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[2026] NSWSC 780
Supreme Court of NSW
2026-07-03
McGrath J
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Darlinghurst Public School Parents and Citizens Association v Department of Education [2026] NSWSC 780
Hearing dates: 30 June 2026
Date of orders: 3 July 2026
Decision date: 03 July 2026
Jurisdiction: Equity - Duty List
Before: McGrath J
Decision: Interlocutory injunction granted
Catchwords: EQUITY — equitable remedies — interlocutory injunctions — principles – application for injunction restraining the defendant from taking steps to terminate the plaintiff’s licence to operate out of school hours care centre – where the plaintiff is the longstanding operator of the centre – where the defendant alleges the plaintiff has breached the licence agreement by committing events of default – where the defendant has purported to terminate the licence agreement based on the events of default – apparent failure by the defendant to inform the plaintiff of the alleged events of default and provide a proper opportunity to remedy them – whether there is a serious question to be tried that the defendant has acted in breach of express and implied terms of the licence agreement — HELD — serious question to be tried satisfied and balance of convenience favours granting the interlocutory injunction CONTRACTS — construction — good faith – express term of good faith – restriction on the power to terminate a contract based on events of default where there is a proposed procedure for dealing with events of default expressed in the contract CONTRACTS — implied terms — terms implied in law – duty to cooperate
Original judgment source is linked above.
Legislation Cited: Government Information (Public Access) Act 2009 (NSW)
Parents and Citizens Associations Incorporation Act 1976 (NSW)
Cases Cited: Adaz Nominees v Castleway Pty Ltd [2020] VSCA 201
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1
Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1; [2012] VSCA 209
Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69
BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45
Bond v Gray [2013] NSWSC 1793
Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24, Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Caravelle Investments Ltd v Martaban Ltd (1999) 95 FCR 85; [1999] FCA 1505
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1986] HCA 58
Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at [28]–[29] (French CJ, Bell and Keane JJ)
Council of the City of Sydney v Goldspar Australia Pty Ltd (2006) 230 ALR 437; [2006] FCA 472
First Netcom Pty Ltd v Telstra Corp Ltd (2000) 101 FCR 77; [2000] FCA 1269
Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703; [1999] FCA 903
Goater v Commonwealth Bank of Australia [2014] NSWCA 265
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 383 ALR 577; [2010] NSWCA 268
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268; 383 ALR 577
Organic Marketing Australia Pty Ltd v Woolworths Ltd [2011] FCA 279
Paciocco v Australia and New Zealand Banking Group Ltd (2015) 235 FCR 199; [2015] FCAFC 50
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1; [1998] HCA
Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51
Warner-Lambert Company LLC v Apotex Pty Ltd (2014) 106 IPR 218; [2014] FCAFC 59
Wolfe v Permanent Custodians Ltd [2013] VSCA 331
Texts Cited: Cheshire & Fifoot, Law of Contract (12th ed)
Category: Principal judgment
Parties: Darlinghurst Public School Parents and Citizens Association (Plaintiff)
The Minister of Education and Early Learning on behalf of the Department of Education (Defendant)
Representation: Counsel:
S Scott (Plaintiff)
A Smyth (Defendant)
Solicitors:
Hearn Heathcote Solicitors (Plaintiff)
Holding Redlich (Defendant)
File Number(s): 2026/00265331
Publication restriction: Nil
Darlinghurst Public School Parents and Citizens Association (Darlinghurst P&C) has been licensed to operate an outside of school hours care (OSHC or OOSH) service, known as Darlo Play Centre and located at Darlinghurst Public School, by the Minister for Education and Early Childhood Learning for several decades. With effect from 3 July 2026, the Minister has purported to terminate the most recent iteration of the licence and appoint another operator to provide the OSHC service at Darlo Play Centre.
Darlinghurst P&C has sought an urgent interlocutory injunction to prevent the Minister taking any steps to enforce the purported termination of its licence as the operator of Darlo Play Centre. Sitting as Duty Judge under significant time constraints, I have to determine that application.
