the Yeehah events of 2011 and 2012 had a much smaller regularity component.
The question of breach of clause 3.4 may thus be tested first by reference to the FOSC event of 2010.
This event (as sanctioned by the Council) involved both racing and non-racing events. Trackcorp's event does not involve any racing events. Its competitive events are all supersprints which are classified, not as races, but as speed events. The non-racing events at the FOSC 2010 event made up about five eighths of the total programme. These were all regularity events which are not classified as speed events. Trackcorp's event does not involve any regularity events. Trackcorp's event includes Hot Lap activities but no Hot Laps activities were included in the FOSC 2010 event. No events or activities on the programme for the FOSC 2010 event appear to be of the kinds which make up Trackcorp's driveBathurst component.
The similarity between the FOSC event of 2010 and Trackcorp's event lies in the similarities between regularity events and supersprints. Whilst the type of competition is different, with supersprints focusing upon the fastest lap time and regularity focusing upon consistency of lap time, both types of events are open to the holders of L2S licences, and the cars which participate in such events do not need to be modified to the extent that cars participating in race events have to be. There is also some scope for a competitor in a regularity event to nominate a low lap time so that there is little practical difference between attempting to consistently meet that time and driving the car as fast as possible around the circuit. These matters were essentially accepted by Mr Chopping in his evidence, although he maintained that the nomination of such low lap times might not be acceptable to the officials running a properly organised regularity event.
Both events comprise a number of different motor sport activities which are to take place over a number of days. None of the activities which comprise the Event as negotiated by both parties are found within the FOSC event of 2010. However, each event has, as an important part of its programme, a type of motor sport competition which bears some similarity to a motor sport activity which forms an important part of the other event.
There is a limited similarity between supersprints and regularity events insofar as competitors in a regularity event might be able to drive much as they might in a supersprint. However, that is not the true aim of a regularity event and, as Mr Chopping stated, such a competitor would run the risk of falling foul of the event officials.
The main similarity between supersprints and regularity events lies in the fact that they both hold an appeal to holders of L2S licences and provide an opportunity for such holders to participate in non-racing motor sport competition involving driving around the circuit at speed.
It seems to me that when the two events are each viewed as a whole, and thus compared, the degree of similarity between them is not sufficient for the FOSC event of 2010 to be regarded as substantially similar to "the Event as negotiated by both parties" within the meaning of clause 3.4 of the Agreement.
The points of difference between the two events, as described above, are significant. Not one type of competitive motor sport is common to both. Only Trackcorp's event contains a component (indeed an important component) devoted to events of an "untimed and non-competitive" nature, and only Trackcorp's event offers Hot Lap activities. An important part of the FOSC event of 2010 concerns racing events which are not featured at all in Trackcorp's event. Each event, viewed as a whole, has a distinctive composition and character. As a matter of substance, they are quite different. It is true that important parts of the programmes of both events appeal to an identifiable segment of consumers, namely, the holders of L2S licences. However, that similarity has to be seen in the context of the events viewed as a whole. I do not accept Trackcorp's submission that clause 3.4 was breached because it was an essential aspect of each event that it provided an opportunity for non-expert drivers in unmodified vehicles to compete on the Mount Panorama circuit. When the events as a whole are compared, the degree of similarity which is called for by clause 3.4 is not demonstrated.
It follows that I do not think that the Council, by giving FOSC the right to conduct its event in 2010, and a fortiori the right to conduct its events in 2008 and 2009, was in breach of clause 3.4.
The Yeehah events included a regularity component which was much smaller than that contained in the FOSC event of 2010. The Yeehah event of 2011 did, however, include a day of Hot Laps activities. Such activities also formed part of Trackcorp's event. Trackcorp, in its submissions, did not specifically raise this as a similarity to be considered. The focus of the complaint was upon the regularity aspect of the Yeehah events, and the fact that such regularity events are open to the holders of L2S licences. Of course, the customers of a Hot Laps experience do not require any licence. They are merely passengers.
In any case, a comparison between the 2011 Yeehah event and "the event as negotiated by both parties" does not lead me to conclude that the two events are substantially similar within the meaning of clause 3.4. The Yeehah event predominantly consisted of racing events, although more than one quarter of the events are regularity events. Again, even allowing for the similarities which exist as a result of the regularity aspect, and the offering of Hot Laps, the events have a quite distinctive composition and character, and I do not think that the degree of similarity called for by clause 3.4 is shown. The position is a fortiori the 2012 Yeehah event which did not include any Hot Laps.
