Ardee Pty Ltd v. Collex Pty Ltd [2001] NSWSC 836

[2001] NSWSC 836

Supreme Court of NSW|2001-09-28|Before: Palmer J

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Source facts

Court

Supreme Court of NSW

Decision date

2001-09-28

Before

Palmer J

Catchwords

Defendant's claim for relief under Frustrated Contracts Act refused.

Source

Original judgment source is linked above.

Catchwords

Defendant's claim for relief under Frustrated Contracts Act refused.

Judgment (106 paragraphs)

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CITATION : Ardee Pty Ltd v. Collex Pty Ltd [2001] NSWSC 836 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1675/00 HEARING DATE(S) : 9 to 11 July, 2001 JUDGMENT DATE : 28 September 2001

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PARTIES : Ardee Holdings Pty Ltd [Plaintiff] Collex Pty Ltd [Defendant] JUDGMENT OF : Palmer J

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COUNSEL : R.C. McDougall QC, John E. Robson [Plaintiff] R.T. McKeand [Defendant] SOLICITORS : Hallett & Associates [Plaintiff] Holman Webb [Defendant] CATCHWORDS : CONTRACTS - FRUSTRATION - SUPERVENING ILLEGALITY - Put and Call Option Deed entitling Defendant to call for contract for sale of land to itself or to nominee and entitling Plaintiff to require Defendant to enter into contract - Deed subject to condition that approval to Defendant's acquisition of land be obtained under Foreign Acquisitions & Takeovers Act, 1975 (Cth) upon conditions acceptable to it - Treasurer approves acquisition upon condition that options not exercised unless Defendant proceeds with development of waste management centre on different land - condition acceptable to Defendant - development consent to waste management centre later refused - Defendant cannot acquire land without committing breach of Foreign Acquisitions & Takeovers Act - Plaintiff exercises Put Option and seeks specific performance - whether Deed frustrated. CONTRACT - FRUSTRATION - DISCHARGE - Whether Option Deed wholly discharged or partially discharged - Defendant cannot acquire interest in land for itself without breach of Foreign Acquisitions & Takeovers Act but can exercise Call Option in favour of nominee third party without breach of Act - other benefits retained by Defendant - whether frustrated part of the Deed severable - whether performance of non-frustrated part of Deed would make as much commercial sense as performance of whole Deed - frustrated part of Deed held severable - Defendant discharged from performance pro tanto. FRUSTRATED CONTRACTS ACT - Payments by Defendant in consideration for grant of Call Option - partial frustration of Deed - Call Option cannot be exercised for benefit of Defendant but can be exercised for benefit of nominee - Defendant seeks order for repayment of option consideration under Frustrated Contracts Act - benefit lost to Defendant by partial frustration not a benefit which it really wanted or needed - other benefits retained by Defendant - prejudice to Plaintiff - adjustment of rights of parties not appropriate under s.12 Frustrated Contracts Act - discretionary considerations under s.15(1) - relief under Frustrated Contracts Act refused. Environmental Planning & Assessment Act 1979 - s.91, s.97 LEGISLATION CITED : Foreign Acquisitions and Take-overs Act 1975 (Cth) - s.5(1), s.12A, s.21A, s.25, s.26A Frustrated Contracts Act 1978 (NSW) - s.6, s.12, s.15. - Bank Line Ltd v Arthur Capel & Co [1919] AC 435 - Beaton v McDivitt (1987) 13 NSWLR 162 - BP Exploration (Libya) Co Ltd v Hunt (No 2) [1979] 1 WLR 783; [1983] 2 AC 352 - Codelfa Construction Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337 - Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 - Denny Mott & Dickson Ltd v James B. Fraser & Co Ltd [1944] AC 265 CASES CITED : - The Eugenia [1964] 2 QB 226 - Hirgi Mulji v Cheong Yue SS Co [1926] AC 497 - Khoury v GIO (NSW) (1984) 58 ALJR 502 - Penrith District Rugby League Football Club Ltd v Fittler (unrep. SCNSW, 8 February 1996) - Sargent v. ASL Developments Ltd (1974) 131 CLR 634 - Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 - Treitel "Frustration & Force Majeure" (1994) DECISION : Plaintiff's claim for specfic performance or damages refused; Defendant's claim for relief under Frustrated Contracts Act refused.

