on Park Pty Limited (Plaintiff)
Country Garden Wilton West Pty Ltd (First Defendant)
Country Garden Australia Pty Ltd (Second Defendant)
Representation: Counsel:
R Newlinds SC/D Hughes/L Rich (Plaintiff)
MJ Darke SC/R Yezerski (First Defendant and Second Defendant)
These proceedings concern a large parcel of land (870 hectares) near Wilton, south west of Sydney. The land is currently rural, but is to be developed as part of the expansion of Wilton into a large satellite town.
The dispute about the land is between two large corporate groups which operate as land-owners and developers. Bradcorp Wilton Park Pty Ltd ("Bradcorp") is the owner of the land. In February 2017, Bradcorp entered into put and call option agreements over the land with Country Garden Wilton West Pty Ltd ("CG"). The aggregate purchase price under the option agreements was $297 million.
Bradcorp purported to exercise the put option early in December 2018, but CG refused to execute the contract of sale, on the ground that conditions precedent ("CPs") to the exercise of the put option had not been satisfied. Bradcorp claims damages of more than $50 million from CG for alleged repudiation of CG's contractual obligations.
Call option fees of $29.7 million have been paid by CG. In accordance with the option agreements, $9 million has been released to Bradcorp. The remaining $20.7 million is held by HWL Ebsworth, the solicitors for Bradcorp on the transaction, as stakeholder. The parties are also at issue about what should happen with these fees. Bradcorp claims it is entitled to retain them as part of its damages, even if it is not entitled to damages for repudiation. For its part, CG claims that it is entitled to recover the fees.
These proceedings were begun on 11 December 2018 by Bradcorp as plaintiff. CG was the first defendant. The second defendant was Country Garden Australia Pty Ltd ("CGA"). It is another company in the same corporate group as CG and is sued as guarantor. CG and CGA have at all times been commonly represented and I will not refer to CGA separately in the balance of this judgment except where it is necessary to do so.
After the proceedings were under way, Bradcorp sought to proceed with the sale, specifying 18 December 2018 as the date for completion. CG did not tender the purchase price, maintaining that the option had not been validly exercised. In January 2019, CG's solicitors formally demanded repayment of the option fees.
In April, Bradcorp asserted that CG had repudiated the agreements and purported to terminate them. CG contended that Bradcorp's purported termination was unjustified (even if, contrary to CG's primary position, the CPs had been satisfied) and was itself a repudiation of the agreements. CG then purported to terminate the agreements (if they were still on foot).
Bradcorp then amended its Summons and Commercial List Statement to claim damages for repudiation. HWL Ebsworth was also joined as third defendant. A cross-claim was later filed for CG seeking recovery of the option fees from HWL Ebsworth and Bradcorp. HWL Ebsworth entered a submitting appearance, and has taken no part in the proceedings.
The hearing took place over six days between 29 July and 7 August. In final submissions, an issue emerged about CG's claim to recover the option fees. Counsel for Bradcorp contended that even if its purported exercise of the option was invalid, or the purported exercise of the option was valid but Bradcorp had not been entitled to terminate, Bradcorp was entitled to retain the option fees. Counsel for CG responded with claims that CG was so entitled under the option agreements, or alternatively, was entitled to damages representing the value of the option fees.
Disputes arose about whether these rival contentions had been pleaded, or fully pleaded. There was also a dispute about whether Bradcorp had adequately pleaded all of the bases for repudiation upon which it sought to rely in submissions. Eventually it was agreed between the parties that both would be allowed to make amendments to raise the arguments which they wished to raise. The parties agreed a timetable for revised Commercial List Statements and Responses to be filed on Bradcorp's claim and CG's cross-claim, and for supplementary submissions. This has now been done. The last submissions were lodged on 16 September.
Bradcorp now claims damages representing the difference between the sale price of the property under the option agreement and current market value. Bradcorp also seeks orders forfeiting the call option fees, on the basis that the fees would be counted towards Bradcorp's damages if Bradcorp's repudiation claim is successful. But Bradcorp also seeks orders forfeiting the fees even if its repudiation claim fails. CG's cross-claim seeks orders for the repayment of the option fees, or in the alternative, damages in the same amount.
[4]
Issues for determination
The first question in the proceedings is whether the put option was validly exercised. The option was subject, relevantly, to three CPs. It is common ground that unless all three were satisfied, Bradcorp was unable to exercise the option.
The first condition (referred to in the evidence as the "Rezoning CP") related to the zoning of the property. At the time the option agreements were entered into, the land was still zoned for rural use but Bradcorp was seeking to have it rezoned. The first condition required that the land be rezoned so that at least 5,350 residential lots could be produced by subdivision. The land was rezoned in November 2018. The issue between the parties is whether the rezoning satisfied the minimum lot requirement specified in the Rezoning CP.
The second condition (referred to in the evidence as the "Mining CP"), concerned an existing mining lease which extended under the land. The condition required that certain rights under the lease (in effect, rights to conduct mining under the land) be surrendered. That happened, but the steps to make it happen only took place at the last minute. The dispute is whether, having regard to the terms of the option agreements, it happened in time.
The third condition is referred to in the evidence as the "Access CP". As its name suggests, this condition concerned access to the property from the Hume Motorway, which passes next to it. The parties are in dispute also about whether this condition was satisfied.
The next question concerns Bradcorp's purported termination of the agreements. CG's contention is that, even if the Court ultimately finds that Bradcorp was entitled to exercise the put option, CG's conduct did not amount to repudiation and Bradcorp was not entitled to terminate.
Finally, on Bradcorp's claim, there is a factual issue about damages. The experts called by Bradcorp and CG disagree about the current value of the land. The difference between them narrowed somewhat in the course of the proceedings, but is still $80 million.
The remaining issues in the proceedings concern the put option fees paid by CG. As already noted, CG claims that it is entitled to recover the option fees as a debt or under a claim for damages; on the other hand, Bradcorp contends that it is entitled to retain them.
[5]
The land and the proposed development
Bradcorp has owned the land since 1999. It is located about 80 kilometres south west of the Sydney CBD, where the main south western road, the Hume Motorway, passes over a sandstone plateau which is intercut by deep gorges carved by the Nepean River and its tributaries. The land lies just north of the highway interchange where the Picton Road crosses over the Motorway. The township of Wilton is about 2.5 kilometres east of the interchange.
The land forms part of what is known as the Wilton Growth Area, which is one of a number of what are called Sydney Region Growth Centres. These are areas that have been identified by the State Government as locations for development to accommodate Sydney's increasing population. The policy is reflected in the State Environmental Planning Policy (Sydney Region Growth Centres) 2006 ("Growth Centres SEPP").
The Growth Centres SEPP is a dynamic planning instrument. As new growth centre areas come on line, the SEPP is amended to cover them. Existing environmental planning instruments cease to apply, and the SEPP prescribes the zoning and land use rules which will apply, but (subject to some exceptions) the local council is specified as the consent authority. In effect, the ground rules are laid down at State Government level in the SEPP and the land is then passed back to the local council, as consent authority, to regulate the actual construction of the development.
The plan for the Wilton Growth Area is that new town precincts will be developed around the existing township of Wilton. In this way, the existing township will become one precinct of a much larger town.
There are in total six new precincts planned. On one of these, known as Bingara Gorge, development has already begun, the land having been rezoned in 2005. The Bingara Gorge land is actually owned by Bradcorp but is being developed by another developer, Lend Lease. Pursuant to contractual arrangements between Lend Lease and Bradcorp, for all practical purposes Lend Lease controls the land.
The land in question in these proceedings constitutes one of the undeveloped precincts, known as "Wilton North" (it is also referred to in places as "Wilton West"). To the south of the land, another precinct, known as "Governor's Hill", will be developed as the new Wilton town centre. Another undeveloped precinct, known as Wilton South East, lies to the south of Wilton. Most of the land in that precinct is owned by another major land developer, Walker Corporation.
A satellite photograph of the area is reproduced below. Wilton North is shown with a yellow boundary at the top of the photograph and marked "Bradcorp Holdings". To its south is Governor's Hill, edged in pink. To the south-east of Wilton North, on the other side of the Motorway, is Bingara Gorge, edged in blue. South of the Bingara Gorge land is the existing township of Wilton and then the Walker Corporation land, edged in green, in Wilton South East.
Passing through the Wilton North land from north-west to south-east is the Maldon-Dombarton rail corridor which has been set aside for the possible future construction of a rail line. Its boundaries (where they cross the Wilton North land) are shown in white.
The Nepean River Gorge forms the western, north-western and northern boundaries of the land. To the north east and the east, the land is bounded by the Allens Creek Gorge (Allens Creek - also known as Moolgun Creek - flows into the Nepean River at the north-eastern corner of the land).
On its northern, eastern and western sides the land thus forms a bluff above the gorges. The land on the top of the bluff is relatively flat and has largely been cleared. It remains heavily treed around the edges and in the gullies which cut into the bluff.
The Wilton North development is a large one. It will involve the construction of over 5,000 homes. There is also to be a school, shops and other commercial premises. The public amenities will include a community centre, lakes and playing fields. The northern, eastern and western sides of the land will consist of an environmental conservation area to protect the existing bushland.
[6]
Contract terms
The Wilton North land comprises five separate titles. There are two formal option agreements between the parties. One concerns four of the parcels of land, which are collectively known as "tranche 1". The other option agreement covers the other parcel of land, which is referred to as "tranche 2". The agreements are in substantially the same form. The parties agree that whatever conclusion is reached concerning the enforceability of the option under the tranche 1 agreement will also apply to the tranche 2 agreement. For the moment, therefore, I will refer only to the terms of the tranche 1 agreement.
The agreement was recorded in a deed styled "Put and Call Option Deed - Tranche 1", to which I will refer as the "Option Deed", executed in February 2017. An amending deed was executed in June 2018. I will refer to this as the "Option Amendment Deed".
The disputes in these proceedings have revealed deficiencies in the drafting of the Option Deed. But the parties agree that the difficulties must be dealt with by way of interpretation of the language the parties used in the Deed, however imperfect. I was not presented with any evidence about the way in which the Deed came to be drafted and there is no case for rectification. Nor is there any case based on misrepresentation or estoppel.
[7]
General structure of Option Deed
Under the Option Deed, the Grantor (Bradcorp) granted to the Grantee (CG) a call option over the land, and CG granted Bradcorp a put option over it. The Option Deed was structured so that the options would be exercisable sequentially. The first option in the sequence was CG's call option. CG was able to exercise the option between the Call Option Commencement Date and the Call Option Expiry Date. The Call Option Commencement Date was 28 May 2017. I set out the definition of the Call Option Expiry Date below. For the moment, it is enough to say that, as events turned out, the Call Option Expiry Date was 30 November 2018.
If CG did not exercise the Call Option, Bradcorp could then (subject to compliance with the terms of the Option Deed) exercise the put option. The Put Option Commencement Date was the day after the Call Option Expiry Date and the Put Option Expiry Date was one month later. As events turned out, the Put Option Commencement Date was 3 December 2018, being the first business day after the Call Option Expiry Date, and the Put Option Expiry Date was 3 January 2019.
Clause 20.9 dealt with dispute resolution. It provided:
If a dispute arises between the parties in relation to any matter other than payment of the Call Option Fee and whether or not the Call Option or the Put Option has been validly exercised, then before commencing litigation in relation to the dispute the matter must be referred to the chief executive officers or other senior officer of the respective parties for a period to 10 Business Days to seek to resolve the dispute.
Annexure E to the Option Deed was a form of Contract for the Sale of Land. The Deed provided that, upon exercise of either the Call Option or the Put Option, the Contract was to be binding upon the parties. They were also expressly required to proceed to execution and exchange.
[8]
Conditions precedent
Clause 2.1 provided:
Conditions Precedent
Despite any other provision of this deed, the parties agree that the exercise of the Put Option and the Call Option is subject to this clause (unless the relevant Condition Precedent is waived by the Grantee in writing under clause 2.7, in which case, it will cease to apply).
The Conditions Precedent are as follows:
[there then followed the three conditions precedent, which are set out below in the relevant sections of the judgment]
Clause 8.1 provided that, despite any other provision of the Option Deed, Bradcorp could not exercise the Put Option until the CPs had been satisfied or had been waived by CG.
The scheme of the Option Deed was to place the responsibility for satisfying the CPs on Bradcorp. Clause 2.6 provided:
Satisfaction of Conditions Precedent
(a) Subject to clause 2.7, the Grantor must, at the Grantor's cost, diligently pursue, and use reasonable endeavours to satisfy the Conditions Precedent.
(b) If money is payable in relation to satisfaction of the Conditions Precedent, then that amount is payable by the Grantor.
(c) When the Grantor is of the opinion that a Condition Precedent has been satisfied it must give the Grantee notice with reasonable evidence of that.
The Option Deed contained an additional notice provision in clause 2.3(b):
The Grantor must keep the Grantee informed on a monthly basis (including within 5 Business Days after request in writing) in relation to its progress in satisfying each of the Conditions Precedent and promptly provide notice in writing to the Grantee on satisfaction of each of the Conditions Precedent.
The Option Amendment Deed added a new clause 2.2A:
The Grantee must, within 10 Business Days after the Grantor notifies the Grantee that a Condition Precedent has been satisfied, serve notice confirming whether or not it agrees that the relevant Condition Precedent has been satisfied.