For these reasons, Trackcorp's case concerning breach of clause 3.4 of the Agreement fails.
Trackcorp also pleaded the existence of certain implied terms, including terms obliging the Council to monitor events staged at the circuit by other promoters, to ensure that Trackcorp's rights under clause 3.4 were protected, and to ensure that any events were conducted in accordance with relevant requirements such as those imposed by CAMS. The implied terms case was not addressed in Trackcorp's final submissions. It seems to me that the alleged terms, which would require the Council to ensure that certain things occurred or did not occur, would not be implied in the Agreement. Moreover, to the extent that any implied terms may have required the Council to monitor events, there was evidence given by the circuit manager, Mr Rayner, on that topic. This evidence, which was not challenged, included that, as part of his role, he checks that promoters are complying with the permits under which the events are held, and further, that to his observation the 2010 FOSC event was conducted in accordance with the approved programme. Trackcorp has failed in my view to establish that the Council has breached any implied term of the Agreement.
Before leaving this topic, I should record that even if I am wrong in my conclusion that the Council, by permitting the FOSC and Yeehah events that involved regularity events, did not breach of the Agreement, I do not think that Trackcorp proved that it suffered a loss as a result.
Trackcorp's case on damages was essentially to the effect that after its 2008 event, it lost revenue due to the FOSC and Yeehah events. There was evidence that Trackcorp had fewer customers in 2009, 2010 and 2011 as compared to 2008, even though it marketed and ran its event in basically the same way, and well, each year. There was also evidence given by Mr Jellins to the effect that the ticket prices for the Trackcorp event were not increased in 2009, and were reduced in 2010 and 2011, because he believed that the Trackcorp event was losing customers to the FOSC and Yeehah events (which charged lower ticket prices).
Calculations (which were agreed by the two accounting experts called in relation to quantum issues) of foregone net revenue were performed on two bases, both of which assumed that the lower number of customers after 2008 was the result of breach of the Agreement. The first calculation ($803,844) assumed that the prices in 2009-2011 were the 2008 prices adjusted for inflation. (If no inflation adjustment is made, the figure becomes $702,302). The second calculation ($533,056) assumed that the prices in 2009-2011 were the actual prices charged in those years.
No evidence was adduced from any witness with expertise in relation to the market in which the events compete. There was no analysis of the attributes of the market (including as to prices), or the position of the respective events in the market. There was no analysis of the likely causes of the fall in the number of Trackcorp's customers since 2008, and the extent to which such fall was likely caused by any particular attributes of the FOSC and/or Yeehah events. There was no evidence adduced concerning customer behaviour or attitudes, whether of customers who actually participated in one or more of the Trackcorp, FOSC and/or Yeehah events, or of customers more generally in the market.
I was invited to find, based on the evidence that Trackcorp's event was conducted in the same way, and well, each year, and the further evidence of Mr Jellins concerning ticket prices, that apart from the FOSC and Yeehah events, there were no other extraneous factors that might explain the lower numbers of customers in 2009-2011.
The Council submitted that Trackcorp had failed to establish that the FOSC and Yeehah events were the only things that had changed, and that those events caused the drop-off in customer numbers. Reference was made to the evidence of Mr Chopping to the effect that after 2009 there was a reduction (in NSW and most of the other states) in the numbers of people who held L2S licences. It was also said that the Court could take note of the likely effects of what is generally referred to as the Global Financial Crisis, which commenced to have a significant effect on the Australian economy from late 2008. Finally, reference was made to some analysis of data concerning the competitors in the various events in the period 2008-2011 which, it was submitted, did not support Trackcorp's case on causation.