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1 By Summons filed on 8 March 2000 the plaintiff ("Ardee") seeks specific performance of a Deed of Put and Call Options dated 16 November 1998 between itself and the defendant ("Collex"). Ardee claims that it has duly exercised the put option under that Deed whereby Collex is obliged to enter into and complete a contract to purchase certain land owned by Ardee at Muswellbrook in New South Wales ("the Land"). Alternatively, Ardee seeks specific performance by Collex of the contract for sale of the Land which Ardee says came into existence upon its exercise of the put option. Alternatively, Ardee claims damages for breach of the Deed and of the contract for the sale of the Land. 2 By its Defence and Cross Claim Collex alleges that the Deed was discharged by frustration because performance became illegal under the Foreign Acquisitions and Take-overs Act 1975 (Cth) ("FATA"). Collex claims repayment of amounts paid by it to Ardee under the Deed and relief under Pt III of the Frustrated Contracts Act 1978 (NSW) . Alternatively, Collex claims that it has validly rescinded the Deed for breach by Ardee of a warranty by it contained in the Deed. Alternatively, if the Deed is not rescinded and is to be performed, Collex claims damages for breach of that warranty. The Defence and Cross Claim raised several other defences, none of which was pursued at trial. Facts 3 The material facts are not in dispute and may be shortly stated. At all relevant times Ardee has been the registered proprietor of a substantial parcel of rural land about four kilometres south of Muswellbrook. The Land is adjacent to the main northern railway line and to a road called Muscle Creek Road, which in 1998 was used by coal trucks hauling coal from nearby mines. By June 1998, Ardee had obtained approval for the subdivision of the Land into rural housing allotments of between one and two hectares. Work had commenced on the subdivision and a number of lots had already been sold off the plan. 4 Collex is, ultimately, a subsidiary of a French company, Vivendi SA. By June 1998 Collex had developed a proposal for the construction and operation of a putrescible waste management facility near Muswellbrook, called the Bells Ridge Waste Management Facility. The proposal involved the dumping of putrescible waste collected from Sydney into an abandoned open-cut coal mine located approximately 1.5km north-east of the town of Muswellbrook and the construction of an "inter-modal transfer station", where the containerised waste carried by rail from Sydney would be transferred to trucks for haulage to the site of the waste management facility. The favoured location for the inter-modal transfer station was adjacent to Ardee's Land, where the railway line and Muscle Creek Road intersect. 5 In June 1998 Collex lodged with the Muswellbrook Shire Council a development application for the inter-modal transfer station and for the waste management facility. The parties have referred to the subject of the development application as "the Landfill project" and I will, for convenience, adopt the same abbreviation. The development application met with strong and vocal opposition from a large section of the community in and around Muswellbrook. One of the leaders of that opposition was Mr Yore, the controlling director of Ardee. He saw the proposed development of the Landfill project as highly detrimental to the successful sale of Ardee's subdivision. Through his solicitors he protested to the Shire Council; he arranged for the distribution of 'flyers' drawing attention to the adverse impact which the development would have on living standards in the surrounding areas, and organised a petition against the development signed by hundreds of members of the Muswellbrook community. 6 On 11 September 1998 Collex's solicitors wrote to Ardee's solicitors suggesting that Collex might "be in a position to make some offer to achieve a commercial settlement" . On 16 November 1998 the parties entered into the Deed of Put and Call Options ("the Option Deed") and into a collateral Deed providing for nomination by Collex of another party to enter into the Option Deed in certain circumstances ("the Nomination Deed"). 7 Recital B of the Option Deed provides that "Ardee has agreed to sell and Collex has agreed to buy the Land and the parties have agreed that the transaction shall proceed by way of a call option and a put option as set out in this Deed" . The Land is defined as the land comprised in Folio Identifier 31/611506 and 32/611506, subject to deletions therefrom of certain lots in the subdivision which Ardee is entitled to sell until such time as either the put option or the call option is exercised. 8 By clause 2.1 of the Option Deed, Ardee grants to Collex or its Nominee (as defined) the option to acquire the Land upon the terms of the Option Deed, in consideration of an option fee of $100,000 ("the Call Option"). By clause 7.1, Collex grants to Ardee the option to require Collex to acquire the Land upon the terms of the Deed ("the Put Option"). By clause 9 the purchase price of the Land is $1,500,000, subject to adjustments and to deductions of the net proceeds of sale received by Ardee for any lots in the subdivision sold by it prior to exercise of the Put Option or the Call Option. 9 By clause 4.1 of the Option Deed Collex agrees to pay defined Outgoings in respect of the Land every month until the earlier of completion of the contract for sale of the Land to Collex, if the Call Option is exercised, or until that lapse of the Call Option. By clause 2.3, the option fee and the outgoings paid by Collex are to be forfeited to Ardee if neither the Put Option nor the Call Option is exercised. If either Option is exercised, the option fee is to be the deposit under the contract for sale thereupon coming into existence. 10 It is now necessary to set out the provisions of the Option Deed which will require closer consideration. They are as follows: "3. FIRB CONSENT 3.1 This Deed is subject to the condition within 90 days of the date of this Deed that: (a) Collex receives notice from the Australian Government to the effect that there is no objection to the acquisition of interests in the Land under the Australian Government's foreign investment policy, such notice being unconditional or, if conditional, imposing conditions which are acceptable to Collex; or (b) the period (including any extension of the period under an interim order) under Foreign Acquisitions and Takeovers Act ("FATA") during which the Treasurer may make an order under section 21A of FATA prohibiting the acquisition elapses without such order being made. 3.2 Collex undertakes to promptly give notice under FATA and the parties each agree to use all reasonable diligence to procure consent to such acquisition. 3.3 If the above condition is not satisfied either party may rescind this agreement by notice in writing effective forthwith.