The thrust of the claim brought by Darlinghurst P&C is that in the exercise of the power to terminate the licence the Minister has breached an implied term of the licence (being the duty to cooperate) and breached an express term of the licence (being the duty to act in good faith) by denying Darlinghurst P&C a proper opportunity to respond to the alleged events of default on which the Minister has relied to terminate the licence and any opportunity to remedy them.
I am satisfied that there is a serious question to be tried that the Minister has breached the terms of the licence of Darlinghurst P&C to operate Darlo Play Centre in purporting to terminate that licence and that the balance of convenience lies in favour of granting of the interlocutory injunction to restrain the Minister from acting on that termination.
The evidence for Darlinghurst P&C was provided by Paul Yardley, the president of Darlinghurst P&C.
The evidence for the Minister was provided by Anthony Futia, the director, shared use of schools in the New South Wales Department of Education.
Darlinghurst P&C is an incorporated association under the Parents and Citizens Associations Incorporation Act 1976 (NSW) and is a school-based parent organisation, run by the parents and citizens of the Darlinghurst Public School community. Darlinghurst P&C has operated Darlo Play Centre for many decades.
Darlinghurst P&C employs two staff to operate Darlo Play Centre, namely:
the director, Laurence Catzel, who has been employed by Darlinghurst P&C since 6 February 2017; and
the assistant director, Catherine Wong, who has been employed by Darlinghurst P&C since 1 March 2018.
On or around 12 October 2020, Darlinghurst P&C (as operator) and the Minister (as licensor) entered into the OOSH Licence Agreement dated 8 December 2020. The OOSH Licence Agreement was varied by the Variation Agreement dated 24 October 2023 between Darlinghurst P&C and the Minister. The Variation Agreement did not vary the relevant operative provisions of the OOSH Licence Agreement which are at the heart of this dispute. I will therefore refer to the OOSH Licence Agreement, as varied by the Variation Agreement, as the Licence Agreement.
In the Licence Agreement, Darlinghurst P&C is defined as the Operator, the Minister is defined as the Licensor, Darlinghurst Public School is defined as the School and the Premises are defined in the plan annexed as Appendix A to the Licence Agreement.
In the Licence Agreement, the following relevant definitions are also used:
Applicable Laws means all Laws relating to the operation of an education and care service and use of the Premises, including the Children (Education and Care Services National Law Application) Act 2010 (NSW), Education and Care Services National Law, Education and Care Services National Regulations, Child Protection (Working with Children) Act 2012 (NSW), Child Protection (Working with Children) Regulation 2013 (NSW) WHS Laws and Laws applicable to the Child Care Subsidy.
…
Law means any statute, rule, regulation, order, rule, subordinate legislation or other document or direction enforceable under any statute, rule, regulation, order, rule or subordinate legislation
The objectives of this Licence are:
(a) to support the Operator to conduct high quality OSHC Service that is compliant with the Applicable Laws and to provide continuity of care for the benefit of the children receiving such services, parents of the children, and the School; and
(b) to establish an ongoing collaborative relationship to enable the Operator to utilise its expertise and resources, in combination with the School’s provision of the Premises, to conduct OSHC Service.
5.1 (Term) The Operator must provide the OSHC Service from the Service Start Date and until the Service End Date, unless extended under this clause 5 or ended earlier under this Licence.
5.2 (Discretionary extension by the Licensor)
(a) (Request to extend) The Operator may request an extension of the Licence of up to the period of time specified in Item 5 of the Schedule, (the Extension Period). This request must be given not less than 14 months before the Service End Date.
(b) (Licensor discretion) The Licensor will, no later than 12 months before the Service End Date, give:
(i) consent to the extension of the Licence; or
(ii) notice that the Licensor does not consent to the extension and the Licence will end at the Service End Date.
(c) (No right of extension) The Operator has no right to an extension beyond the Service End Date. The Operator will have no Claim in connection with the Licensor not extending the Licence, or for any Loss arising in connection with the Licensor not extending the Licence.
5.3 (Holding over)
(a) (Monthly arrangement) If the Operator with the consent of the Licensor continues to use the Premises after the Service End Date or the Extension Period, the License will continue on a month to month basis. Either party can end this arrangement with 1 month’s notice.