[9]
Lapse of Options and rescission of Option Agreement
Clause 10.1 provided that if the Call Option was not validly exercised prior to 5.00 pm on the Call Option Expiry Date, then it would lapse. The Call Option Expiry Date was defined as the earlier of the Sunset Date and twenty business days after notice of satisfaction of the three CPs had been served on the grantee. The Sunset Date was defined as 30 November 2018.
Clause 2.5 was headed "Right to rescind - Sunset Date". It provided:
(a) If by the Sunset Date the Grantor has not given notice to the Grantee that all of the Conditions Precedent have been satisfied (or they have not all been waived in writing by the Grantee under clause 2.7), then at any time before exercise of the Call Option, the Grantee may give 20 Business Days' notice to the Grantor of its intention to rescind this deed unless all of the Conditions Precedent are satisfied or an alternate arrangement acceptable to the Grantee is agreed and documented within that period.
(b) If the Conditions Precedent are not satisfied or waived in writing under clause 2.7 or an alternate arrangement acceptable to the Grantee is not documented within that 20 Business Day period, the Grantee may rescind this deed (at any time until satisfaction of the outstanding Conditions Precedent) by notice in writing to the Grantor and clause 20.10 will apply.
(c) if the Conditions Precedent are not satisfied or waived or an alternate arrangement acceptable to the Grantee is not documented within a period of 25 Business Days after the Sunset Date then the Grantor may rescind this deed by notice to the Grantee given no earlier than 25 Business Days after the Sunset Date and clause 20.10 will apply.
Clause 20.10 was headed "Effect of Rescission". It provided:
Unless otherwise provided under this deed, if a party rescinds this deed or the Call Option expires before notice has been given that the Conditions Precedent have been satisfied then:
(a) the Call Option and Put Option cease to operate and may not be exercised;
(b) the Call Option Fee will be released to the Grantee by the stakeholder within 5 Business Days of the date of the rescission;
(c) the amount of the Call Option Fee released under clause 4.1(b)(i) must be refunded by the Grantor to the Grantee within 5 Business Days of receipt of the notice of rescission and request for refund;
(d) a party can claim for damages, costs or expenses arising out of a breach of this deed prior to the date of rescission; and
(e) a party will not otherwise be liable to pay to the other party any damages, costs or expenses, but
(f) the Grantor will be entitled to retain 100% of the interest earned in relation to the investment of the Call Option Fee.
[10]
Rezoning CP
At the time the Option Deed was executed, the Wilton North land was zoned "RU 1" for primary production under the Wollondilly Local Environmental Plan 2011 (Wollondilly LEP"). Bradcorp had made an application to have the land rezoned to permit the re-development. The State Department of Planning and Environment ("DPE") had carriage of the rezoning.
Clause 7.2 of the Wollondilly LEP provided for biodiversity protection. Clause 7.2(4) provided:
Development consent must not be granted to development on land to which this clause applies unless the consent authority is satisfied that:
(a) the development is designed, sited and will be managed to avoid any adverse environmental impact, or
(b) if that impact cannot be avoided - the development is designed, sited and will be managed to minimise that impact, or
(c) if that impact cannot be minimised - the development will be managed to mitigate that impact.
The clause applied to land identified as "sensitive land" on the Natural Resources - Biodiversity Map which was part of the LEP. None of the Wilton North land was identified as "sensitive land" on that map.
In its initial form, the Rezoning CP was defined as "achieve the Rezoning". The definition of rezoning referred to the "Total Land" which was the whole of the Wilton North land (that is, both tranche 1 and tranche 2). The definition relevantly provided:
Rezoning means the rezoning of all or part of [the Total Land] by the gazettal of an EPI or any other method effective at Law such that:
(a) in relation to residential uses: A is greater than or equal to 5,350 in the following formula:
A = (B - C - 10) x 70% / D
In this formula A represented the minimum number of homes which could be built. B was the part of the Total Land which was zoned for residential use; C was that part of the Total Land, if any, which was subject to a "Sensitive Land Overlay"; and D was the minimum lot size. The effect was that land subject to a Sensitive Land Overlay did not count towards determining the minimum residential yield.
The definition of Sensitive Land Overlay was:
Sensitive Land Overlay means land:
(a) subject to the Natural Resources-Biodiversity Map in Wollondilly Local Environmental Plan 2011 and identified as Sensitive land; or
(b) identified in any other mapping or specific clause under the Wollondilly Local Environmental Plan or any other EPI which:
(i) identifies the land as environmentally sensitive with respect to biodiversity; and
(ii) does not apply generally to all land within a zone,
and which operates to prevent Development Consent for uses permitted in the relevant zone from being granted unless the consent Authority is satisfied that the development will protect any environmental values of the land.
The purpose of deducting the area of any Sensitive Land Overlay was clearly to accommodate the possibility of planning restrictions, which might make the area zoned for residential use difficult or more expensive to develop.
In November 2017 DPE published a document entitled Wilton North Precinct Draft Precinct Plan. It set out details of the proposed development at Wilton North and invited comment from members of the public. The Plan contained an "indicative layout plan" which identified the proposed location of the school, playing fields, open space and shops. It is reproduced below:
One of the features of the Draft Precinct Plan was what it described as "a new approach to rezoning". This was explained in the following way:
We are exploring a new approach to rezoning for the Wilton North Precinct under the State Environmental Planning Policy (Sydney Region Growth Centres) 2006 (Growth Centres SEPP).
A proposed flexible urban development zone would apply to all land within the precinct, which is suitable for development. A flexible boundary clause will allow for some variation of the urban development zone boundary in specific locations after the rezoning. This approach to rezoning would allow appropriate areas to be rezoned before final details of the neighbourhood layout and the final boundary of the conservation area are determined.
The Draft Precinct Plan also included a draft zoning map and a further copy of the draft zoning map depicting "application of flexible zone boundary". The latter map is reproduced below:
The proposed zonings are colour coded as follows: Urban Development (blue); Environmental Conservation E2 (orange); Special Purpose Infrastructure S2 (yellow). The "flexible zone boundary" is edged in purple.
The idea of a "flexible urban development zone" under which land zoned for urban development could possibly be rezoned later to make it part of the conservation area, was a concern to CG. At the end of April 2018, CG wrote to Bradcorp about the CPs under the Option Deed. Concerning the Rezoning CP, CG referred to correspondence from Bradcorp about the Draft Precinct Plan. CG stated:
… based on our own calculations, if the rezoning were gazetted in the form of the current exhibited documents, the residential yield has the potential to fall short of what is required by the Tranche 1 Deed. Our calculations are attached at Attachment 1 for your reference. We note that the main reason for this is the "Flexible Zone Boundary" and understand that Bradcorp are working with the Department of Planning to have this removed.
However we believe the Rezoning Condition Precedent will be satisfied if the rezoning is gazetted in the form of the exhibited documents but subject to the following changes.
(a) the Flexible Zone Boundary that is proposed to be imposed as part of the rezoning is removed such that the land falling within the Flexible Zone Boundary will instead fall within the "Urban Development" zone; and
(b) there are no other changes between what has been exhibited and what is gazetted other than as set out in (a) above.
Following this, a new definition of "Rezoning" was substituted by the Option Amendment Deed in June 2018. The amended definition used the same formula for residential land yield as had been used in the original version of the Option Deed. But the definition of variables B and C were changed as follows:
Where, in accordance with the Structure Plan:
B = the aggregate area of that part of the Total Land (expressed in hectares) of:
(i) any combination of playing fields (but only including up to a maximum of 20 hectares), school, low density, medium density, local open space or by any other description, designation or label which is analogous to any of these; and
(ii) local roads which run through or are adjacent to these areas and where such roads are also adjacent to an area in paragraph (b)(i) of this definition, then half the area of such road; and
C = area of that part of the Total Land which is subject to any Sensitive Land Overlay, expressed in hectares (expected to be zero);
The new term "Structure Plan" was defined as follows:
Structure Plan means the indicative layout plan (or equivalent document) which issues with the Rezoning which the parties anticipate will resemble the plan at Annexure F.
Annexure F is reproduced below:
Annexure F was very similar to the "indicative layout plan" which had been published by DPE as part of the Draft Precinct Plan. Relevantly, part of the open space in the centre of the land was removed, so that there ceased to be an open space corridor from one side to the other. This was balanced by the hatchet-shaped area on the north-west side being changed from a playing field to open space. The conservation zone itself was unchanged.
In late September 2018 the Department published a document entitled Wilton 2040. This was subtitled "a plan for the Wilton Growth Area". It was described as a "high level framework for the Wilton Town Centre, its supporting residential neighbourhoods, infrastructure and commercial and employment areas". It set out principles to be applied and was said to be based on five "themes", namely: "place"; "landscape"; "land use"; "built form"; and "movement".
Each theme was addressed in more detail over several pages of the document. Text boxes identified, under the heading "planning principles", relevant objectives which planning for the precinct was to achieve.
Biodiversity issues were dealt with under the "landscape" theme. Under the heading "protecting and enhancing important habitats" the document stated:
Environmental conservation and protection are central to the sustainable development of Wilton. The Wilton area is home to a range of threatened and vulnerable species including koalas.
Under the heading "strategic conservation planning", the document continued:
The Department of Planning and Environment is undertaking strategic conservation planning in Western Sydney to support the delivery of housing, infrastructure and economic development. This work will deliver the Cumberland Plain Conservation Plan (CPCP), one of the largest conservation planning exercises ever undertaken in Australia. This will provide an enduring conservation legacy for Western Sydney.
Under the heading "supporting the Wilton Growth Area" it continued:
The CPCP will streamline environmental assessments and approvals under relevant State and Commonwealth legislation and conservation planning on a landscape scale. The final CPCP will be administered by both State and Commonwealth Ministers.
The CPCP will run concurrently with land use and infrastructure planning and precinct rezoning. It will seek to balance biodiversity impacts in the biocertified areas through a range of conservation measures. These include protection of high conservation value core and corridor areas, revegetation and renewal, protection using development controls and investment in species recovery initiatives.
Work to finalise the strategic biocertification and strategic assessment for the Wilton Growth Area is currently underway. A determination on development impacts and associated conservation measures may result in amendments to the urban development zone shown within Wilton 2040. The approved CPCP will inform the final urban development footprint in the future precinct plans and the conservation outcomes for the growth area.
Of critical importance for the present case was the following statement:
The Department has carried out field surveys to identify the biodiversity values in the Growth Area so that precinct plans can avoid or minimise biodiversity impacts.
Preliminary mapping of core biodiversity sites is available at Figure 10.
Figure 10 was on the following page. It is reproduced below:
The "planning principles" box on the first page of the "landscape" section stated:
Precinct planning must:
be consistent with the biodiversity conservation measures identified in the Cumberland Plain Conservation Plan
ensure stormwater management design minimises impact on the biodiversity values of conservation areas
support measures to protect primary koala habitat and corridors in perpetuity, and to restore land to augment and strengthen existing koala corridors
identify areas where development controls are required to reduce on-going threats to koalas
be in accordance with the approved strategic biocertification and strategic assessment.
On the next page of the "landscape" section the "planning principles" relevantly stated:
Precinct planning must:
ensure new/enhanced open space can meet the passive and active recreation needs of the future population and support biodiversity values
integrate waterway corridors, heritage items and high value landscape features to improve enjoyment and access to these places as part of an integrated open space network
….
In October 2018 DPE published the North Wilton Precinct Structure Plan. This was essentially in the same form as the structure plan attached to the Option Amendment Deed (Annexure F).
On 20 November, ten days before the expiry of the call option period, the Growth Centres SEPP was amended and the Wilton North Area was rezoned: State Environmental Planning Policy (Sydney Region Growth Centres) Amendment (North Wilton Precinct) 2018 (NSW). A map showing the area rezoned is reproduced below:
The zonings are colour coded as follows: Urban Development (red); Environmental Conservation E2 (orange); Special Purpose Infrastructure S2 (yellow).
Notice was duly given by Bradcorp on 21 November stating that this rezoning satisfied the Rezoning CP.
It is common ground that the red shaded area was sufficient to achieve the minimum residential yield specified in the Option Deed. But the contention for CG is that the area was reduced by a Sensitive Land Overlay.
CG's argument relies on cl 5.1A of the North Wilton Precinct Plan, which was inserted into the Growth Centres SEPP by the November 2018 amendment. That clause relevantly provides:
Consideration of development applications
(1) Development consent must not be granted to the carrying out of development on land within Zone 1 Urban Development unless the consent authority:
…
(c) is satisfied that the development is consistent with the North Wilton structure plans, and
The definition of "North Wilton structure plans" is:
North Wilton structure plans means the following:
(a) Wilton 2040: A Plan for the Wilton Growth Area dated 28 September 2018 and published on the Department's website,
(b) the North Wilton Precinct Structure Plan dated 11 October 2018 and published on the Department's website.
CG's contention is that the effect of cl 5.1A was to make the cross hatched area in Figure 10 in Wilton 2040, depicting "high value waterways and riparian vegetation areas", a Sensitive Land Overlay for the purposes of the Option Deed. The parties agree that if this was so, the Rezoning CP was not satisfied.
Both sides led evidence from town planning experts. Bradcorp's expert was Dr Gary Shiels and CG's was Mr Adam Byrnes. Mr Byrnes and Mr Shiels produced a joint report and at the trial gave evidence concurrently.