Had I concluded that Trackcorp had made out its case that the FOSC and Yeehah events were substantially similar to the Trackcorp event because of the inclusion in them of regularity events, I would not have been satisfied on the evidence that the inclusion of those events was a cause of the lower numbers of Trackcorp customers after 2008, whether in whole or in part. In my view, the evidence does not provide a sufficient basis upon which to conclude that any reduction in customer numbers was a result of the regularity events conducted by FOSC and Yeehah. It is far from self evident that the holding of regularity events by FOSC and Yeehah would significantly impact upon ticket sales for Trackcorp's event. There was evidence, for example, that Trackcorp's event, which did not involve any regularity events, was priced at a much higher level than the FOSC event. The absence of any evidence concerning the market and its participants leaves the Court in a position where any conclusions as to the extent to which the regularity events affected the numbers of customers attending Trackcorp's event would have to be based largely on speculation. In those circumstances, I would not have been prepared to conclude that Trackcorp had established that it had suffered any loss as claimed.
Negligence
It is convenient to next deal with Trackcorp's claim that the Council is liable to it in negligence. It is pleaded that the Council was in breach of a duty of care owed to Trackcorp in:
(a) permitting FOSC and Yeehah to conduct events which included regularity events (and in 2010 de facto supersprints);
(b) allowing those promoters to pay track hire fees lower than Trackcorp had to pay; and
(c) in applying different resident access requirements in respect of their events.
The alleged breaches concerning track hire fees and resident access requirements were not referred to in Trackcorp's closing submissions. In those submissions, Trackcorp acknowledged that, ordinarily, the imposition of a duty of care between two contracting parties "would be unavailable as a matter of legal principle". Reference was made to the observations of Emmett J (as his Honour then was) in McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230 at [66] where his Honour stated:
"There is no reason for the law to impose a duty on one of two contracting parties to act in the interests of the other party in relation to a matter that the parties have not by express conduct or necessary implication included into the terms of their contractual relationship. While vulnerability is an important requirement in cases where a duty of care to avoid economic loss arises, vulnerability in that context is not to be understood as meaning only that the claimant was likely to suffer damage if reasonable care was not taken. Rather, vulnerability is to be understood as a reference to the claimants' inability to protect itself from the consequences of a wrongdoer's want of reasonable care, either entirely or at least in a way that would cast consequences of loss on the wrongdoer (see Woolcock Street Investments Pty Ltd v CDJ Pty Ltd (2004) 216 CLR 515 at [22] and [23])."
The Council's solicitors, in their letter of 2 August 2011, stated that the correct figure for the track hire fee paid in respect of the 2009 Bathurst 12 hour event was $127,000 (plus GST), and that the fees for the 2010 and 2011 events were $147,600 (plus GST) and $150,000 (plus GST) respectively. Moreover, it was stated that the 12 hour event was wholly different to Trackcorp's event "in terms of the number of days of track hire and the services provided by our client, and the events are sufficiently dis-similar that no correlation can be drawn between them as is alleged by your client." The letter reiterated that in the Council's opinion, the negotiations with respect to a track hire fee "must reflect the existing track hire fee and the services that are being provided to your client".
On 9 August 2011, the solicitors for Trackcorp responded to the abovementioned letter. Issue was taken with many of the matters contained in the letter. In particular, it was put that Trackcorp did not think credible the statement that the Bathurst 12 hour event was so different from Trackcorp's event that no correlation can be drawn between them. Further, complaint was made about the lack of progress towards a new agreement.
The debates continued in the communications which followed. On 9 August 2011, the solicitors for the Council responded. A "substantive response" to the default Notices was sought, and Trackcorp was reminded that 50% of the track hire fee for the 2011 event was due to be paid on 11 August 2011. The Council's position, that the starting point for negotiations must be the current track hire fee, was repeated. Reference was also made to some half page coloured advertisements placed by Trackcorp in the local Bathurst newspaper. The solicitors for Trackcorp, for their part, responded with a further letter on 11 August 2011. This letter contained a lengthy response to the matters raised by the Notices of Default. A further letter was sent by those solicitors on 26 September 2011. This letter contained an offer to pay a track hire fee of $110,000 (plus GST). The offer was made upon the basis that the fee for the Bathurst 12 hour event in 2011 was $150,000 (plus GST), a six day event which, it was asserted, required more services to be provided by the Council. The offer was also expressed to be predicated upon various matters including that there were no events which are charged a lower track hire fee than that which is paid in respect of the Bathurst 12 hour event. Finally, it was stated that the offer made was "commensurate with what appears to be the going market rate".