(b) (Licence Fee) The Licence Fee to be paid each month during any holding over period is an amount equal to the Licence Fee immediately before the start of the holding over period divided by 12, and increased by 4%.
The Schedule to each of the Licence Agreement and the Variation Agreement stipulates that the Service Start Date was 12 October 2020. The Schedule to the Variation Agreement details that the Service End Date (as varied) is 11 October 2025 and the Extension Period is 12 October 2025 to 11 October 2028 (a 3-year extension period).
Clause 9 of the Licence Agreement states:
9 Operating Guidelines
The Operator must comply with the Operating Guidelines. The Operating Guidelines are part of this Licence and a breach of the Operating Guidelines is a breach of this Licence.
11.1 (Conduct of OSHC Service) The Operator must conduct the OSHC service in accordance with:
(a) all Applicable Laws (including the National Quality Framework)
(b) the Service Approval (including any conditions on the Service Approval)
(c) the Additional Conditions in item 16 of the Schedule (Licence Details)
(d) the remaining terms of this Licence (excluding the Operating Guidelines, Appendix A and Appendix B)
(e) the Operating Guidelines; and
(f) Appendix A and Appendix B.
To the extent of any inconsistency between the above, the order of priority will be (a), (b), (d), (e), (f) and (f).[sic]
20.1 Termination for convenience
The Licensor may end this Licence for any reason with at least 6 months’ notice to the Operator. The Operator will have no claim in connection with the Licensor terminating under this clause, or for any loss arising in connection with the termination.
20.2 Termination or suspension for Operator default
(a) (Not allow an Event of Default) The Operator will not allow an Event of Default (defined below) to occur.
(b) (Notify Licensor about an event) If an Event of Default occurs, the Operator will immediately notify the Licensor of the event and give full details to allow the Licensor to assess the event.
(c) (What Licensor may do if an Event of Default occurs) If an Event of Default occurs, then the Licensor may, by notice to the Operator, immediately:
(i) (suspend) suspend all or part of the Operator’s rights;
(ii) (enforce other rights) exercise any of its rights under the Licence; or
(iii) (ending) end this Licence.
(d) (Event of Default capable of remedy) If the Event of Default is capable of remedy, the Licensor may take the following actions before suspending or ending the Licence:
(i) (notify the Operator) notify the Operator of the Event of Default; and
(ii) (request action) depending on the circumstances, ask the Operator to:
(A) immediately remedy the Event of Default;
(B) provide the Licensor with a plan for remedying the Event of Default (including a commitment to a timeframe);
(C) advise the Licensor how it will ensure that the Event of Default does not occur again; or
(D) give reason why the Licensor should not take steps to terminate the Licence due to the occurrence of this Event of Default.
The Licensor may request one or more of the actions above and will specify the time period for completing the action(s).
The Operator must complete the action within the specified time period.
(e) (Definition**)** Event of Default means, amongst other things, (whether or not caused by anything outside the control of the Operator):
(i) non compliance: the Operator has not complied with any term or condition of this Licence or the Operating Guidelines; and
…
(viii) disrepute: the Licensor believes that to continue the Licence may: bring into disrepute or affect the reputation of; or be detrimental to, the Licensor.
28.2 (Good Faith) The parties will act in good faith in connection with this Licence, including to resolve any disputes.
7.7 (If an Event of Default occurs) Event of Default is defined in the Licence. It includes where you have not complied with any term or condition in the Licence or these Operating Guidelines.
If an Event of Default occurs, we propose to:
(a) (notify you) notify your Contract Manager by email of the Event of Default; and
(b) (request action) depending on the circumstances, ask you to:
(i) immediately remedy the Event of Default;
(ii) provide us with a plan for remedying the Event of Default (including a commitment to a timeframe);
(iii) advise us how you will ensure that the Event of Default does not occur again; or
(iv) give reason why we should not take steps to terminate the Licence due to the occurrence of this Event of Default.
We may request one or more of the actions above. We will also specify the time period for completing the action(s).