The environmental conservation area (coloured dark green) in the Structure Plan (which corresponds with the area zoned E2 for environmental conservation under the Growth Centres SEPP, as amended in November 2018) is roughly contiguous with the treed area around the northern, western and eastern parts of the land which can be seen on the satellite photograph at [25] above. Thus in Figure 10 where the cross hatched "high value waterways and riparian vegetation areas" extend beyond the conservation area, the cross-hatching actually covers land which has been cleared. This conclusion was confirmed by photographs taken by Dr Shiels, and was accepted by Mr Byrnes. The evidence does not suggest any reason why these particular areas of cleared land would have a high biodiversity value.
Both experts expressed views on whether development would be permissible in the cross hatched area extending beyond the conservation zone. Each expert's opinion coincided with the position taken by the party calling him. Dr Shiels considered that development was not prohibited or made conditional in that zone. Mr Byrnes took the opposite view.
The question before the Court is ultimately one of contractual interpretation: whether the "high value waterways and riparian vegetation areas" shown in Figure 10, to the extent that they extend beyond the conservation zone, formed a "Sensitive Land Overlay" within the meaning of that term in the Option Deed. That in turn requires the Court to consider whether the effect of cl 5.1(A)(1)(c) of the North Wilton Precinct Plan in the Growth Centres SEPP is to impose a condition or restriction on development which answered the contractual description. That issue is a question of construction of the SEPP and of Wilton 2040, to the extent the SEPP requires reference to it.
Thus the case involves question of construction of a commercial contract and, incidentally, of statutory planning instruments. It seems to me, with respect, that the experts' opinions on these questions cannot substitute for the Court's own analysis. Probably, strictly speaking, those opinions are not even admissible. As there was no objection, the experts' opinions are in evidence but I have treated them as in effect being submissions to which I should have regard in forming my own view on the questions of construction which arise.
Counsel for Bradcorp pointed out, as did Mr Shiels, that the language in Wilton 2040 concerning biodiversity in general, and Figure 10 in particular, lacked finality. Wilton 2040 referred to conservation planning for the area as being governed by the Cumberland Plain Conservation Plan, which was a plan which had not yet (and still has not) been published (in fact, according to Mr Byrnes, the scope of work for the preparation of the plan has not even yet been determined).
Mr Byrnes pointed out that the field surveys to which Wilton 2040 referred, and upon which Figure 10 was presumably based, were undertaken separately from the process of preparing the Cumberland Plain Conservation Plan. Even so, Wilton 2040 described the mapping of "core biodiversity sites" in Figure 10 as "preliminary". The fact that the "high value areas" depicted in Figure 10 included areas which have been cleared reinforces its tentative nature.
In my view it is significant that, in order to satisfy the definition of Sensitive Land Overlay in the Option Deed, the land in question did not only have to be identified as "environmentally sensitive with respect to biodiversity". It also had to be so identified in a "mapping or specific clause" under the relevant EPI, and that clause had to operate to prevent development consent from being granted unless the consent authority was satisfied of a particular matter, namely that the development would protect any environmental values the land might have.
The contractual context at the time the parties entered into the Option Deed included the then restriction in the Wollondilly LEP, clause 7.2(4). That clause operated by reference to cadastral maps published as part of the LEP ("map" is a term with a specific technical meaning in this context: see EPAA s 3.23; Growth Centres SEPP cl 6A. The clause contained an express prohibition on the grant of development consent unless the consent authority was satisfied of specified matters.
SEPP cl 5.1(A)(1)(c) is not in this form. It does not itself expressly refer to any map which would identify the area of land affected. Figure 10 in Wilton 2040, is a diagram rather than a cadastral map. It is also only one of several diagrams contained in the document.
Counsel for CG emphasised that cl 5.1(A)(1)(c) does contain an express prohibition on development consent being granted unless the consent is "consistent" with Wilton 2040 and the Structure Plan. In counsel's submission, that prohibition had to be given some effect.
So much may be accepted. But Wilton 2040 is not a conventional EPI like the Wollondilly LEP. It was a higher level planning document which contemplated that the use of particular areas of land could be subject to further clarification, or even alteration, over time. In assessing, for the purpose of cl 5.1A(1)(c) of the Wilton North Precinct Plan, whether a development application is "consistent" with that document, it is in my view necessary to take the nature of the document into account. The relevant comparison, on the face of it, is with the high-level principles identified in the document rather than details which are not spelled out or features which the document contemplated might change.
As we have seen, so far as Wilton 2040 dealt with biodiversity, it did so in a preliminary way. Figure 10 did not purport to be a final and exhaustive identification of all of the land within (or outside) the Wilton Growth Area having biodiversity values. Nor did Wilton 2040 itself prescribe what the eventual response to those biodiversity values should be if a consent authority was considering a development application. It expressly stated that the urban development zone shown in the document might be amended when the biodiversity investigations, undertaken as part of developing the Cumberland Plain Conservation Plan, were complete. But this was something which might happen in the future.
In my opinion, in this context, the preliminary identification of "high value waterways and riparian vegetation" areas in the cross hatched part of Figure 10 did not purport to be, and was not, an immediate statement that the whole of those cross hatched areas had biodiversity values which had to be protected. The identification of land (if any, beyond the conservation zone) requiring protection was a matter for the future. At most Figure 10 gave a general indication of the area where such land might ultimately be identified.
Nor did the planning principles stated in Wilton 2040 refer in terms to the consent authority being satisfied of any relevant matter. They were all stated at a much greater level of generality, and in a form where their application to a particular development application on a particular piece of land in the Wilton Growth Area (or outside it) left a great deal of scope for the consent authority's judgment. In particular, the planning principles did not specify that the development applications might only be approved if certain criteria were satisfied.
Furthermore, the requirement of consistency imposed by cl 5.1A(1)(c) does not just apply to Wilton 2040. It applies to the Structure Plan as well, and that Plan clearly specifies an urban development zone within which urban development is to take place. To treat Figure 10 as mandating the refusal or limitation of development where the cross hatched area overlaps with the urban development zone would bring Wilton 2040 into conflict with the Structure Plan.
The answer, of course, is that consistency is to be achieved by reference to the general principles in, or underlying, the two Plans, rather than by slavish adherence to the diagrams contained in them. If, for example, later investigation shows that part of the cross hatched area in the urban development zone has important biodiversity value, that might justify excising it from the zone or placing some other restriction on it. This would be consistent with both Plans, treating them as high-level documents. But it is quite different from saying that a restriction now exists in that cross hatched area.
For these reasons, I reject the submission that the cross hatched area in Figure 10 of Wilton 2040 constituted a Sensitive Land Overlay for the purposes of the Option Deed. The Rezoning CP was satisfied by the amendment to the Growth Centres SEPP on 20 November 2018.
[11]
Access CP
At the time of the Option Deed, there was no direct access between the Hume Motorway and the Wilton North land. Access to the land was from the Governor's Hill land, or from the Bingara Gorge land via a single lane bridge known as the Niloc Bridge. The Niloc Bridge crossed the Hume Motorway and allowed access via a gravel road or track between the Bingara Gorge land and the Wilton North land. Access to the bridge was controlled by Lend Lease; there was a locked gate on the Bingara Gorge side of the bridge.
Prior to entry into the Option Deed, Bradcorp provided CG with an information package concerning proposed access to the land. Under the heading "summary of existing approved access" it recited that the original master plan for development of the site, following the State Government's call for land owners to nominate sites in October 2011, proposed that initial access arrangements be via a "spine road" (to be known as Fairway Drive) running from the southern to the north western side of Bingara Gorge, and extending, over the existing Niloc Bridge, into Wilton North. This had been "endorsed and supported" by Transport for NSW, RMS and Wollondilly Shire Council.
The information package then recounted:
After considering a number of access options, Bradcorp developed a concept for an additional ramp off the Hume Highway (southbound) to connect with the existing Niloc Bridge which provides direct access to landholdings west of the Hume Highway.
The concept involved two stages. The first stage involved a southbound off-ramp which would connect with Fairway Drive just on the Bingara Gorge side of the Niloc Bridge. This would give access across the existing single land bridge. The second stage, which would be implemented once Wilton North had reached three thousand dwellings, involved the construction of a second bridge immediately south of the Niloc Bridge, so as to give two lanes for cars to cross (one in each direction) together with a bicycle and pedestrian crossing on the southern bridge. The information package contained pictures of the proposed development. One is reproduced below (it looks south so that the new bridge is at the top of the picture).
Under the Option Deed the Access CP was as follows:
(c) Access: in addition to the access route to the Property through Bingara Gorge, when the following is satisfied;
(i) either:
(A) agreement from the RMS and, if required, agreement from the local Council has been obtained to build:
(1) an exit ramp off the Hume Highway (southbound) to connect the existing Niloc Bridge which provides access to the Property west of the Hume Highway, and
(2) a second bridge parallel to the existing Niloc bridge, and
(3) a north bound on ramp from the Property to the western side of Hume Highway
(together the "Alternate Access"); or
(B) the land for that Alternate Access is rezoned SP2 - Infrastructure under the Wollondilly Local Environmental Plan 2011 or State Environmental Planning Policy (Sydney Region Growth Centres) 2006 (or similar zoning) to the extent it does not currently have that zoning; or
(ii) another similar vehicular access to the Property is approved by the relevant consent Authorities which is acceptable to the Grantee. While the Grantee must act reasonably in relation to considering whether access under clause 2.1(c)(ii) is acceptable, it may have regard to its own particular requirements for marketing and its proposed display gallery.
The Option Deed also made provision for work on access to the Wilton North property to be brought forward at CG's option. Clause 2.3 relevantly provided:
Payment for work to bring forward planning for Alternate Access
(a) If the Grantee agrees to fund the relevant work, then;
(i) the Grantor must commence and (to the extent possible) complete the planning and design work, and seek to obtain the relevant approvals from Authorities to build the Alternate Access or other access acceptable to the Grantee under clause 2.1(c)(i) or 2.1(c)(ii) promptly after the date of this deed; and
(ii) the Grantee must reimburse the relevant cost of this work to the Grantor within 10 days after written request from the Grantor attaching copies of relevant invoices.
(b) The Grantor must keep the Grantee informed on a monthly basis (including within 5 Business Days after request in writing) in relation to its progress in satisfying each of the Conditions Precedent and promptly provide notice in writing to the Grantee on satisfaction of each of the Conditions Precedent.
The definition of "Authority" was:
Authority includes:
(a) any government in any jurisdiction, whether federal, state, territorial or local;
(b) any provider of public utility services, whether statutory or not; and
(c) any other person, authority, instrumentality or body having jurisdiction, rights, powers, duties or responsibilities over the Land or any part of it or anything in relation to it (including the Insurance Council of Australia Limited).
In August 2017, DPE published a document entitled Wilton Growth Area Interim Land Use and Infrastructure Implementation Plan. As its name suggests, the document set out DPE's plans for determining the land use and building the necessary infrastructure for Wilton North. One of the priorities identified in it was to investigate a connection to the Motorway in the area of the Niloc Bridge.
The terms of the Access CP definition were not altered in the Option Amending Deed of April 2018. The structure plan (Annexure F) did show arrows depicting the off-ramp and the bridge, but that was all.
This off-ramp and bridge issue was taken up by a transport working group which included representatives of DPE; Roads and Maritime Services ("RMS"); the Wollondilly Council; and Bradcorp, among other land owners. As part of the process DPE commissioned a consultancy firm known as Urbis to report on the options. Urbis' report was completed in June 2018. It described Bradcorp's proposal (as reflected in the master plan) and set out various alternatives. One of these was called "potential optimised solution 2".
Potential optimised solution 2 was set out on a page of the report which included a brief description of the proposal and "key findings" about its advantages. The page also included a diagram depicting the proposal. One of the problems Urbis identified with Bradcorp's proposal was that RMS considered that the retention of the Niloc Bridge might involve extra cost to the State in maintenance and replacement. The advantage in potential optimised solution 2 was that it "mitigated the risk" of retaining the existing bridge. Instead, the bridge was to be demolished and replaced by a new three-lane bridge. The diagram on the page of the Urbis report is reproduced below.
The image shows the new bridge constructed at the south of the old bridge rather than exactly where the existing Niloc Bridge is.
A meeting to discuss transport issues took place on 6 July 2018 between representatives of DPE, RMS, Bradcorp, the other land holders, and the Council. On 9 July DPE wrote to RMS as follows:
I am writing to you to confirm that following the recent detailed investigation and assessment undertaken jointly by RMS and the Department to resolve outstanding issues related to the future arterial road network in the Wilton Growth Area. As a result of this work, the Department is endorsing the "Potential Optimised Solution 2" as contained in the attached Urbis report.
…
The preferred solution includes the removal of the Niloc Bridge and its replacement with a new overpass for pedestrians, cyclists and vehicles.
The attached strategic road and rail network map provides high level details of the elements of this preferred solution. It is proposed to include this map in the Department's "Wilton 2040" document (which will update the 2017 Wilton Interim Land Use and Infrastructure Implementation Plan).
It is further proposed to incorporate the preferred road network solution in the precinct plans for the Wilton North Precinct and the Wilton Town Centre Precinct. The draft Special Infrastructure Contribution (SIC) being finalised by the Department, will also use this preferred road network solution as a basis to identify and cost the roadworks that will be funded by the SIC. The SIC will include funding for the acquisition of land required for the Hume Motorway off-ramp in Bingara Gorge, on the eastern side of the motorway.
It would be appreciated if RMS could also endorse the preferred strategic road network for the purposes of moving forward with the development of the Wilton Growth Area.