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… 5. EXERCISE OF CALL OPTION 5.1 The Call Option may be exercised at any time after 9.00am on 1 February 1999 but before 5.00pm on 31 December 2000 by Collex giving Ardee: (a) a duly completed and executed notice in the form of the Notice of Exercise of Call Option attached to this deed; (b) if Collex wishes to nominate a Nominee to be the purchaser under the Contract a duly completed and executed notice in the form of the Nomination Certificate attached to this deed; and (c) the Contract duly executed and dated by Collex or the Nominee as applicable. 6. EARLY LAPSE OF THE CALL OPTION 6.1 The Call Option lapses and shall no longer be exercisable immediately on Collex giving written notice to Ardee in which Collex irrevocably undertakes to Ardee that it will not proceed with the Landfill Project. 7. PUT OPTION 7.1 In consideration for the undertakings herein by Ardee, Collex grants to Ardee the option to require Collex to acquire the Land on the terms and conditions contained in the Contract subject to the terms of this Deed ( the Put Option ). 8. EXERCISE OF PUT OPTION 8.1 Subject to clause 8.2, the Put Option will commence at 9.00am on the first to occur of (a) the date being 14 days after the last to occur of the following: (i) the date of exchange of the Northern Board Contract; and (ii) the date on which Collex obtains irrevocable authority from Waste Service to access their Transfer Stations in the Northern Waste Board region; and (iii) the date on which Collex obtains all Approvals for the Landfill Project; and (iv) the date on which Collex obtains a right of access to the Muswellbrook Coal Company Limited Land sufficient to operate the Landfill for a period of years and on terms reasonably satisfactory to Collex; and (v) 28 February; and (b) 31 January 2000 provided that if Collex gives an undertaking in the terms of clause 6.1 the Put Option shall not be exercisable. 8.2 The Put Option will expire on 14 February 2000 at 5.00pm if not exercised by that date. 8.3 The Put Option can only be exercised by Ardee serving on Collex duly completed and executed by Ardee: (a) a notice in the form of the Notice of Exercise of Put Option attached to this Deed; and (b) the Contract. 10. EXCHANGE OF CONTRACTS 10.1 On the exercise of either Option Ardee and Collex will promptly exchange a separate contract for the Land, in the form of the Contract. 10.2 Failure to exchange the Contract in accordance with clause 10.1 will not affect the validity of the agreement created by this Deed which will be deemed to be on the terms, covenants and conditions which would have been set out in the Contract. 11. NOMINEE 11.1 Collex by giving the Nomination Certificate to Ardee at the same time or any time before exercise of the Call Option may nominate one or more Nominees who will replace Collex under this Deed, subject to that Nominee or those Nominees accepting the terms and conditions of this Deed. 11.2 Collex hereby irrevocably and unconditionally guarantees to Ardee the performance of this Deed and the Contract by the Nominee. Collex guarantees to Ardee the payment of all money which Collex would have been obliged to pay if there had been no nomination. Collex will pay that money to Ardee on the due dates if required by Ardee to do so irrespective of whether the contract has been completed or title has been transferred to the Nominee provided that upon payment of all that money Ardee will transfer the Land to the Nominee in accordance with the Contract. … 14. WARRANTIES 14.1 Ardee warrants that: (a) it is the registered proprietor and beneficial owner of the Land; (b) there are no unregistered interests held or claimed in the Land or any part of the Land at the date of this Deed, except for the contracts referred to in Annexure C; (c) Annexures B and D are respectively true copies of the proposed plan of subdivision and the Council development consent; and (d) the Sales Prices are realistic appraisals of the value of the Lots. 14.2 Any breach of the above warranties by Ardee, its directors, spouses of the directors or its related body corporates (within the meaning of the Corporations Law) will entitle Collex to rescind this Deed." 11 The relevant provisions of the Nomination Deed are as follows: " 2. AGREEMENT TO NOMINATE 2.1 If the deed of put and call entered into between the parties on the same date as this deed ("the Deed of Put and Call") is terminated under clause 3 of that deed, then Collex undertakes that by notice in writing to Ardee within 30 days of the date of recision [sic] it shall nominate an Australian resident in which case: (a) Ardee and the Nominee shall forthwith enter into a Deed in the same terms as the Deed of Put and Call under which the Nominee shall be substituted for Collex; (b) Ardee shall be entitled to retain the Call Option Fee under the Deed of Put and Call as the Call Option Fee, and (c) Collex at the time of entering into the Deed pursuant to clause (a) must grant a guarantee to Ardee in such terms as Ardee may reasonably require securing performance by the Nominee of its obligations."