It should be noted here that on 9 September 2011, the solicitors for the Council issued a Default Notice under the Agreement in respect of the failure of Trackcorp to pay the first instalment of track hire fee which was due on 11 August 2011. The notice provided that if payment was not made within 21 days of service, then the Council would be entitled to terminate the Agreement pursuant to clause 3.6. The first instalment of the track hire fees was paid by Trackcorp, under protest, on 29 September 2011.
The solicitors for the Council wrote again on 29 September 2011. It was stated that they were presently finalising their instructions to submit an offer, and expected to be able to do so within two weeks. In fact, no offer was made by the Council until 27 October 2011, when Trackcorp's offer of 26 September 2011 was rejected and a counter-offer of $297,000 (plus GST) was made. That figure (which was to be increased by 3.5% each year, or CPI, whichever is the greater) was justified by reference to the level of track hire fees in the existing Agreement (and changes to the amount of track time made available for the event), as well as capital expenditure in the order of $5 million which the Council had or would soon incur in respect of the circuit.
By letter dated 9 December 2011 from Trackcorp's solicitors, the Council's offer was rejected. Detailed reasons were provided as to why the rationale for the counter-offer and the counter-offer itself could not be accepted. It was stated, by reference to the Council's own principles of "market pricing" that the counter-offer was not considered to have been made in good faith.
The solicitors for the Council responded on 15 December 2011. They stated that the letter of 9 December 2011 had been discussed and noted at the meeting of the Council held the previous evening. It was further noted that the letter of 9 December 2011 did not contain any offer on behalf of Trackcorp. The offer made by the Council on 27 October 2011 was expressed to remain open for acceptance until 23 December 2011.
There followed some discussion between the parties on the question whether the period for negotiations might be extended. No agreement to that effect was made. On 21 December 2011, the solicitors for the Council indicated that the Council's offer would remain open for acceptance until the afternoon of Saturday 31 December 2011.
By letter dated 22 December 2011, the solicitors for Trackcorp responded, stating that it was Trackcorp's view that the offer made by the Council was not credible and not put forward on a proper basis. It was noted that there had not been any substantive response to the matters they had raised in their earlier letter of 9 December 2011. Finally, it was stated that Trackcorp's offer of $110,000 (plus GST) would remain open for acceptance until the afternoon of 31 December 2011.
Later on 22 December 2011, the solicitors for the Council rejected that offer, and made a counter-offer of $285,000 (plus GST) (subject to an increase of 3.5% per year, or CPI, whichever is the greater). Again, the offer was expressed to remain open until the afternoon of 31 December 2011. There does not appear to have been any response to that counter-offer, and accordingly, the Agreement expired without any agreement having been reached concerning the track hire fees to apply during a renewed term.
In support of its claim that the Council breached clause 3.2 of the Agreement, Trackcorp relies, not only upon the course and content of the negotiations which are summarised above, but also upon the terms of a conversation which occurred on 12 October 2011 between Ms Iddon and Mr Roach.
Ms Iddon deposes that during the conversation, Mr Roach was abusive towards her and employed profane language. Ms Iddon deposes that the conversation commenced with Mr Roach saying words to the following effect:
"I don't know what you think you're up to but I've had a gutful of you and that smart mouth Jellins and your stupid games."
Ms Iddon said that Mr Roach then went on to express frustration about "answering your stupid emails", and state that he would not be answering any more of them. Ms Iddon says that she responded with words to the following effect:
"Well I disagree that they're stupid. The way I see it Bob, Trackcorp is a customer of Council's and all we're asking from you is some basic customer service so that we can run our event. We do have some rights you know."
Ms Iddon says that Mr Roach then used abusive language towards her in denying that Trackcorp had any rights, before going on to say words to the effect that Trackcorp only had an obligation to run an event and that he wanted Trackcorp to make an immediate payment. Ms Iddon further says that after she complained about the way in which Mr Roach was speaking to her, he again used abusive language towards her, said that he would "personally make it my business to see that you and Jellins never set foot on the Mount ever again" and said that if the payment was not made by the following day, another breach notice would be issued.
Mr Roach deposes that as at 12 October 2011, Trackcorp was overdue in payment of track hire fees. According to Mr Roach, payment (presumably of the second 50% of the fee) was due on 10 October 2011. He deposes that it was his intention on 12 October 2011 to issue a breach notice by reason of the default in payment in the event that payment was not made. He says that he spoke to Ms Iddon on that day and in doing so, made his intentions plain and may have used "plain language". However, Mr Roach denies that he was abusive and offensive in the manner portrayed in Ms Iddon's affidavit. He also denies making any threat of termination of the Agreement other than as a consequence of non-payment of the track hire fees.