As indicated, the letter enclosed a copy of the page from the Urbis report describing and depicting potential optimised solution 2.
On 18 July RMS responded:
Roads and Maritime Services recognises and appreciates the Department's collaborative approach to investigating and identifying a strategic road network for the growth area.
Roads and Maritime notes the Department's preferred network is that shown in the attached strategic road and rail network map. Roads and Maritime endorses the road aspects of this network.
Roads and Maritime recognises the funding arrangements are proposed to be resolved through the creation of a special infrastructure contribution plan. Roads and Maritime supports this approach in principle. Roads and Maritime also supports the delivery of infrastructure through works-in-kind arrangements, particularly for works which are only required to facilitate development.
The "strategic road and rail network map" attached to the letter is reproduced below. The proposed off-ramp (for south bound traffic) and the proposed on-ramp (for north bound traffic) are shown as red arrows.
On 7 August, Bradcorp entered into a deed styled "Wilton North Planning Agreement" with the Minister for Planning. The Agreement was what is known as a voluntary planning agreement under the Environmental Planning and Assessment Act 1979, s 7.4. Under the Agreement Bradcorp undertook to make defined development contributions and to undertake infrastructure works, including road works.
The road work included the construction of the off-ramp, its connection with Fairway Drive and a "duplicate bridge". It provided:
Works to be constructed to a design approved by RMS and generally in accordance [sic] the road work concept plans.
The relevant road work concept plan is reproduced below.
This road work concept plan is difficult to reconcile with Urbis' potential optimised solution 2. At one point counsel for Bradcorp suggested that the cross-hatching on the northern bridge represented demolition; this would, counsel seemed to suggest, take place after the new bridge was built, so there would be a period of time during which the off-ramp access would be connected to the existing bridge. But although the Wilton North Planning Agreement was entered into in August, it appears to have been in preparation for some time before that. An internal Bradcorp memorandum, written after a meeting with representatives of DPE on 22 June, referred to RMS not wanting to maintain the existing Niloc Bridge and for that reason wanting it demolished. The memorandum stated that Bradcorp received confirmation from DPE that the demolition of the bridge "would not require any amendment to our VPA, ie is covered in our VPA clause relating to a future SIC". Presumably the memorandum was referring to cl 8.1 of the planning agreement, referred to at [154] below, or some similar provision. I think the better view is that the concept plan simply reflected Bradcorp's original proposal before it was overtaken by DPE's adoption of potential optimised solution 2.
The reference in the Bradcorp memorandum to the "SIC" was to the special infrastructure contribution (see Environmental Planning and Assessment Act 1979, s 7.24) which Bradcorp would be required to make for the Wilton North Development. In September 2018 the DPE issued a document Proposed Special Infrastructure Contribution Wilton. This identified the proposed infrastructure works and the SIC which would be required from Bradcorp.
Among the roads specified in the Proposed Special Infrastructure Contribution Wilton was one identified as "sub-arterial from Niloc Bridge link to MDB crossing [in the central part of North Wilton] including North Wilton Hume Motorway ramp access". The road was depicted on a diagram in the form of a map which showed a bridge over the Hume Motorway in the general area of the Niloc Bridge but contained no more detail about its precise configuration.
When Wilton 2040 was published on 28 September it stated:
The strategic layout of the arterial road network for the Wilton Growth Area has been finalised and key items included in the draft SIC. This work has been informed by a traffic and transport study commissioned by the Department, and in consultation with RMS, Transport for NSW, and Wollondilly Shire Council.
As already noted, the Structure Plan published in October 2018 was relevantly the same as Annexure F to the Option Amending Deed. In particular, the plan depicted the Motorway access points with arrows (see [59] above).
There followed the rezoning effected by amendments to the Growth Centres SEPP in November 2018. But this did not fully reflect the draft zoning map in the Draft Precinct Plan of November 2017. The on-ramp area was rezoned SP2 but the off-ramp area (on the Bingara Gorge land) was not rezoned (compare the maps at [54] and [71] above). Its zoning was left as residential R2.
On 23 November, a week before the Sunset Date, DPE wrote to Bradcorp:
The final strategic road network for the Wilton Growth Area is now incorporated in Wilton 2040 (released on 28 September 2018), the draft Wilton Special Infrastructure Contribution (SIC), and the North Wilton Precinct Structure Plan (dated 11 October 2018).
Both Wilton 2040 and the North Wilton Precinct Structure Plan have been given statutory status through their inclusion in clause 1.4 of Appendix 15 of the Growth Centres SEPP (the SEPP) as "the North Wilton Structure Plans". Development of the Precinct must be in accordance with these plans. An amendment to the SEPP would be required to change either of these plans.
It is noted that under the current Residential R2 zoning of land within the Bingara Gorge area, the proposed roadworks for the Hume Motorway northern off-ramp would be permissible either under the Wollondilly Local Environmental Plan 2011, or pursuant to the provisions of the Infrastructure SEPP. Similarly, roads are permissible in the Urban Development Zone under the Growth Centres SEPP.
This letter was relied upon by Bradcorp in giving notice under the Option Deed that the Access CP had been satisfied. Notice was duly given on 23 November.
The parties agree that the letter was correct in stating that the proposed off-ramp area on the Bingara Gorge land could be used for roadworks. But it does not have to be. In fact, Lend Lease has lodged a development application which would see part of the proposed off-ramp area used for housing. In February 2019 Bradcorp wrote to Lend Lease offering to buy the off-ramp land. There has apparently been no response from Lend Lease to this offer.
Bradcorp had three alternative ways of satisfying the Access CP. It could obtain:
(1) agreement from the RMS to build the Alternate Access (subclause (c)(i)(A));
(2) a rezoning of the land to accommodate the Alternate Access (subclause (c)(i)(B); or
(3) approval from relevant consent authorities for, and acceptance from CG of, vehicular access to the property "similar" to the Alternate Access (subclause (c)(ii)).
Bradcorp relied in its contentions on the first two. Both concerned the Alternate Access, as defined. It was not suggested that approval for, and acceptance by CG, had been obtained for access "similar" to the Alternate Access.
It is convenient to deal first with the rezoning alternative. Bradcorp's contention is that the rezoning effected by the amendment to the Growth Centres SEPP satisfied this requirement.
The contentious question is the zoning in the area of the off-ramp. As already noted, the parties agree that the residential zoning in that area permits it to be used for constructing the ramp and connecting it to Fairway Drive. Counsel for Bradcorp acknowledged that the area was not zoned SP2 as the other road areas covered by the rezoning were. But counsel submitted that the permissive residential zoning was enough to satisfy the condition.
Many forms of zoning allow use for roads. A feature of the SP2 zoning, which in my view is critical, is that that is the only use which is permitted. That is not a feature of residential zoning.
The purpose of the Access CP was to give reasonable confidence that the necessary vehicular access could be provided as part of the development of the Wilton North land. I will deal with what the Alternate Access required in more detail below, but on any view it required use of the off-ramp area for access, via bridge, to Wilton North. The Option Deed must be construed with the knowledge that that area was not under Bradcorp's control and was effectively owned by Lend Lease.
In this context, what was required was a zoning which would in effect dedicate the land to building the required road works, not a zoning where Lend Lease would have a choice either to build the road works or to use it for building houses instead. In my view, Lend Lease's subsequent conduct is the very sort of thing the parties were seeking, by the zoning requirement, to avoid.
It follows, in my opinion, the rezoning alternative in subclause (i)(B) of the Access CP definition was not satisfied. For the off-ramp area, Bradcorp must rely upon an agreement from RMS (and, if necessary, the Council) to build the Alternate Access.
Bradcorp's contention in this regard focusses on Urbis' potential optimised solution 2. According to that contention, DPE's letter to Bradcorp of 23 November 2018 evidences the adoption of that solution by all interested parties, including RMS. Counsel for Bradcorp submitted that what happened involved "agreement from RMS" in the relevant sense. Counsel's primary submission concerning agreement from the Council was that it was not required for the purposes of subclause (ii). But if it was, counsel submitted that the Council had also given its "agreement". For its part, CG's contention was that an "agreement" was an enforceable contract. Counsel for CG submitted that this was the natural meaning of the term.
The term "agreement" was not defined and its meaning is not immediately clear (to say the least) from the terms of the Option Deed. The parties agreed that it was relevant for the Court to look at the statutory and regulatory regime for road building in this State in construing the Access CP.
I did not understand there to be any dispute that the Hume Motorway (including access works) is a "public road" governed by State Environmental Planning Policy (Infrastructure) 2007 ("Infrastructure SEPP") (see cl 94(1)). RMS has statutory power to carry out works on such a road and does not require any approval from any consent authority. Of course, RMS requires ownership of the land (which can be achieved by exercising its power of resumption) or at least consent from the owner to the land being used in that way. But this is a practical constraint not a legal one. Nor does RMS necessarily have to undertake the works itself. It can allow someone else to do so, on its behalf. Such a person may then, with permission from RMS, construct the road without further ado.
All of this assumes that the road works in question are done by RMS (or someone else on its behalf) on land owned or otherwise controlled by RMS. But frequently in large developments roadworks are done by private developers.
In evidence was a fact sheet issued by RMS concerning the process for undertaking private developments which affect NSW State roads. It was agreed between the parties that the procedures described in the fact sheet were common knowledge to both Bradcorp and CG as experienced property developers. They are therefore part of the factual matrix to which the Court may have regard in interpreting the Option Deed.
The fact sheet starts by referring to the process of obtaining development approval from a consent authority. RMS' role in that process is to consult with the consent authority; it does not itself give approval. Any requirements that it may wish to impose must be imposed by the consent authority through conditions of consent.
Once the development approval has been obtained, RMS decides whether to require a works authorisation deed ("WAD"):
A works authorisation deed is a legally binding contract between RMS and an external party, typically a developer. This deed authorises the developer to undertake roadworks on the State road network and/or traffic control signals.
The deed helps to ensure that the quality of the works meets RMS durability standards and aims to minimise the impacts to road users and the community during construction. Through the deed RMS provides the developer with the requirements and conditions under which they can do this work. The deed requires appropriate controls are in place such as insurances and security, to ensure the works are completed in a safe and timely fashion.
The fact sheet continues:
The works authorisation deed agreement is entered into after the DA has been approved and generally prior to the consent authority issuing a construction certificate for the development. The developer and RMS must agree on the scope of works, prior to the deed being finalised.
The final deed is signed by both the developer and RMS.
Returning to the Option Deed, the terminology it used was not uniform. Clause 2.3 spoke of undertaking planning and design work and seeking to obtain "approvals from Authorities". In the definition of the Access CP, subclause (c)(i)(A) spoke of "agreement" from RMS, and, if required, the Council. Subclause (c)(i)(B) spoke of rezoning, without referring to agreement or approval at all. Subclause (c)(ii) spoke of similar access being "approved by the relevant consent Authorities".
Counsel for Bradcorp submitted that the wording of the Option Deed supported its case. Counsel argued that Bradcorp's obligations under cl 2.3(a) to undertake planning and design works, and to obtain approvals, depended on CG first agreeing to fund those works. Counsel argued that it would be incongruous to read the definition of the Access CP so as, in effect, to require Bradcorp to undertake the same obligations without funding from CG. Counsel's submission was that both of these considerations should lead the Court to interpret the reference to "agreement from the RMS" as an expression of assent which was preliminary in nature.
An initial difficulty with this argument is the intractability of the contractual language. Clause 2.3 uses the term "approval from Authorities". Subclause (c)(ii) of the definition of the Access CP uses the term "approved by the relevant consent Authorities". The language is the same, and seems clearly to connote some sort of development approval process. It is hard to see how subclause (c)(ii) could be read down to mean some sort of preliminary and informal expression of assent. And if that is so the case for reading down the term "agreement with RMS" in subclause (c)(i)(A) simply because of the presence of cl 2.3 cannot be any stronger.
It is true that cl 2.3 subjected the performance of the access works specified in it to funding from CG, but cl 2.6 required Bradcorp to take reasonable steps at its own cost to satisfy the CPs, including the Access CP. There was an apparent tension. But I think the tension can be resolved.
The starting point in my opinion is to recognise that the Access CP could be satisfied simply by obtaining the zoning specified in subclause (c)(i)(B) of the definition. This would not have any actual approval or agreement to build the works, or even any preliminary planning or design for such works. Thus there was a pathway for Bradcorp to satisfy the Access CP without funding from CG.
The relative ease with which the zoning alternative might be satisfied was noted by counsel for Bradcorp. Counsel submitted that it was a reason for reading down the other alternatives. In particular, counsel submitted that it would be incongruous to read the requirement of an "agreement from the RMS" in subclause (c)(i)(A) in such a way as to make it more difficult to satisfy than the zoning requirement in subclause (c)(i)(B). But I do not see why that should be so. The Option Deed provided alternatives and there is no rule of interpretation which requires the Court to try to assimilate those alternatives to each other.
There is a further point about the tension in the Option Deed. It is that any tension was between cl 2.6 and cl 2.3. If CG had refused to fund works on access under cl 2.3, and had then made a claim against Bradcorp for failure to undertake works on the Access CP, it might have been an answer, in some circumstances, for Bradcorp to say that CG's failure to fund the works discharged it from any obligation under cl 2.6: cf Mackay v Dick (1881) 6 App Cas 251.