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12 In accordance with its obligation under clause 3.2 of the Option Deed, on 18 December 1998 Collex gave to the Foreign Investment Review Board notice under s.26A FATA of the proposed acquisition by it of the Land pursuant to the Option Deed, and sought confirmation that that acquisition was acceptable under the Act. By letter dated 21 January 1999, received by Collex on 25 January 1999, the Commonwealth Treasury advised as follows: "I am able to inform you that there are no objections to this proposal in terms of the Government's foreign investment policy on condition that the Options are only exercised if Collex Waste Management Pty Limited proceeds with the Landfill [project] . … Pursuant to s.25(1A) of the Foreign Acquisitions and Takeovers Act 1975, the Government considers that compliance with this condition is necessary to avoid the proposal being in conflict with the national interest. Section 25(1C) provides for substantial penalties for failure to comply with the above condition." 13 By an instrument dated 27 January 1999 the Minister for Urban Affairs and Planning ("the Minister") made a determination under s.91 of the Environmental Planning & Assessment Act 1979 in respect of Collex's development application for the Landfill project. The Minister's determination was to refuse consent due to the potential for the proposed development to introduce the grape pest, phylloxera, into the Hunter Valley region, to the detriment of the wine growing industry. 14 Collex received notice of the Minister's refusal of the development consent on or about 1 February 1999. The notice advised that if Collex was dissatisfied with the Minister's determination, s.97 of the Environmental Planning & Assessment Act gave a right of appeal to the Land & Environment Court exercisable within twelve months. There is no evidence that any such appeal was prosecuted and neither party has made any submission as to the effect of such right of appeal. The parties have conducted the proceedings on the basis that the Minister's refusal of development consent on 27 January 1999 prevented Collex from proceeding further with the development of the Landfill project. 15 Under clause 5.1 of the Option Deed, 1 February 1999 was the first day upon which Collex was permitted to exercise the Call Option. On 4 February 1999 Collex made a monthly payment of Outgoings pursuant to clause 4.1 of the Option Deed. Thereafter it made another nine monthly payments of Outgoings. 16 On 20 July 1999 Ardee's solicitor, Mr Hallett, wrote to Collex's solicitors a letter in the following terms: "Announcements have been made in various arenas that Collex is not to continue with its proposed development adjacent to Ardee Holdings' land. If indeed that is the situation, there is a mechanism within the Deed that could be activated to bring the relationship between our clients to an end. That of course would permit Ardee Holdings to continue to pursue its subdivision and relieve Collex from paying funds to Ardee Holdings thereafter. We acknowledge that Ardee Holdings does not now have the right to call upon Collex to act in that manner, nevertheless we ask if you might seek instructions from your client as to its intentions, and if indeed it wishes to bring the relationship to an end." 17 On 2 August 1999 Mr Hallett had a telephone conversation with Mr Berry, a director of Collex who was also acting as its solicitor. Mr Hallett referred to his letter of 20 July 1999 and wanted to find out what was happening. Mr Berry told him that Collex wished "to keep its options open" for at least two months as to whether to acquire the Land. In cross examination, Mr Berry said that, amongst other matters, Collex was considering advice as to the prospects of success of an appeal to the Land & Environment Court against the Minister's refusal of development consent. Mr Berry conceded that as at July 1999 and up to February 2000, as far as he was concerned, Collex still regarded the Option Deed as on foot. Doubtless for that reason, Collex continued to pay monthly instalments of Outgoings under the Option Deed up to November 1999. 18 On 14 February 2000 Ardee served on Collex a notice exercising the Put Option and an executed copy of the contract provided for in the Option Deed. That was the last day upon which clause 8.2 of the Option Deed permitted exercise of the Put Option. 19 On 8 March 2000 Ardee filed its Summons for specific performance of the Option Deed. On 1 May 2000 Collex served a notice rescinding the Deed for alleged breach of the warranty contained in clause 14.1(d). Relevant provisions of FATA 20 Collex's primary submission is that the Option Deed was discharged by frustration because of supervening illegality arising under the provisions of FATA. 21 There is no issue between the parties that Collex is and was at all material times a "foreign person" within the definition of that term in s.5(1) FATA and that an acquisition by Collex of the Land pursuant to exercise of either the Put Option or the Call Option under the Option Deed was an acquisition of "Australian urban land" , as defined, to which s.21A FATA applied. 22 So far as is presently relevant, s.21A FATA provides: " (1) … (2) Where the Treasurer is satisfied that: (a) a foreign person proposes to acquire an interest in Australian urban land; and (b) the proposed acquisition would be contrary to the national interest; the Treasurer may make an order prohibiting the proposed acquisition. (3) Where the Treasurer makes such an order in relation to an interest in Australian urban land, he or she may also make an order in relation to: (a) a specified foreign person; or (b) a specified foreign person and specified associates, or the persons included in a specified class of associates, of that person; directing that that person shall not, or none of those persons shall, whether alone or together with any other or others of them acquire: (c) any interest in the land or other thing concerned; or (d) any such interest except to a specified extent.