Both Ms Iddon and Mr Roach were cross-examined about the conversation. Ms Iddon maintained that her version was correct, and denied that Mr Roach said anything about the possible termination of the Agreement. She further said that she was shocked by what Mr Roach had said and, further, that he was rude and was shouting at her.
Mr Roach appeared to accept that he did not have a firm recollection of what was said, but he maintained that he could not accept that the conversation occurred as set out in Ms Iddon's affidavit. Mr Roach specifically denied saying that he would ensure that Mr Jellins and Ms Iddon never set foot on Mount Panorama again. He denied other aspects of the conversation including that he was abusive or had described Mr Jellins as a "smart mouth".
The conversation took place at a time when there were evident difficulties in the relationship between the Council and Trackcorp. The Council had issued a Default Notice on 9 September 2011 in respect of the track hire fee. Later in September 2011, Trackcorp had asserted that the Council had breached the Agreement. Those assertions were made in an email sent by Ms Iddon to Mr Roach on 15 September 2011, and a letter dated 27 September 2011 from Trackcorp's solicitors to the solicitors for the Council. As at 12 October 2011, the level of tension between the parties was likely quite high, with payment of the balance of the track hire fees now overdue and the event due to commence on 9 November 2011. I think it is likely that, in the conversation held on that day, Mr Roach forcefully demanded payment of the outstanding track hire fees, failing which a further Notice of Default would issue. It is also likely, in my view, that there was discussion about the assertions recently made by Trackcorp, and that Mr Roach expressed frustration about the raising of such matters. I am also prepared to accept that Mr Roach may have used some profane language during the conversation. However, I think it is unlikely that the language employed by Mr Roach was such as to cause any significant offence or shock to Ms Iddon as claimed. I also do not accept that Mr Roach said words to the effect that he would personally make it his business to ensure that Ms Iddon and Mr Jellins never set foot on Mount Panorama again. He is likely, in my view, to have said no more than that if payment of the track hire fees was not made, then steps would be taken to terminate the Agreement.
Ms Iddon sent an email to Mr Roach in the late afternoon of 12 October 2011. The email includes the following:
"Thanks for the phone call this morning.
My understanding of our conversation is that you're not prepared to answer further emails from us and that makes it extremely difficult. Realistically, for us to be able to finalise our preparations for 2011, we need answers both to the concerns already raised as well as any other issues that may arise.
We have assured you of our co-operation and we ask for yours in return, but as of now we seem to have reached an impasse.
As a solution, despite the fact that it will significantly disrupt my preparations for the event, I am prepared to travel to Bathurst to meet with you one-on-one ... I will bring a cheque with me - the default notice you have intimated you intend to issue tomorrow is neither warranted nor necessary and will do nothing to assist the current situation."
In cross-examination, Ms Iddon said that the words "thanks for the phone call this morning" were said ironically. To my mind, the tone of the email rather suggests an attempt on Ms Iddon's part to have the dialogue henceforth proceed on a more reasonable and constructive basis. There was, after all, an event due to commence within a matter of weeks that needed to be organised. Nevertheless, in the light of the difficult relationship that undoubtedly existed at that time, and Trackcorp's demonstrated willingness to make complaints about the Council and its officers, had the conversation been as threatening and shocking as Ms Iddon claims, there would surely have been some complaint made about it at the time.
A Default Notice was in fact issued by the Council on 13 October 2011 in relation to the unpaid portion of the track hire fees. Later on that day, Mr Roach responded to Ms Iddon's email of the previous day. Mr Roach's email contained the following:
"It is incorrect to say that I will not reply to further emails.
What I said was I would not reply to your email of 7 October 2011 as I had given you my reply of 5 October 2011 that covered Council's position.
Should you decide to travel to Bathurst you will need to meet with Mark Rayner, Doug Patterson and myself to ensure we are going forward with your November event.
Council has today issued a 'breach notice' regarding payment in accordance with the contract conditions."