But it does not follow that the terms of the Access CP should in some way be read down or treated as discharged because of cl 2.3. Satisfying the Access CP (or persuading CG to waive it) was something Bradcorp had to do if it wanted the commercial advantage of being able to exercise the Put Option. There is nothing incongruous about saying that if Bradcorp wanted that advantage, it might have to pay for it.
This still leaves the problem of determining what the parties meant when they referred in subclause (c)(i)(A) to "agreement" from RMS (and if required, from the Council). It is not easy to understand. One problem is the difference between subclause (c)(i)(A) and subclause (c)(ii), which required "approval" from relevant consent authorities for "similar" vehicular access if the Alternate Access could not be obtained. On the face of it the parties went to the trouble of using different language, which referred specifically to RMS. But there seems no logical reason for any distinction.
Counsel for CG argued that, when regard is had to the RMS fact sheet, the meaning of "agreement from RMS" is clear. Counsel submitted that it referred to an agreement with RMS under a WAD. This would define the scope of works and authorise Bradcorp to proceed with the construction. Counsel submitted that such a WAD agreement would give the necessary certainty, consistently with the purpose of the Access CP, that the Alternate Access could be built.
Although counsel did not say so, presumably the WAD would not necessarily have to require the works to be done immediately. The agreement could provide that the building works were to be deferred or even made conditional on other events.
A WAD does fit the language of subclause (c)(i)(A). But the problem remains that there is no logical reason for a different regime to apply under subclause (ii). Furthermore a WAD is between the RMS and the developer. It does not help in identifying what the parties meant by an "agreement" with the Council, which is recognised as a possible further requirement under subclause (c)(i)(A).
In the end, it is not necessary for me to reach a final conclusion on the submission that "agreement" under subclause (c)(i)(A) required a WAD. I can deal with Bradcorp's contention that the Access CP was satisfied on the facts.
Bradcorp's contention is that RMS "agreed" with Urbis' proposed optimised solution 2. Any such "agreement" must be found in RMS' letter of 18 July 2018. Statements in subsequent DPE publications such as Wilton 2040 could not rise any higher, so far as RMS was concerned, than what it said in that letter.
Counsel for Bradcorp pointed out that by November 2018 Bradcorp had entered into the voluntary planning agreement which, so counsel submitted, obliged Bradcorp to construct the access in accordance with Urbis' proposed optimised solution 2. But this agreement was with DPE not RMS. Indeed cl 8.1 provided:
8.1 Without limiting any other provision of this Deed, Road Work is to be carried out in accordance with:
8.1.1 a design and specifications approved by RMS under the terms of a WAD;
8.1.2 any WAD for that Road Work,
8.1.3 any relevant Approval;
8.1.4 any other applicable law.
As noted, the information package supplied to CG before entry into the Option Deed in February 2017 recited that RMS had already endorsed Bradcorp's initial access proposal. It described this endorsement under a heading which referred to "approval". But counsel for Bradcorp did not rely upon this in their argument, and I can pass it by.
Although RMS was asked to endorse Urbis' proposal, its letter of 18 July 2018 in response was accompanied by its own diagram which did not refer to the Niloc Bridge at all. The "endorsement" was thus at a very general level.
Furthermore, there is nothing to suggest that RMS' endorsement was in some way binding on it. It was not directly enforceable as a WAD would have been. It was not even given in the context of a formal notification of requirements to be included in conditions of consent. There was nothing to stop RMS from changing its mind (as it had apparently done concerning Bradcorp's initial proposal).
Another point taken by counsel for CG was that the access described in Urbis' proposed optimised solution 2 differed from the definition of the Alternate Access. That definition referred to an exit ramp being connected to "the existing Niloc Bridge" and a second bridge being constructed "parallel to the existing Niloc Bridge". Urbis' solution involved the demolition and replacement of the Niloc Bridge with a new three-lane bridge.
Counsel for Bradcorp submitted that as a matter of substance Urbis' solution satisfied the definition of Alternate Access. According to counsel, it did not matter whether there were two bridges or one. The second bridge could be constructed "parallel to" the Niloc Bridge even if that bridge were then removed.
These submissions must be evaluated in the light of the principles stated by Bryson AJ in Comdox No. 24 Pty Ltd v Robins [2009] NSWSC 367 at [23]:
An option is said to be "a ticklish thing", and as much case law shows, if particular means for exercising an option are intended to be essential for effective exercise, compliance with the prescribed means is necessary if the stated contractual relationship is to result. It does not matter whether observing the prescribed means is objectively important: what matters is whether the words used show that they were intended to be essential. If the language used really means that it is a condition of effective exercise of option that the notice must be on blue paper and delivered by a man in a clown suit, pink paper or a woman in a pixie suit will not be effective. There must be compliance; there is no allowance for taking some other non-complying course, even if it appears to achieve the same result. I do not see any value in speaking of strict compliance or exact compliance; compliance is required, the fair meaning of the contractual requirement should be understood and given effect, and undue exactitude or the creation of difficulties which the language does not yield on a fair reading are not appropriate. It is inherently likely that requirements for compliance with provisions of the existing lease, for written notice of exercise of option and for exercise within defined periods are conditions compliance with which is essential. References to means of communication and matters of details are unlikely to be intended to be essential; but they are essential if it clearly appears that they are intended to be. The Court does not spell out conditions from slight or incidental references.
His Honour's statement emphasises that deciding what in substance is required to satisfy the conditions of the option, the Court is engaged in a process of construction. In the present case, the structure of the definition clause is relevant. In order to satisfy subclause (i) it is not enough that the access is "similar" to the Alternate Access as there defined. In such a case, subclause (ii) applies and approval of consent authorities and acceptance by CG must be obtained. It follows, in my view, that what is required to satisfy subclause (i) is a form of access which corresponds in a precise way with Alternate Access as defined in the clause.
In my view, that definition, on its true construction, required the retention of the existing Niloc Bridge. The new bridge to be constructed was to be a "second" bridge, not a new bridge replacing the Niloc Bridge. In passing, I note that in that plan (and in the rezoned map: see [71] above), the bridge appears to have been moved somewhat to the south of the existing bridge so that it is not even in the same place as the Niloc Bridge.
In my view the conclusion is clear from the language of subclause (i) itself. But if there were any doubt then I think my interpretation is confirmed by the information pack, which, it is agreed, formed part of the factual matrix and is available for the purposes of interpreting the Deed. The access arrangements depicted in the information pack may be "similar" to Urbis' solution but they were not the same.
It follows, in my view, that if any "agreement" was obtained from RMS in its letter of 18 July 2018, it was not "agreement to build the Alternate Access". Subclause (c)(i)(A) was not satisfied.
Counsel for CG submitted that Urbis' potential optimised solution 2 did not satisfy the Access CP for a further reason. Counsel argued that the introductory words of clause (c) required Bradcorp to provide access to the Wilton North land through Bingara Gorge and the consent for the construction of Fairway Drive did not do so. In view of the conclusions I have already reached I do not need to rule on this submission. I also do not need to rule on CG's further submission that "agreement" was required from the Council and on the facts there was no such "agreement".
For these reasons, I reject Bradcorp's contentions concerning the Access CP. In my view it was not satisfied.
[12]
Mining CP
At the time the Option Deed was executed, Endeavour Coal Pty Ltd ("Endeavour") had the benefit of a lease for mining coal under the Mining Act 1992 (NSW) which extended under the Wilton North land. The Mining CP provided for the surrender of rights under that lease to undertake works which had the potential to cause subsidence on the land. The CP was amended in the Option Amendment Deed. Relevantly, as a result of the Amendment Deed, it was possible to comply with the CP if:
the Mining Lease has been cancelled or surrendered in so far as it affects the Cancelled Lease Area by the relevant Authority and all administrative and other steps are taken such that the cancellation or surrender is effective at Law, including any conditions to the cancellation or surrender have been complied with to the satisfaction of the relevant Authority. However, if registration is required, then this condition is satisfied when the relevant document of the cancellation or surrender is provided to the Grantee in registrable form;
Bradcorp negotiated an agreement with Endeavour under which Endeavour agreed to surrender its rights in exchange for payment of $40 million. It is common ground that this arrangement complied with the requirements of the CP but the step of formally surrendering the lease was not taken until late November 2018.
Endeavour is a wholly owned subsidiary of South32 Limited, a publicly listed company whose headquarters are in Perth. The formal application for cancellation of the relevant rights under the mining lease was lodged on the afternoon of 23 November. The contact for the application was given as Narrelle Bevan, described as an "Administrator Tenement Manager" of South32, who was based in Perth.
As already noted, the Sunset Date under the Option Deed was 30 November. That was a Friday. The Option Deed required that, for a notice to be given on a date, it had to be given by 5 pm; otherwise the notice would only be deemed to have been given on the next business day (which was Monday 3 December). This resulted in a flurry of activity as, among other things, Bradcorp sought to effect the agreed cancellation of Endeavour's rights under the mining lease. The relevant legislation was administered by DPE (although of course it was a different area of the Department than that for which Bradcorp had been dealing for planning purposes).
Negotiations with the Department were carried out on Bradcorp's behalf by Mr Peter Grogan, whose job title was "General Manager - Commercial". In the course of the negotiations, Mr Grogan was informed by the Department that the cancellation would take effect when, following signature of the instrument of calculation by the Minister's delegate, written notice was given to the lease holder (this reflected s 126(4) of the Mining Act, set out at [173] below).
At 4:01 pm on 30 November Mr Grogan sent an email to the directors of Bradcorp reporting on his negotiations with the Department. He stated that he had been told that the application for cancellation and written notice of the cancellation would be "finalised today" and "sent to South32 and copied to us today". He said: "In those circumstances I believe the Mining CP has been met".
Mr Andrew Flannery of HWL Ebsworth was acting for Bradcorp on the CG transaction. Mr Brad Woodhouse, Ms Christine Covington and Ms Natalie Bryant of Corrs Chambers Westgarth ("CCW") were acting for CG. At 4.52 pm Mr Flannery sent an email to Mr Woodhouse, Ms Covington and Ms Bryant which gave notice that Bradcorp was of the opinion that the Mining CP had been satisfied. The email continued:
As reasonable evidence of that, I attach:
1. The application documents lodged for part cancellation and variation of the Mining Interest;
2. The Department has confirmed that the Cancellation has been processed.
3. In relation to the variation, Bradcorp is of the opinion that the Condition Precedent has been satisfied in the following way:
a. By its letter to DP+E dated 22 November 2018, Endeavour Coal Pty Limited requested a variation to the CLL in wording agreed with by Country Garden during the negotiation of the Deed of Variation in June this year. This is in the context of longstanding discussions with DP+E about how the CLL would be cancelled and varied to permit the Wilton North development to proceed without being impeded in any way by mining activities.
b. DP+E have approved the request. Wording has been agreed and final documentation is being settled for execution by the Minister's delegate.
c. However, importantly, the exchanges between South32 and the Minister confirm that the commitment from South32 will be accepted, implemented and enforced - and that the land shown Area 1, Area 2 and Area 3 will not be permitted to be used for any use which would cause subsidence.
Accordingly, as the relevant land will not be able to be used other than for first workings which will not cause subsidence, and given that this is clear and will be enforced by DP+E, Bradcorp is of the opinion that the condition precedent has been met.
The evidence does not identify precisely when the Minister's delegate signed the instrument of cancellation but by around 6pm at the latest it had been signed and the Department's computerised title system (known as "TAS") had been updated. At 6.06 pm a representative of the Department sent an email to Mr Richard Walsh of South32. Mr Walsh's job title was "Superintendent Brownfield Exploration". The email stated:
We confirm that the area sought for part cancellation in CCL767 has now been cancelled. Please see attached TAS dealing as evidence of part cancellation. A letter confirming the part cancellation will follow.
Please see attached varied conditions for CCL767, effective immediately.
Attached to the email were a copy of the instrument of variation as signed by the Secretary and a printed title dealing enquiry showing the application as having been determined and the variation as having been affected.
At 6.19 pm Mr Flannery (who had received a copy of the email) forwarded it to CG. At 6.45 pm Mr Walsh forwarded the email to Ms Bevan's email address, as well as to another colleague, Mr Anthony Holmes.
As already noted, Bradcorp purported to exercise the put option on Tuesday 4 December 2018. It was not until the following day, Wednesday 5 December, that the Department issued the formal confirmation foreshadowed in the email to Mr Walsh of 6:06 pm on 30 November. The confirmation took the form of a letter addressed to Endeavour, care of Ms Bevan, at the nominated postal address in Perth. It stated:
I refer to your request for the part cancellation of this lease.
In accordance with the provisions of Section 125(1)(a) of the Mining Act 1992, the Deputy Secretary, Division of Resources and Geoscience under delegation has cancelled that part of the lease described in the application lodged with the Division on 23 November 2018.
Cancellation of this area took effect on 30 November 2018.
The attached Endorsement Schedule should be placed with the original lease document.
At 3.15 pm DPE sent an email to Ms Bevan attaching the letter and stating:
Please find attached correspondence from Eddie Love, A/Director Titles Assessment following the Part Cancellation of Consolidated Coal Lease 767 (Act 1973).
As a reminder, please note the following regarding Partial Relinquishment Reporting requirements.
There is no dispute that the partial cancellation of Endeavour's rights under the mining lease complied with the terms of the Mining CP. The Mining CP was satisfied when the cancellation became "effective at law". The question is whether that happened in time.