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26 Section 25 applies where the Treasurer receives a notice of proposed acquisition under s.26A. So far as is presently relevant, s.25 provides: "(1) … (1A) Where the Treasurer is empowered to make an order under subsection … 21A(2) in relation to the acquisition, agreement, arrangement, issue or alteration specified in the notice, the Treasurer may, instead of making such an order, decide that the Commonwealth Government has no objection to the proposal specified in the notice, provided that the person or corporation complies with conditions that the Treasurer, when making the decision, considers necessary in order that the proposal, if carried out, will not be contrary to the national interest. (1B) Where the Treasurer makes a decision under subsection (1A), the person or corporation shall be given advice in writing of the decision, being advice that includes a statement of the conditions to be complied with, before the end of 10 days after the day on which the decision is made. (1C) Where: (a) the person or corporation is given advice in writing of the decision within the period of 10 days; and (b) the person or corporation carries out the proposal; the following provisions have effect: (c) if the person or corporation does not comply with the conditions - the person or corporation is guilty of an offence punishable, on conviction by: (i) in the case of a natural person - a fine not exceeding $50,000 or imprisonment for a period not exceeding 2 years, or both; or (ii) in the case of a corporation - a fine not exceeding $250,000; (d) the Treasurer may only make an order under subsection 18(4), 19(4), 20(3), 21(3) or 21A(4) in relation to the acquisition, agreement, arrangement, issue or alteration specified in the notice if: (i) the person or corporation is convicted of an offence against paragraph (c) of this subsection in relation to the conditions; or (ii) an order is made under section 19B of the Crimes Act 1914 in relation to the person or corporation in respect of an offence against paragraph (c) of this subsection in relation to the conditions."