The emails referred to by Mr Roach do not appear to be in evidence. Neither is there any reply to Mr Roach's email in the evidence. It does appear, however, that arrangements were subsequently made for meetings to take place (including meetings on 21 and 28 October 2011) to discuss numerous issues concerning the operation of the forthcoming event. On 1 November 2011, Trackcorp paid the balance of the track hire fees, again under protest.
As noted earlier, it was not suggested that the obligation to hold good faith negotiations was too vague or uncertain to be enforceable. In assessing the content of the obligation it is, of course, necessary to consider it in its particular contractual setting (see United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618; [2009] NSWCA 177 at [70]). Here, the obligation arises in the context of the exercise of an option to renew an existing contract, where the subject matter of the contemplated negotiations concerns an important term which would need to be agreed before the renewed agreement would come into existence. It seems to me that the obligation, so viewed, allows the negotiating parties to pursue their own interests in relation to the subject matter of the term (the track hire fees) so long as they continue to honestly and genuinely participate in the negotiation process (cf United Group Rail Services Ltd v Rail Corporation New South Wales (supra) at [73]-[74]).
Trackcorp relied upon a number of matters to establish a breach by the Council of the obligation. It was submitted that such breach should be inferred from the following:
(a) by not engaging in negotiation between February and late October 2011;
(b) by leaving the conduct of the negotiations to Mr Roach, who had an animus against Trackcorp, primarily evidenced by the conversation he had with Ms Iddon on 12 October 2011;
(c) by delay in dealing with enquiries and requests for information made by Trackcorp and by being unresponsive to a number of such enquiries;
(d) by refusing to engage in negotiations other than through, or in the presence of, lawyers;
(e) by failing to address concerns advanced by Trackcorp about the Council's philosophy in relation to the setting of track hire fees;
(f) by imposing a fee which was higher than the current fee payable by Trackcorp and higher than that charged to other users of the circuit;
(g) failing to appoint a person within the Council who could impartially and properly engage in good faith negotiations; and
(h) by adopting, without considering other available approaches, a pricing policy of using the existing track hire fees as the minimum fee from which to add an uplift.
For the reasons which follow, I do not think that any breach of clause 3.2 has been established.
I do not think it is correct to characterise the Council's conduct as not engaging in negotiations between February and late October 2011. It is true that the Council did not make any offer to Trackcorp during that period. However, I do not think that the question whether the Council is holding good faith negotiations within the meaning of clause 3.2 is determined by whether or not it is making offers. The concept of holding negotiations seems to me to entail a broader process of engagement in relation to the issue at hand which might, but not necessarily, involve the making of formal offers.
In February 2011, the Council requested that all negotiations be conducted through the parties' respective legal representatives. That is an indication of a willingness to engage in a process of negotiations. In March 2011, the Council expressed the view that the proposed track hire fee set out in Trackcorp's letter of 7 February 2011 was so disingenuous as not to represent any meaningful offer. The Council accordingly stated that until such time as Trackcorp was willing to engage in meaningful negotiations, it had no desire to meet with Trackcorp. Again, and notwithstanding the reference in the 2 March 2011 letter to not proposing to "engage in negotiations", I do not think that this stance of the Council is tantamount to a failure to hold good faith negotiations within the meaning of clause 3.2.
It is apparent that the parties were seeking to establish points of reference in relation to which the negotiations may progress. That process continued following the lacuna which occurred whilst the complaints made against Messrs Roach and Sherley were dealt with. The position of the Council was, in essence, that the negotiations must reflect the current track hire fee and the services that are provided. The current fee was $241,758 (inclusive of GST). (That figure was less than the figure for the negotiated fee set forth in the schedule to the Agreement. That was due to the reductions which were agreed upon in 2008.) Against that, Trackcorp maintained that a track hire fee set by reference to the fee payable in respect of the Bathurst 12 hour event was appropriate. Offers were made upon those respective bases in the period from September to December 2011.
The offer made to Trackcorp in late October 2011 was apparently based upon the then current figure for full track set-up costs for the circuit for a four day event. Mr Roach said that it was the part of the Council's then revenue policy. I accept Mr Roach's evidence in that regard. The figure is the 2011 equivalent of the $258,000 figure which was used as the basis for discussion in 2007. I do not think that the Council, by proposing a track hire fee on that basis, was failing to honestly or genuinely participate in negotiations. Neither do I think that the Council, by maintaining its position that the track hire fee should be in the order of such a figure, was failing to honestly or genuinely participate in negotiations.