The Mining Act, s 126, refers to the rights under a mining lease as an "authority". The section relevantly provides:
(3) The decision-maker is to cause written notice of the cancellation of an authority to be given to the holder of the authority.
(4) The cancellation takes effect on the date on which the written notice of the cancellation is given to the holder of the authority ….
The parties agreed that the cancellation became "effective at law" for the purposes of the Mining CP when written notice of the cancellation was "given" to Endeavour for the purposes of s 126(4). The parties were at issue, however, both as to when this happened and as to when the Option Deed required it to have happened.
[13]
When notice of cancellation was given
I will deal first with when notice of the cancellation was given. Bradcorp's contention was that notice was given at 6.06 pm when the Department's email was sent to Mr Walsh; or, alternatively, at 6.45 pm when Mr Walsh forwarded the Department's email to Ms Bevan. CG's contention was that service was not effective until formal notice was sent to Ms Bevan on 5 December.
Counsel for CG pointed to the statement in the 6.06 pm email that it would be confirmed. But this did not deprive the email of effect as notification. In my view the email contained all relevant information and was itself notice under s 126(3), if sent to the correct person.
Counsel for Bradcorp argued that the email to Mr Walsh was sufficient notification. Counsel submitted that the Court could infer that Mr Walsh was a South32 executive whose responsibility extended to receiving notice on Endeavour's behalf.
There is however no direct evidence to this effect. Essentially, all the Court has is Mr Walsh's title of "Manager Brownfield Development". Ms Bevan apparently worked in a department of South32 responsible for managing the group's mining tenements. There is no evidence that Mr Walsh was responsible for that department or otherwise had any power to act on behalf of Endeavour.
Endeavour must have a board of directors and a company secretary even if they are South32 employees. On the face of it, evidence could readily have been led from them identifying who has management responsibility for Endeavour's activities. In the absence of such evidence I am not prepared to draw any inference in Bradcorp's favour on this point.
There is no dispute that notice to Ms Bevan, whose name appeared on the original application for cancellation, would be sufficient. But counsel for CG pointed out that DPE's email reached her indirectly, on Mr Walsh's initiative. DPE did not ask for the email which it sent to Mr Walsh to be forwarded to anyone.
Counsel for CG submitted that forwarding the email to Ms Bevan did not count. The argument was that s 126(3) required an intention on DPE's part to transmit the notice to Ms Bevan.
All that s 126(3) requires is that a particular result, namely that the authority holder be given notice, be achieved; and that this result be "caused" by the secretary. In the ordinary use of language, causation may be indirect. Thus the notice may be (and usually will be) given to somebody else to be transmitted to the authority holder. There seems to me to be no reason why the giving of notice should be any less effective if the recipient sends it on to the person in fact authorised to receive it. That is what happened here.
Nothing in the legislation contradicts this. Once cancellation takes effect the authority holder commits an offence if it continues to conduct mining operations in accordance with the terms of the former lease (see s 5). The purpose of giving notice is to ensure that the authority holder is aware its authority to conduct works has ceased. That purpose is satisfied, in the case of a corporate authority holder, if the person authorised to receive notice in fact does so. How notice is conveyed makes no difference in achieving the statutory purpose.
For these reasons, I conclude that notice was given for the purpose of s 126(3) when Mr Walsh forwarded DPE's email to Ms Bevan at 6.45 pm. However, that is not the end of the debate and it is necessary for me to consider a further contention by Bradcorp concerning the timing of notice.
In final submissions, counsel for Bradcorp pointed out that there was no equivalent in s 126 to the provision in the Option Deed which deemed a communication received after 5.00 pm to be received on the following business day. Given my conclusions, cancellation was effective on 30 November 2018. Counsel built on this by submitting that as a general rule the law does not take account of fractions of a day. It followed, so the submission ran, that the cancellation was taken to have been effective for the whole of 30 November (that is, starting from 12 midnight on the night of 29/30 November).
In support of this submission, counsel relied on the judgments of Dixon CJ and Kitto J in Prowse v McIntyre (1961) 111 CLR 264 (at 270-1 and 274 respectively) and upon the judgment of Gibbs J in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 (at 466). Counsel also relied on the judgment of McDougall J in the Owners Strata Plan 76502 v Waterpoint Shepherd's Bay Pty Ltd [2015] NSWSC 1129.
Prowse concerned the limitation period for a personal injuries action, which was required under the relevant statute to be brought within six years after obtaining the age of majority (then 21 years). The plaintiff was born on 28 November 1930. The action was begun on 27 November 1957, the day before the 27th anniversary of the plaintiff's birth.
The plaintiff ultimately failed because of a common law rule concerning when a person obtains the age of majority. Dixon CJ quoted (at 270) a statement of the rule from Simpson on the Law of Infants (A H Simpson, A treatise on the law and practice relating to infants (3rd ed, 1909, London : Stevens and Hayes) at 3):
An infant attains majority on the completion of his twenty-first year, but, except where it is necessary for the purposes of the decision to show which of two events first happened, the law recognizes no fractions of a day, and therefore the year is regarded as completed on the first instant of the day before the birthday. Thus an infant born on the 1st February attains his majority at the first instant of the 31st January.
The rule is based on reasoning which includes the proposition that no account is taken by the law of fractions of a day. But, as Kitto J pointed out (at 273-274), the rule does not actually follow from that proposition. It is anomalous but too firmly entrenched to be reconsidered (see Kitto J at 272; Windeyer J at 281).
In terms, the rule only applies to the attaining of the age of majority. But furthermore, the proposition about parts of the day on which it is (incorrectly) based concerns the reckoning of time. As Windeyer J said (at 278):
A day has a significance for law in two ways: first, as a division of time, that is the space of time within which an event happened or is to happen, or something was done or is to be done: secondly, as a measure of the passage of time, a unit in a period of time. The distinction tends to become blurred because the passage of time is sometimes spoken of as itself an event, as if it were of the same order as an event that occurs in time. But this is misleading. The birth of a man is an event. His attaining twenty-one is not, in the same sense, an event. It is merely a way of saying that a certain period of time, twenty-one years, has passed since he was born.
This passage is consistent with the exception as stated by Simpson in which the rule does not apply where the order of events is in question. In my view there is no rule that an event which happens on a particular day is in some way deemed to occur at the beginning of that day.
Similar comments apply to Forster and Waterpoint. In each case the Court decided as a matter of construction that a period of days after an event extended until the end (i.e midnight) on the last day. That is not the issue here.
If Bradcorp's argument were correct, then had Endeavour carried on works under the mining lease until noon on 30 November it would retrospectively have committed an offence upon being formally notified of cancellation of the lease after 6.00 pm. This would be absurd and reinforces the conclusion which I have reached about the interpretation of s 126(4). In my view, the cancellation of the licence took effect for the purpose of s 126(4) when the email was forwarded to Ms Bevan at 6.45 pm on 30 November, and not before.
[14]
Timing for satisfaction of Mining CP
CG's argument was based on cl 20.10, which I have already set out at [44] above. It will be recalled that cl 20.10 provided that "unless otherwise provided under this deed" if the call option "expires before notice has been given that the conditions precedent have been satisfied" then Bradcorp was to be unable to exercise the put option. CG's contention was that the notice sent by Bradcorp at 4.52 pm on 30 November which stated that the Mining CP had been satisfied was invalid. Accordingly, on CG's contention, cl 20.10 meant that, as from 5.00 pm, the Put Option could not be exercised by Bradcorp (see subclause (a)).
Bradcorp maintains that the notice was valid even where (as I have found) the Access CP was not actually satisfied at the time that it was sent. Furthermore, Bradcorp disputes that cl 20.10 operated in the way CG contends. As I understood Bradcorp's contention, even if the notice was invalid it remained open to Bradcorp to exercise the Put Option.
Validity of notice: Counsel for CG put its argument two ways. First, counsel argued that cl 20.10 on its true construction required that the Mining CP actually have been satisfied at the time the notice was issued. Bradcorp argued to the contrary. On Bradcorp's contention, the notice was merely a statement of Bradcorp's opinion that the CP was satisfied. It did not matter whether the CP actually was satisfied or not.
CG's alternative argument was that the notice was invalid because Bradcorp had no opinion, or at least no genuine or reasonable opinion, that the Mining CP had been satisfied. CG's argument was that the terms of the Option Deed clearly required Bradcorp to be satisfied at the time the notice was given that the cancellation had been notified to Endeavour, and the evidence showed that Bradcorp did not believe this in fact happened; Bradcorp only understood that it was going to happen. CG also pointed out that no one from Bradcorp gave evidence on this point.
Dealing with CG's first argument, clause 20.10 spoke of giving notice "that the conditions have been satisfied". In my view the natural meaning of the language was that the condition must be satisfied in fact, as well as notice being given.
There is no doubt that cl 2.6(c) imposed an obligation on Bradcorp, once it formed the opinion that the condition precedent had been satisfied; to issue the notice. But this was not the only notice obligation in the Option Deed. Clause 2.3(c), as well as imposing an obligation on Bradcorp to keep CG up to date with its progress in satisfying the CPs, required Bradcorp to give a notice promptly "on satisfaction of" the CPs. While the structure and drafting are clumsy, this clearly created a separate obligation on Bradcorp. There was nothing in the language of cl 20.10 to confine the reference to notice under cl 2.6(c). The reference must be read in a way which accommodates both notice provisions.
If in fact a condition precedent was satisfied but Bradcorp did not realise it had been or did not actually think that it had been, Bradcorp would have no obligation to serve a notice under cl 2.6(c). But it would still have an obligation under cl 2.3(c). The latter clause simply depends upon satisfaction of the condition precedent and does not depend upon Bradcorp forming any state of mind about the matter. In my view this reinforces the natural meaning which I have ascribed to the language of cl 20.10 considered on its own.
These conclusions are supported by more general considerations. The purpose of the notice provisions was to inform CG (which would not necessarily have knowledge) of the satisfaction of the CPs. The obvious intent was that CG was to be given an opportunity to consider whether the CP was in fact satisfied (and possibly seek a ruling under the dispute resolution procedure if there was sufficient time to do so). But the effect of cl 2.1 and cl 8.1 is that the actual right to exercise the option depended upon whether the CPs were actually satisfied. I think it would be contrary to the scheme of the Option Deed if the parties' rights under cl 20.10 depended upon opinion or belief rather than the actual state of affairs.
Whether the CPs were actually satisfied might have been a complicated and contestable question. However, to allow the validity of the notice to depend upon opinion, would on any view have introduced still more complexity. Counsel for Bradcorp accepted that the fact that Bradcorp held the opinion could not in every circumstance mean an erroneous notice would necessarily be valid. Questions of good faith, and perhaps of reasonableness, could arise. On counsel's own admission, therefore, it would become necessary to draw an interpretation out of the notice provisions defining where legitimate error would end and illegitimate error would begin.
As we have seen, counsel for CG contended that such an issue arose on the facts of this very case. As well as questioning the genuineness of Bradcorp's belief, counsel pointed to the requirement of "reasonable evidence" in cl 2.6(c).
In my opinion, the very fact that Bradcorp's construction would allow such issues to arise shows how unattractive it is from a commercial point of view. On Bradcorp's construction, even if an erroneous notice were given, it would be necessary to conduct some further inquiry, which might involve a factual inquiry into Bradcorp's corporate state of mind, before the parties would know whether the notice was effective or not. It hardly needs pointing out that this sort of commercial uncertainty is something the Court should try to avoid when construing a commercial contract, especially in a transaction of the present type.
For these reasons, I conclude that Bradcorp's notice, being (as I have found) erroneous in its statement that the Mining CP had been satisfied at 4:52 pm on 30 November 2018, was invalid. I do not need to consider CG's alternative argument concerning the genuineness and reasonableness of Bradcorp's opinion.
Effect of clause 20.10: Counsel for Bradcorp faintly took a point about the use of the word "expiry" in cl 20.10. Counsel acknowledged that if (as I have found) valid notice for the provision of the Mining CP was not given by 5.00 pm, then the call option "lapsed" on 30 November, the Call Option Expiry Date. But counsel argued that the Call Option did not "expire" until 12 midnight. Counsel emphasised that the Call Option Expiry Date (as events happened) was 30 November, not any particular time on that date.
This construction is commercially unattractive. It would result in a seven hour period between 5.00 pm and midnight during which the Call Option had "lapsed" but not "expired". During that period the Call Option would not be exercisable but would retain some vestigial, but pointless, existence. I see no reason why the parties would have intended such a result.
In my view, counsel's submission has no support in the text of the Option Deed. The only place in the deed which refers to the Put Option coming to an end is cl 10.1. That clause refers to "lapse", but the lapsing happens on the "Expiry Date". In my opinion "expiry" and "lapse" mean the same thing in the context. I reject counsel's argument.
Counsel also faintly argued that "and" should be read as "or". But the contract only provides for rescission under 2.5 and rescission under that clause could only have occurred if notices were not given by the Sunset Date. Reading "or" as "and" would introduce a redundancy which would not otherwise exist. That seems to me to be impermissible.
The main argument for Bradcorp focused on cl 2.5. Counsel argued that it "otherwise provided" for the purposes of cl 20.10.
On the face of it, cl 2.5 set out a rational and comprehensible scheme for rescission of the Option Deed. If notice was not given by the Sunset Date, Country Garden could no longer exercise its Call Option but the parties remained bound and Bradcorp could exercise the Put Option if it could satisfy the CPs.