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31 Mr McKeand, who appears for Collex, submits that on 27 January 1999, when the Minister for Urban Affairs and Planning refused development consent for the Landfill project, the Option Deed was brought to an end by operation of law, regardless of what the parties themselves may then or thereafter have believed or intended. This is so, he says, because on that day further performance of the Option Deed by either party, whether by exercising the Put Option or the Call Option, must necessarily have resulted in Collex carrying out the "proposal" for acquisition of an interest in the Land referred to in its s.26A Notice when it was impossible for it lawfully to comply with the condition imposed by the Treasurer under s.25(1A) FATA. If Collex acquired any interest in the Land by exercise of either Option when it could not proceed with construction of the Landfill project, Collex would commit an offence under s.25(1C) FATA. Performance by Collex of the Option Deed, or of the contract for sale arising thereunder, resulting in the inevitable commission of an offence under FATA would be a performance radically different from that which it undertook under the Option Deed, so that the Deed is discharged by frustration. Mr McKeand relies upon the principle as stated by Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, at 729: "[F]rustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do." 32 That principle has been adopted in Australia: Codelfa Construction Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337, at 357 per Mason J., and 376ff per Aickin J. (with both of whom Stephen and Wilson JJ agreed) and per Brennan J. at 407-409. 33 Mr McDougall QC, who appears with Mr J. Robson for Ardee, accepts that the test for frustration is as stated by Lord Radcliffe in Davis (supra). He says, however, that if the Option Deed on its true construction applies to the fact situation in which the parties now find themselves - as, he submits, the Deed does - then there is no room for the doctrine of frustration because the parties themselves have provided for what is to happen in these circumstances. He relies in this regard on the observations of Lord Reid in Davis (supra) at 720-721 and upon what was said by Lord Denning MR in The Eugenia [1964] 2 QB 226, at 239: "To see if the doctrine applies, you have first to construe the contract and see whether the parties have themselves provided for the situation that has arisen. If they have provided for it, the contract must govern. There is no frustration. If they have not provided for it, then you have to compare the new situation with the situation for which they did provide. Then you must see how different it is. The fact that it has become more onerous or more expensive for one party than he thought is not sufficient to bring about a frustration. It must be more than merely more onerous or more expensive. It must be positively unjust to hold the parties bound. It is often difficult to draw the line. But it must be done." 34 Mr McDougall submits that the Option Deed expressly provides for the situation which has arisen, in the following way. First, he says, it was obvious to both parties that the acquisition of the Land could not lawfully proceed without the approval of Treasury under the FATA and that such approval might be subject to conditions which were unacceptable to Collex. This is the genesis of the provisions of Clause 3.1 and, more particularly, the right to rescind the Option Deed afforded to both parties by Clause 3.3. On 25 January 1999 Collex received notice of the condition attached by Treasury to the acquisition of the Land; it could immediately have rescinded the Option Deed on the basis that that condition was unacceptable. It did not rescind under Clause 3.3 then or at any time thereafter. Likewise, when Collex received notice that the Minister had refused development consent to the construction of the Landfill project it could have rescinded on the basis that the Treasurer's condition was now unacceptable. Again, no such right of rescission under Clause 3.3 was ever exercised. Clause 3.3 of the Deed expressly provided an 'escape route' for Collex in the events which happened; Collex chose not to take that escape route. It follows, says Mr McDougall, that Collex must now face the contractual consequences of that choice. The Option Deed is not terminated by frustration but Collex cannot perform it without exposing itself to penalties under s.25(1C)(c) FATA. If Collex now chooses not to perform the Option Deed in order not to incur those penalties, it must pay damages to the Plaintiff for breach of contract. 35 Mr McKeand's answer to this submission is simple. He says that a right of rescission never arose under Clause 3.3 of the Option Deed because the condition imposed by the Treasurer was at all times acceptable to Collex. Collex did not wish to acquire the Land unless development of the Landfill project was to proceed. The real purpose of the Deed, as Mr McDougall himself put it in opening, was that Collex, having perceived in Ardee a potentially dangerous source of opposition to the Landfill project, bought Ardee's silence by agreeing to acquire the Land if the project went ahead. Because the condition attached to the Treasurer's approval was acceptable to Collex so that Clause 3.1(a) was satisfied, says Mr McKeand, neither party ever had a right to rescind under Clause 3.3. 36 In my opinion, that submission is correct. It is clear from a letter dated 23 September 1998 from Mr Berry to Mr Hallett, in which Mr Berry on behalf of Collex put the outline of the suggested Option Deed to Mr Hallett, that Collex's purpose in offering to acquire the Land was to "give your clients some profit from the subdivision if the landfill project goes ahead and otherwise to compensate them in the meantime for any delay" . Mr Berry proposed that the option which Collex would have to acquire the Land would lapse "if the proposed landfill becomes no longer possible or if the Landfill project is cancelled by Collex" . 37 While the terms of the Collex proposal underwent a number of changes before taking their final form in the Option Deed as executed, I am satisfied that Collex's predominant intention at all times was that it should acquire the Land only if the Landfill project proceeded. Mr Berry gave this evidence in cross examination: " Q: As at 16 November 1998 you believed and understood that if Collex succeeded in obtaining approval for its landfill project and carrying out that project, it was likely, through the exercise of one or other of the options, that Collex would also become the owner of Ardee's land?

Ardee Pty Ltd v. Collex Pty Ltd [2001] NSWSC 836

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Judgment (106 paragraphs)

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