I do not accept Trackcorp's complaint concerning the role played by Mr Roach. It may be accepted that there were tensions and difficulties in the relationships between Mr Roach on the one hand, and Mr Jellins and Ms Iddon on the other. Those tensions and difficulties were but part of a fraught relationship between the parties. Mr Sirtes described the relationship in 2011 as "toxic". However, it was not shown to my satisfaction that Mr Roach was imbued with personal animus against Trackcorp. That suggestion was primarily based upon Ms Iddon's account of the conversation of 12 October 2011. I have not accepted important parts of that account, and I do not think that the conversation demonstrates any significant animus on Mr Roach's part. In any event, it was not established that the stance taken by the Council in the negotiations was dictated by Mr Roach. He was undoubtedly the officer with carriage of the negotiations on the Council side, but he was not operating at large. As earlier mentioned, the offer made in October 2011 was derived from the Council's revenue policy. There was also evidence that the position advanced by Trackcorp in its solicitor's letter of 9 December 2011 had been discussed by the Council itself at its meeting on 14 December 2011. Following that meeting, the Council in effect reaffirmed the offer which had been made in October 2011.
I also reject the suggestion that Council's insistence that negotiations be conducted through the respective legal advisers was evidence of a failure to hold good faith negotiations. It seems to me that in circumstances where the parties were involved in litigation, such an insistence was not unreasonable, and the actual conduct of negotiations on such a basis ought in no way impede their progress. The continuation of the difficulties between the parties throughout 2011, including the making of complaints against Messrs Roach and Sherley, reinforces the reasonableness of the Council's position in this regard.
Finally, I do not accept that any delays in dealing with Trackcorp's enquiries or requests for information, or any inadequacies in their responses to such enquiries or requests, establishes any failure on the part of the Council to honestly or genuinely participate in negotiations concerning the track hire fee. Both parties had stated their essential positions on the question. A debate then followed. In the course of that debate, Trackcorp sought to advance its position, or undermine the Council's position, through the seeking of information and calling for explanations. Trackcorp was perfectly entitled to take that course. The Council, in deciding how to respond to such requests, was itself entitled to take into account its own commercial interests. The obligation to engage honestly and genuinely in negotiations provides a qualification to, but does not undermine, the essential nature of the process which was a commercial negotiation. The Council, in responding to Trackcorp's requests, no doubt did so in a manner calculated to best advance its own position. Perceived inadequacies in the Council's response do not, in themselves, indicate that the Council has acted other than honestly and genuinely in the conduct of the negotiations.
Viewed overall, the conduct of the Council has not been shown to have been in breach of clause 3.2. The Council, as the owner of the circuit, was entitled, in the context of the negotiations, to seek to maximise its revenue. That it chose to seek a track hire fee at a level higher than the current track hire fee does not, in itself, suggest that the Council was not genuine in its approach to the negotiations. In essence, both parties took a position about the level at which the track hire fee should be negotiated, and maintained their respective positions throughout. In circumstances where those positions were so far apart, the maintenance of those positions inevitably led to the failure of the negotiations. Both parties exhibited a somewhat inflexible approach, but in my view neither can be said to have approached or continued the negotiations in a manner which was not honest or genuine.
Even if I am wrong about that, I do not think that Trackcorp established that it lost a valuable commercial opportunity by reason of any failure on the Council's part to hold good faith negotiations (see Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 349-350). Trackcorp claimed that due to the Council's failure to hold good faith negotiations, Trackcorp lost the opportunity to reach agreement as to the track hire fee which would operate throughout the renewed term. The calculations put forward on this head of claim were based on track hire fees of $165,000 for the five day event. That figure was taken from the amount that was charged in respect of the 2012 Bathurst 12 hour event.
However, no evidence was given that Trackcorp may have been prepared to accept a track hire fee higher than the amount it offered, namely, $110,000 (plus GST). Moreover, neither Mr Roach nor Mr Sherley was cross-examined (by reference to the 12 hour event or otherwise) to the effect that the Council, negotiating in good faith, may have accepted a track hire fee considerably lower than the amount it offered, namely, $285,000 (plus GST). In those circumstances, I would not be prepared to conclude on the evidence that there was any real (as opposed to speculative) prospect that these parties would have reached an agreement on the track hire fees for a renewed five year term.