In such circumstances, CG did not have to do anything. But if CG wanted to get out of the contract it could issue a notice under subclause (a). Bradcorp then had twenty business days to satisfy the CPs. If it failed to do so, CG could then rescind. If CG did not do so, Bradcorp might itself rescind.
Although the overall scheme is clear enough, there are some difficulties with the details. One concerns the definition of the Call Option Expiry Date which was fixed as one month after the commencement of the Call Option period. If CG were to delay in issuing its notice under subclause (a), the Call Option Expiry Date might fall before the end of the twenty day period allowed under cl 2.5 to satisfy the CPs. Unless cl 2.5 implicitly extended the Call Option Expiry Date, this might leave the parties locked into a contract where neither could exercise the option. The same might occur if Bradcorp were unable to satisfy the CPs within the twenty business days, but CG did not then rescind and thereafter Bradcorp chose not to rescind.
A second difficulty is the reference to "before exercise of the Call Option" in subclause (a). Once the Sunset Date passed, the Call Option would expire and could not in any event be exercised. Except for the possibility that the notice could be issued on the Sunset Date itself (reading "by the Sunset Date" as meaning up to the beginning of the Sunset Date: cf Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53 at [38]) the reference would be meaningless. Counsel for Bradcorp said that this should be addressed by reading "Call Option" as "Put Option". But this is not particularly compelling as the Put Option could not be exercised until all of the CPs were satisfied, and in that event there was no opportunity to issue a notice under subclause (a) in the first place.
In fact, CG never purported to exercise its rights under cl 2.5. It is not necessary to decide these questions. It could hardly be suggested that the theoretical difficulties were so great as to bring down the clause itself.
Without the words "or the Call Option expires before notice has been given that the CPs have been satisfied" the effect of cl 20.10 would be clear. The provision would be a mechanical one designed to give effect to notices of rescission issued under cl 2.5. But the introduction of the words changes the nature of the clause. On the face of it they created a type of automatic rescission, in addition to rescission by the parties.
Under the definition of Call Option Expiry Date, the Call Option could expire before the Sunset Date, but only if the CPs were satisfied, and notices were given, before the Sunset Date. Thus the Call Option could only expire before notices were given if it expired on the Sunset Date. But the Sunset Date is when the procedure under cl 2.5, allowing Bradcorp extra time to satisfy the CPs and exercise the Put Option, would begin. There would be no point in following that procedure if after the Sunset Date an automatic rescission took place and the Put Option ceased to be capable of being exercised. Even if notice under cl 2.5(a) were issued on the Sunset Date itself there would for practical purposes be insufficient time for the procedure to be followed before an automatic rescission took place at the end of the Sunset Date. On the face of it, therefore, automatic rescission under cl 20.10 cuts right across cl 2.5.
The additional expiration words providing for automatic rescission do not integrate well with the rest of cl 20.10. Subclauses (b) and (d) refer to the "date of rescission" and subclause (c) refers to receipt of the "notice of rescission". There is nothing to pick up the automatic rescission created by the additional words. To meet this problem it would be necessary to extend the provisions in the subclauses, implicitly, to such an automatic rescission. The "date of rescission", for instance, would in that event have to be the date of expiry of the Call Option.
It is tempting to suppose that the words were added to cl 20.10 to meet some point which was raised in the course of the drafting process, after the rest of the Option Deed had taken its final shape. Had there been evidence to confirm this, it might have showed what the real intention was behind those words, and allowed for rectification to reflect that intention. But the agreed approach of the parties means that there is no assistance for the Court from this quarter. All the Court has is the words of the final version of the Option Deed and it must make do with them, even if, as seems possible, it will end up with a construction quite different from what the parties contemplated.
In my opinion, on the wording, there is an inconsistency between cl 2.5 and the additional words in cl 20.10. Counsel for Bradcorp submitted that in such circumstances, the Court should not seek to read one or other of cll 2.5 and 20.10 down to accommodate each other. Rather, cl 2.5 should be construed in its ordinary way and if that resulted in conflict with 20.10 then 20.10 would give way: Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565 at 574; [1987] 2 Lloyd's Rep 342 at 350 per Bingham LJ.
I do not think that the analysis is as simple as that. The cardinal rule that conflict is to be avoided by reading the relevant clauses so as to operate harmoniously if at all possible: Forbes v Git [1922] 1 AC 256 at 259; see also Greencapital [2019] NSWCA 53 at [52]. The Pagnan approach works perfectly well where the overlap between the clauses is not total. In that event, the exclusion in the clause which gives way takes effect in some cases, and the words of that clause still have some work to do.
That is not so for the additional expiration words in cl 20.10. The contradiction of cl 2.5 was effectively total. To accept that cl 20.10 "otherwise provides" in effect means reading the words out entirely. Their inclusion becomes pointless, contradicting the usual assumption that they were intended to have some meaning.
But bizarre as this is as a matter of presumed intention, I am left with the fact that the words negate cl 2.5. The parties did not suggest any interpretation which would resolve the conflict, or resolve it in some circumstances. The conflict is total and intractable. In such circumstances I am thrown back on the rule that, where a covenant earlier in a deed is contradicted by later provision, the later provision gives way where it is repugnant: Forbes v Git at 259.
For these reasons I reject CG's submission that the Put Option came to an end when the Call Option expired at 5.00 pm on 30 November 2018. It follows that Bradcorp was entitled to exercise the Put Option (if the conditions were in fact complied with) on 4 December. By then, the Mining CP had been satisfied. If not for my finding on the Access CP, the purported exercise of the option by Bradcorp would have been valid.
[15]
Repudiation and termination
In the light of my conclusion that the Access CP was not satisfied the question of repudiation does not strictly arise. But it was fully argued and it is relevant to CG's cross-claims so I will deal with it.
Following Bradcorp's purported exercise of the Put Option on 4 December, CCW responded with four letters on 5 December. Three of the letters related to the CPs, one for each of them. Each letter put in issue whether the relevant CP had been satisfied. The letters concerning the Rezoning CP and the Access CP were each said to constitute a notice under cl 2.2A (see [41] above).
The fourth letter referred to the three CP letters and stated:
Each of those items of correspondence was provided after your client served the Put Notice. At the time of writing this letter, our client has not received a response to those items of correspondence. Our client therefore does not know if your client maintains that it has, in fact, satisfied each of the "rezoning" and "access" Conditions Precedent, or if it maintains that it has issued a valid notice in relation to the "mining" Condition Precedent.
As the Put Option cannot be exercised unless the Conditions Precedent have been satisfied (or waived), it will be necessary for the parties to resolve any remaining disagreement on the satisfaction of those Conditions before our client can properly consider its position in relation to the Put Notice.
To that end, if your client maintains that it has satisfied the Conditions Precedent despite our client's notices under clause 2.2A of the Option Deed, our client hereby invites your client to participate in the dispute resolution process contemplated by clause 20.9 of the Option Deed.
If, as a result of that process, our client is satisfied that the Conditions Precedent have been satisfied and the Put Option has not otherwise ceased to operate by reason of clause 20.10 of the Option Deed (which issue is the subject of a separate invitation to participate in the dispute resolution process), our client will proceed with the purchase of the Property in accordance with the terms of the Option Deed.
On 7 December a letter was sent by another solicitor acting for Bradcorp, Ms Michelle Harpur, of the firm Harpur Phillips (the reason for retaining two separate solicitors was not explained in the evidence). Ms Harpur stated that Bradcorp considered that each of the CPs had been satisfied. She rejected the argument based on cl 20.10 of the Option Deed so far as the Mining CP was concerned. She did not explain the reasoning for these conclusions.
Ms Harpur's letter stated that cl 20.9 of the Option Deed (relating to dispute resolution) was not engaged because the dispute related to the exercise of the Put Option. The letter also foreshadowed the institution of proceedings in this List. Ms Harpur stated that she expected the Summons to be served the following Tuesday, 11 December.
The Summons was indeed filed and served on 11 December. The prayers for relief relevantly included:
1. A declaration that the plaintiff has validly exercised the Put Option granted to it by the first defendant pursuant to clause 3.2 of the deed dated 27 February 2017, as amended 21 June 2018.
2. A declaration that the plaintiff and defendants are parties to a contract for the sale of land in the form delivered by the plaintiff to the first defendant on 4 December 2018, which contract is valid and subsisting.
3. Any other orders which may be necessary to effect the completion of the contract for the sale of land.
4. Such other orders as the Courts deems fit.
5. Costs, including interest on costs.
On 17 December Mr Flannery wrote to Ms Bryant, Mr Woodhouse and Ms Covington at CCW proposing 2.00 pm on 18 December as the time for settlement of the purchase contracts. Later that day Mr Woodhouse responded to Mr Flannery. He did not directly address the question of settling the purchase. Instead he referred to CG's earlier request for a dispute resolution meeting under cl 20.9 of the Option Deed. He said that Bradcorp had refused to participate in such a meeting and had not provided a substantive response to the points made by CG about the validity of the exercise of the Put Option, and had instead commenced proceedings. He asked whether Bradcorp would be prepared to participate in a dispute resolution conference under the "Option Deed".
Bradcorp's reply came in a letter from Ms Harpur sent by email at about 11:30 am the following day. Ms Harpur stated that it was clear from her letter of 7 December and from the commencement of proceedings that Bradcorp considered it had validly exercised the Put Option. She referred to CG's four letters of 4 December but made no further response to them, and she repeated that cl 20.9 of the Option Deed was not engaged. She ended by purporting to require CG to attend at the appointed time (2 pm that day) to settle the purchase contracts.
There was no further response from CG, and there was no attendance at the appointment nominated by Bradcorp. On 24 December Mr Flannery wrote to Mr Woodhouse. The letter stated that Bradcorp had been ready, willing and able to complete the contract at the appointed settlement time of 2.00 pm on 18 December but there had been no attendance by CG. The letter stated that as a result CG was in breach of its obligations; that Bradcorp had suffered and would continue to suffer loss; that Bradcorp held CG liable for all of its loss or damage; and that Bradcorp reserved its rights against CG and would "take such action to enforce its rights as it considers appropriate".
On 8 January 2019 Mr Woodhouse replied. His letter referred to the three letters concerning the CPs sent on 5 December. It continued:
Against that background, despite your client's purported exercise of Put Option on 4 December 2018, the Grantee remains of the view that the Grantor has not satisfied, or validly given notice of satisfaction of, the Conditions Precedent as at the date of this letter.
The letter went on to refer to the Call Option having expired on 30 November 2018 at 5.00 pm. The letter referred to cl 20.10 and continued:
In circumstances where the Conditions Precedent have not been satisfied before the expiry of the Call Option, the Grantee hereby requests that the Call Option Fee of $18.7 million be released and refunded to the Grantee within 5 Business Days from the date of this letter pursuant to clause 20.10 of the Option Deed.
On 11 January Mr Flannery responded. He said:
Our client had made its position clear by the issue and service of proceedings in the Supreme Court. Our client rejects your client's contrary "views" and the claims made in your letter of 8 January 2019.
As Bradcorp has exercised the Put Option, in accordance with clause 4.2 of the Option Deed, the Option Fee has been credited towards the Deposit. Your client has no grounds to request that these funds be returned, and our client does not agree to do so.
A Commercial List Response for CG and CGA was filed on 8 February 2019. Section B of the Response identified the issues likely to arise as including whether the CPs were satisfied; when they were satisfied; and whether they had to be satisfied by 5.00 pm on 30 November.
Section C of the Response alleged that neither the Access CP nor the Rezoning CP had been satisfied and that the Mining CP had not been satisfied before the purported exercise of the Put Option. It also contended that the CPs had had not been satisfied before 5.00 pm on 30 November and the Put Option had come to an end on that date in any event. The Response denied that Bradcorp was entitled to the relief sought in the Summons.
Just over two months later, on 12 April, Mr Jonathan Milner of Arnold Bloch Leibler, the firm now acting for Bradcorp, wrote to Mr Woodhouse. In his letter, Mr Milner referred to the Option Deed as the "T1 Deed" and the contract annexed to the Option Deed as the "T1 Contract". The letter stated:
Repudiation of T1 Deed and T1 Contract
On the basis of any or all of the words and conduct outlined below, Bradcorp considers that the Grantee has evinced an absence of readiness or willingness amounting to a refusal to perform its obligations under the T1 Deed and the T1 Contract. In those circumstances, Bradcorp considers that the Grantee has repudiated the T1 Deed and the T1 Contract.
The conduct identified was three-fold. First, CG's failure to execute and return the contract attached to the option notice; second, CG's failure to complete that contract on 18 December; and third, CG's denial (in the letter of 7 December and in the List Response) that the Put Option had been validly exercised and that CG was bound to perform the contract.
The letter continued:
Breach of T1 Deed and T1 Contract
Alternatively, by its failure to perform its obligations under the T1 Deed and the T1 Contract described above, Bradcorp considers that the Grantee has breached essential terms of the T1 Deed and the T1 Contract, or committed substantial breaches of intermediate terms which go to the root of the T1 Deed and the T1 Contract.
Election to terminate
On the basis of the repudiation, the breach of essential terms, or the substantial breach of intermediate terms which go to the root of the T1 Deed and the T1 Contract described above, Bradcorp hereby exercises its rights to terminate both the T1 Deed and the T1 Contract.
On 24 April CCW responded for CG. CCW argued that the purported termination was invalid. It is now common ground that if this is correct, the effect of CCW's letter was to terminate the Option Deed (and the sale contract).