You must complete the action within the specified time period.
You will meet with us as required until we are satisfied the Event of Default is remedied and steps have been taken to prevent a similar Event of Default occurring in the future.
On 17 June 2025, Angela Lyris OAM (the director of educational leadership of the Port Jackson Principals Network, managed under the Department) wrote a letter marked “Private and Confidential” to the audit team in the Department setting out what she described as the “community’s concerns regarding the Play Centre at Darlinghurst Public School”. The principal of Darlinghurst Public School appears to report to Ms Lyris.
The letter from Ms Lyris detailed a series of allegations regarding: ongoing conflicts of interest and nepotism in the staffing and the accounting contractors of Darlo Play Centre; problems in the relationship between the director of Darlo Play Centre and various principals at Darlinghurst Public School; the lack of transparency in the budgets and records of Darlo Play Centre; the financial practices of management; child protection and duty of care issues identified by community members; and allegations of “money laundering” in dealing with deposit funds.
At the conclusion of her letter, Ms Lyris stated (emphasis in original):
I strongly recommend a longitudinal forensic audit investigation for the last ten years to be undertaken as community members are threatening to expose the ongoing alleged fraudulent transactions that have been occurring for over ten years and have denied the school the opportunity to have additional resources provided in the interests of their students.
On 30 June 2025, Theoni Zografakis (the hub coordinator, statewide operations network, early childhood education directorate of the Department) sent a letter to Darlinghurst P&C stating that the Department had investigated a direct complaint concerning non-compliance with provisions of the Children (Education and Care Services) National Law (NSW) and was satisfied that Darlinghurst P&C was not complying with the National Law in relation to an incident which had occurred at Darlo Play Centre of 12 April 2024. The letter set out the steps to be taken by Darlinghurst P&C to comply with the National Law and required Darlinghurst P&C to provide written evidence that it had taken those steps by 14 July 2025.
On 28 July 2025, Sarah Thom (the authorised officer, statewide operations network, early childhood education and care regulatory authority of the Department) sent an email to the director of Darlo Play Centre on the subject of the complaint raised in the letter of 30 June 2025, which stated:
I am satisfied that you have rectified the matters raised and no further action will be taken in relation to these matters at this time.
On 31 October 2025, the Department started their internal audit of the financial accounts of Darlinghurst P&C as the operator of Darlo Play Centre, including a review of its financial accounts and compliance with licence requirements. The Department was assisted by BDO Australia in the conduct of the audit.
On 17 February 2026, the chief audit executive of the Department, Suzette Gay, wrote a letter to the chief procurement officer in the Department, Mark Herrero, confirming the Department’s completion of their audit of the Financial Accounts for a Shared Use of Schools Provider (Licensee) (Audit Report). The Audit Report (dated 18 February 2026) was attached to that letter.
In the letter, Ms Gay stated:
… The Overall Audit Opinion is ‘Improvement Required’.
The review of Licensee’s operations against the Licence Agreement and governance requirements identified nine key findings for rectification by Darlo Play Centre. Several of the key findings presents significant compliance and governance risks. These findings have been assessed against the Department’s rating criteria, considering the nature of each issue and the ideal resolution timeframe. No evidence of misappropriation of funds was found during the review.
On balance, the overall rating for the Licensee’s controls and compliance is improvement required, with certain findings potentially rated as “High” due to the level of compliance exposure.
For Management Action
Internal Audit notes that in light of this assessment, the Department has two options to consider.
Option 1: is to require Darlo Play Centre to review, prioritise and implement all recommendations arising from this audit within defined timeframes, with active monitoring by the Department and a follow-up audit within 12 months to confirm that recommendations have been fully implemented and risks appropriately addressed.
Option 2: Alternatively, where the Department determines that the level of compliance exposure or residual risk is unacceptable, or that remediation is unlikely to be effective, consideration should be given to terminating the shared use of schools licence in accordance with the relevant licence terms and departmental requirements.