It may be accepted that in cases where loss of an opportunity is involved, there may be greater scope for a court to engage in some "guesswork" in doing the best it can to assess the loss (see the discussion of the principles by McColl JA, with whom Campbell JA and Handley AJA agreed, in McCrohon v Harith [2010] NSWCA 67 at [118]-[126]). Nevertheless, the extent to which it is appropriate for a court to engage in such "guesswork" is related to the ability of the parties to adduce evidence to establish the loss claimed. In this case, evidence could have been adduced which would have provided a basis for a rational assessment of the possibility that agreement on track hire fees would have been reached. In the absence of such evidence, the Court is not in my view required to engage in speculation or guesswork in order to assess the claimed loss.
Restitution
Trackcorp contends that when it paid the track hire fees under the Agreement (which it says totalled about $1.175 million over the five year period) it was acting under a mistake, namely, that the Council was duly authorised to charge such fees. The essence of the argument is that the Council was not so authorised because the fees were not determined in accordance with the provisions of Part 10 of Chapter 15 of the Local Government Act 1993 (NSW) ("the Act").
Part 10 of Chapter 15 of the Act regulates the charging by councils of certain fees for services (see s 608(1) of the Act). Procedures are laid down in relation to the determination of such fees. Those procedures include the giving of public notice of the fee, and the consideration of any submissions made in relation to the fee. Trackcorp contends, correctly, that the track hire fees specified in the Agreement were not determined in accordance with the provisions of Part 10 of Chapter 15 of the Act. The Council did not contend to the contrary.
However, Mr Rayment submitted that Trackcorp's case misconceives the scope of Part 10 of Chapter 15 of the Act. He submitted that those provisions are not the only sources of power available to the Council to charge the track hire fees. Reference was made to Chapter 6 of the Act, which concerns, inter alia, the classification of public land into either "community" land or "operational" land, and imposes some restrictions upon the ability of councils to deal with community land, leaving the use and management of operational land relevantly unrestricted. Mr Rayment informed the court that the Mount Panorama circuit was operational land. The provisions of Chapter 6 of the Act clearly contemplate that a council might enter into licence agreements in respect of public land, including licences of more than five years duration.
Mr Rayment further referred to the general power of the Council to contract (see ss 8 and 21-23 of the Act and s 50(1)(e) of the Interpretation Act 1987 (NSW)). Mr Rayment also pointed to what he said were absurd consequences inherent in Trackcorp's contentions on this part of the case. It was said that those contentions involve the suggestion that track hire fees (even if otherwise governed by a multi-year licence agreement) need to be advertised and reset each year with the benefit of public participation and submissions.
I do not think that the track hire fees under the Agreement are governed by the provisions of Part 10 of Chapter 15 of the Act. The Council has not sought to rely upon those provisions as the source of power to charge the fees. It is true that the Council, in its annual statement of revenue policy for the 2007/ 2008 year (which is required pursuant to ss 402 and 404 of the Act) refers to circuit hire in the schedule of fees and charges. However, for "Full Circuit Closure", the amount of the fee is not stated as would be required by s 404(1) of the Act if the fee is a fee to which Division 3 of Part 10 of Chapter 15 of the Act applies. Instead, a per day minimum fee is shown, together with the statement "actual fees on negotiation".
I further accept Mr Rayment's submission that Part 10 of Chapter 15 of the Act is not the only source of power available to the Council to charge the track hire fees. That is so, in my view, regardless of whether the fees are characterised as a fee for service so as to be capable of being dealt with under Part 10 of Chapter 15 of the Act. As shown by the provisions of Chapter 6 of the Act, a council has the power to deal with its public land, including by way of agreements for licence. There is no suggestion that the Agreement falls foul of any relevant restriction found within Chapter 6 of the Act. Moreover, the Council has the general power to contract in connection of the exercise of its functions. In my opinion, the Council had the power to enter into the Agreement with Trackcorp which included the provision requiring Trackcorp to pay track hire fees each year throughout the term of the Agreement. I do not accept the asserted basis of the claim for restitution, and that claim must therefore fail.
Conclusion
For the above reasons, Trackcorp has failed to establish any of its claims to relief. Accordingly, its Further Amended Statement of Claim should be dismissed with costs.
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Decision last updated: 30 May 2014