Bradcorp alleges that there were three aspects of CG's conduct after the commencement of proceedings on 11 December which amounted to repudiation:
(1) CG's failure to attend on settlement on 18 December;
(2) CG's letter of 8 January demanding repayment of the option fee; and
(3) CG's List Response of 6 February denying that Bradcorp was entitled to enforce the contract.
The parties referred me extensively to authority on the question of repudiation. In my view five cases were of particular significance. In chronological order they are:
(1) Spettabile Consorzio Veneziana di Armamento é Navigazione v Northumberland Ship Building Co Ltd (1919) 121 LT 628;
(2) James Shaffer Ltd v Findlay Durham & Brodie [1953] 1 WLR 106;
(3) Sweet & Maxwell Limited v Universal News Services Ltd [1964] 3 All ER 30;
(4) DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; and
(5) Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.
The first three of these are decisions of the English Court of Appeal. The fourth is a decision of the High Court. The fifth is a decision of the House of Lords.
The English cases have taken the view that the Court should lean against treating statements made in the course of negotiations as repudiatory. In particular this is because, if there is a dispute, it should usually be resolved by the court in declaratory proceedings. In Woodar Lord Wilberforce said (at 283):
… it would be a regrettable development of the law of contract to hold that a party who bona fide relies upon an express stipulation in a contract in order to rescind or terminate a contract should, by that fact alone, be treated as having repudiated his contractual obligations if he turns out to be mistaken as to his rights. Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations. To uphold the respondents' contentions in this case would represent an undesirable extension of the doctrine.
Lord Scarman (at 299) explained the error in the Court of Appeal:
The law requires that there be assessed not only the [allegedly repudiating] party's conduct but also, "objectively considered," its impact on the other party. The error is neatly exposed in Goff L.J.'s terse conclusion: "In my judgment rescission is repudiation, and if it cannot be justified by the terms of the contract it is wrongful and a breach." The learned Lord Justice was, with respect, concentrating too much attention on one act isolated from its surrounding circumstances and failing to pay proper regard to the impact of the party's conduct upon the other party.
In DTR Nominees the majority of the High Court (Stephen, Mason and Jacobs JJ with whom Aickin J agreed) said (at 432):
No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.
Their Honours then cited the following passage from the judgment of Pearson LJ in Sweet & Maxwell at 734:
In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments...
In DTR Nominees there was no attempt to persuade the allegedly repudiating party of the error of its ways, nor was the allegedly repudiating party given an opportunity to reconsider. But in my view, the High Court in effect adopted the English view encapsulated by Lord Wilberforce in Woodar. In particular this can be seen in the High Court's quotation, with evident approval, from the judgment of Pearson LJ in Sweet & Maxwell. If I am wrong in thinking that DTR Nominees goes so far as a matter of authority, I think that the Court should follow the views stated in the English cases which, with respect, are compellingly persuasive as a matter of principle.
In James Shaffer, Sweet & Maxwell and DTR Nominees the allegedly repudiating conduct consisted of correspondence between the parties or their solicitors concerning the terms of the contract or whether it was binding. Spettabile was decided also on the correspondence, although in that case proceedings were later commenced.
In the present case all the conduct took place in the context of legal proceedings commenced by Bradcorp seeking specific performance of the contract. In the language of Bailhache J at first instance in Spettabile (at 630) Bradcorp had "submitted the whole matter to the arbitrament of the Court - the jurisdiction of the Court". On appeal, Warrington LJ, having decided the case on the pre-litigation correspondence added (at 633):
But I think that it is desirable to say this, that in my opinion where one party to a contract conceives that he is no longer bound by the contract or has a right to have it rescinded or declared null and void, and issues a writ for the purpose of obtaining that which he believes to be his right, he does not by that mean to repudiate the performance of the contract in any event. It seems to me that he submits to perform it if the court, as the result of the action, comes to the conclusion that he is bound to perform it, and it cannot be taken to be an absolute repudiation.
In Woodar notice of rescission was given by Wimpey (erroneously, as the court ultimately determined). Woodar commenced proceedings seeking a declaration that Wimpey's notice of rescission was invalid. Wimpey defended and counter-claimed for a declaration to the contrary. It was argued for Woodar that this itself amounted to repudiation. Lord Wilberforce said (at 281):
I regard this contention as hopeless. The appellants' pleading carried the matter no further: it simply rested the matter on the contract. It showed no intention to abandon the contract whatever the result of the action might be. If the action were to succeed (i.e. if the appellants lost) there was no indication that the appellants would not abide by the result and implement the contract.
I turn now to the conduct specifically relied upon by Bradcorp as evincing a repudiation in the present case.
Failure to attend on settlement: In my view, CG's conduct must be seen in its context. Bradcorp's conduct in purporting to fix a date for completion was an entirely unilateral act. CG's correspondence at the time had raised an obviously genuine dispute about whether the CPs had been satisfied and whether Bradcorp was entitled to exercise the option as it purported to do. The points made by CG in its correspondence had not been answered (or at least, had not fully been answered) by Bradcorp.
It now appears to be common ground that Ms Harpur was right in saying that the dispute resolution procedure under cl 20.9 of the Option Deed was not engaged. This would not have prevented informal negotiations between the parties. Bradcorp appeared to have set its face against that. But what Bradcorp had done was to submit its claim to the Court.
In these circumstances, was CG really required to choose between paying the purchase price as demanded on the one hand, and running the risk of being being liable in damages, potentially for tens of millions of dollars, on the other? I think not. As Lord Scarman explained in Woodar, the critical question is whether CG's conduct manifested an objective intention not to be bound by the terms of its obligations under the Option Deed. In my view, especially in the context of Bradcorp's specific performance proceedings, it did not.
In any event, Bradcorp had not issued a notice to complete or otherwise made time of the essence. Failure to attend the settlement conference on the date nominated by Bradcorp in such circumstances was not a repudiatory breach of contract: see Ciavarella v Balmer (1983) 153 CLR 438 at 446.
Demand for option fee by letter of 8 January: In my view, similar considerations apply to CG's letter of 8 January. CG was not by this letter repudiating its obligations under the contract. It was seeking to enforce what it conceived (albeit, as I have ultimately decided, incorrectly) to be its entitlements under the contract. Its conduct was the opposite of repudiatory.
Furthermore, in its letter of 11 January, Bradcorp stated that it had made its position clear by the issue and service of proceedings in the Supreme Court. Counsel for Bradcorp submitted that this meant only that Bradcorp had reaffirmed that it considered it had validly exercised the Put Option. But I think the context was broader. Bradcorp had not just asserted its views by commencing proceedings, it had invoked the Court's jurisdiction to resolve the dispute by way of declarations and orders for specific performance. The sending of the letter reinforced that this remained Bradcorp's position despite the demand for repayment of the Option Fees (and the earlier failure to attend settlement on 18 December). If (contrary to my view) there had been repudiatory conduct by CG to this point, Bradcorp's letter of 11 January would have been an affirmation of the contract and such repudiatory conduct could not thereafter be relied upon.
Commercial List Response: The passages which I have quoted from Spettabile and Woodar show the Court's general reluctance to conclude that assertions by the parties about their rights should be treated as repudiatory apply with particular force when those assertions are made in the course of legal proceedings. The purpose of the filing of the List Statement was to set out CG's defence. It had to put its contentions before the Court. To do so could hardly have avoided contradicting Bradcorp's position. The whole point of the Response was that CG was saying Bradcorp was not entitled to the relief it claimed. The Response said nothing about what CG's position would be if the Court found Bradcorp were entitled to such relief.
In passing, I note that more than two months elapsed between the filing of the Response and the letter from Bradcorp's new solicitors purporting to terminate based on it. In the context of proceedings in this List, a delay of this length of time could itself arguably have given rise to an affirmation. However, this point was not argued, and given my earlier findings, would not be dispositive. I therefore do not need to say any more about it.
Counsel for Bradcorp pointed out that CG's Response did not explicitly state that, in the event that CG was wrong in its interpretation of the contract, it was ready, willing and able to perform the contract in accordance with its tenor. I find this an unattractive argument. Proceedings in this List do not require formal pleadings and the Court's focus is on determining the real issues between the parties, which are specifically identified in Section B of the parties' Commercial List Statement and Commercial List Response. Whether CG was ready, willing and able to perform the contract was not raised by Bradcorp as an issue. I think the Court should be slow to uphold a pleading point of this sort.
In any event, Bradcorp accepts that if (as I have found) it did not validly exercise the Put Option, then CG had no remaining executory obligations under the contract. Given this concession, the point cannot succeed, and I do not need to deal with it further.
In England, the law appears to be that a party who commences an action for specific performance may not thereafter terminate the contract for repudiation as a result of subsequent conduct by the defendant without the leave of the Court. This proposition is controversial in New South Wales: see J D Heydon, M J Leeming and P G Turner, Meagher Gummow and Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths Australia) at [20-265]-[20-270]. My decision does not involve entering into this controversy. It is not necessary to go so far as to say that because Bradcorp had commenced proceedings for specific performance it needed the Court's leave (which it did not seek) to terminate. It is sufficient for my purposes to point to the commencement of specific performance proceedings as part of the context in which CG's conduct should be assessed.
[16]
Damages
In view of my findings that Bradcorp's purported exercise of the Put Option was invalid, and that in any event CG's conduct was not repudiatory, the dispute about the quantum of damages is doubly hypothetical. As a result, I do not propose to burden an already lengthy judgment with consideration of it. If there is a successful appeal, the damages issue can be remitted from the Court of Appeal if that proves necessary.
[17]
Refund of Put Option Fees
CG claims repayment of the Call Option Fees under cl 20.10 of the Option Deed. Alternatively, CG claims the same amount by way of damages. The difference (apart from one being a liquidated sum and one an unliquidated sum) lies in when interest accrues.
I have concluded that the additional expiration words in cl 20.10 upon which CG relies were ineffective, as repugnant to cl 2.5. It follows that CG's claim for the repayment of the Option Fees under cl 20.10 fails. CG could after 30 November 2018 have proceeded to rescission by giving a notice under subclause 2.5(a), but it did not do so.
The result is that the Option Deed remained on foot until Bradcorp's purported termination on 12 April 2019. As already noted, it is common ground that if (as I have found) Bradcorp's purported termination was invalid, that was itself a repudiation which was accepted by CG. On my finding CG is therefore entitled to loss of bargain damages which is the alternate basis now advanced by CG for recovery of the Put Option Fees.
It was agreed between the parties for the purposes of CG's claim that, had Bradcorp not repudiated: (1) CG would have issued a notice under subclause 2.5(a); (2) if the Access or Rezoning CPs had not been satisfied by 4 December (as I have found, for the Access CP) they would not have been satisfied within the twenty day business period after the issue of the subclause 2.5(a) notice; (3) CG would thereupon have been entitled to rescind under cl 2.5; (4) CG would have done so; and (5) as a result CG would have recovered the Call Option Fees on the ordinary application of cl 20.10 of the Option Deed.
CG's contention is thus that the loss of bargain damages to which it is entitled include (in fact no other components of the damages were suggested) the amount of the Call Option Fees it would have received on rescission. This reasoning applies equally to the Call Option fees paid on the tranche 2 land. As I understood Bradcorp's submission, on the findings I have made there is no answer to this claim.
The parties' agreement did not extend to agreement on the precise date on which the steps towards rescission would have been taken by CG. Counsel for CG submitted that CG would have issued its notice under cl 2.5(a) on 15 April, the first business day after Bradcorp's repudiation, and would have rescinded as soon as it could thereafter. There was no submission in response from Bradcorp. Pre-judgment interest should therefore run on the damages from 23 May.
[18]
Conclusions and orders
I have concluded that:
(1) satisfaction of the conditions precedent prior to 4 December 2018 was sufficient for the purposes of a valid exercise of the Put Option under the Option Deed;
(2) the Mining CP was not satisfied prior to 5.00 pm on 30 November 2018 but it was satisfied prior to the purported exercise of the Put Option on 4 December 2018;
(3) the Rezoning CP was satisfied prior to 30 November 2018; but
(4) the Access CP had not been satisfied by 4 December 2018 (or indeed prior to 5 pm on 30 November 2018) and as a result Bradcorp's purported exercise of the Put Option was invalid;
(5) even if the purported exercise of the Put Option had been valid, CG's conduct did not constitute a repudiation of its contractual obligations and Bradcorp's purported termination would have been invalid anyway;
(6) CG has no contractual right to repayment of the Call Option Fees but is entitled to recover an equivalent amount by way of damages as a consequence of Bradcorp's repudiation.
In the result, Bradcorp's claim has failed and must be dismissed. There is no apparent reason why costs should not follow the event and I will order Bradcorp to pay CG's costs of its claim. Any application for any variation of this order can be made in accordance with the Rules.
CG's cross-claim has succeeded. It will be necessary to calculate the pre-judgment interest on CG's damages. I will direct CG to bring in short minutes of proposed orders, which should be agreed if possible. The orders should also provide for the payment of monies held by HWL Ebsworth as stakeholder in satisfaction of the damages claim (if that is agreed), and for the costs of CG's cross-claim.
The orders of the Court are:
Order that the plaintiff's claim be dismissed.
Order that the plaintiff pay the defendant's costs of the plaintiff's claim.
Direct that the cross-claimant bring in short minutes of order providing for disposition of the cross-claim in accordance with this judgment.
[19]
Amendments
06 August 2021 - unredacted judgment published
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Decision last updated: 06 August 2021