The Audit Report made nine key findings and, in respect of each finding, outlined its recommendation and the timeline estimate for remedial action, as follows:
There were inconsistencies in the application and use of the ABN that was recorded on the Licence Agreement, which was classified as a high-risk finding and it was recommended that it be remedied within 1 to 3 months;
There were no formal conflict-of-interest disclosures maintained despite clear related-party relationships, including financial engagements with Visions Synergy Associates while Mr Shane Warren served as Darlinghurst P&C President (Mr Warren’s husband runs the accounting practice Visions Synergy Associates), which was classified as a high-risk finding and it was recommended that it be remedied within 1 to 3 months;
Leave entitlements totalling $98,922.25 were not recognised in audited financial statements and over-award hourly rates were paid to staff resulting in an estimated additional cost of $71,019, non-term time payments and undocumented bonuses further indicate contract and payroll control weaknesses, which was classified as a high-risk finding, and it was recommended that it be remedied within 1 to 3 months;
Fees charged for before and after school care (as well as development days) exceeded contractual limits during Years 4 and 5 of the Licence Agreement, which was classified as a high-risk finding and it was recommended that it be remedied within 1 to 3 months;
As at 16 December 2025, Darlinghurst P&C held $156,666.15 in its bank account, with reserves consistently between $100,000 and $200,000 during the review period (and did not apply these funds to other Darlinghurst P&C initiatives), which was classified as a high-risk finding and it was recommended that it be remedied within 1 to 3 months;
Reimbursements totalling $21,016.51 were made to Ms Catzel for items including technology, conferences and staff gifts and four transactions lacked supporting invoices, which was classified as a medium-risk finding and it was recommended that it be remedied within 3 to 6 months;
License fee payments were repeatedly late, with delays ranging from 4 days to 522 days and the cause of the delays could not be determined due to incomplete documentation of the invoicing process, which was classified as a medium-risk finding and it was recommended that it be remedied within 3 to 6 months;
Darlinghurst P&C failed to hold termly meetings between itself, the OSHC Committee and the principal, and newsletters were not regularly distributed, which was classified as a medium-risk finding and it was recommended that it be remedied within 3 to 6 months; and
Visions Synergy Associates, a for-profit entity, was engaged for accounting and financial administration services beyond what could reasonably be considered “minor management services”, which was classified as a low-risk finding and it was recommended that it be remedied within 6 to 12 months.
In the detail of the Audit Report, under each finding the recommended means by which each issue could be remedied was also set out. It is therefore clear in the Audit Report itself that the identified issues were considered to be capable of being remedied by Darlinghurst P&C.
Mr Futia says that shortly after he received the Audit Report, he met with Mr Yardley to inform him that, given the findings of the Audit Report, the Department had determined to terminate the Licence Agreement. Mr Futia provides no date for this meeting and does not give any detail in relation to it. Mr Yardley does not refer to it in his evidence at all.
I infer that Mr Futia did not provide a copy of the Audit Report to Mr Yardley at that meeting given the subsequent complaints by Darlinghurst P&C that it had not been provided with it.
On 14 May 2026, the Minister issued the notice of termination of the Licence Agreement (signed by Mr Futia) terminating the licence of Darlinghurst P&C to operate Darlo Play Centre effective as at 3 July 2026 and requiring Darlinghurst P&C to vacate the premises by that date (Notice of Termination). The basis for the termination of the Licence Agreement was alleged to be several Events of Default (as defined in the Licence Agreement) on the part of Darlinghurst P&C.
The Notice of Termination at [2]–[4] stated:
2. The Licensor has carried out monitoring of the Operator’s operations pursuant to Clause 4.2 of the Operating Guidelines of the Licence, including the auditing of the Operator’s records, the findings of which are contained in Department of Education Internal Audit Report dated 18 February 2026 (Audit Report).
3. The Licensor has identified a number of Events of Default by the Operator.
4. The Licensor considers that the nature and number of the Events of Defaults are of such significance to be incapable of remedy and to warrant immediate termination of the Licence as permitted under Clause 20.2(c)(iii) of the Licence.
The Notice of Termination at [5]–[7] stated that the Minister relied on cl 20.2 of the Licence Agreement which required that Darlinghurst P&C must not allow an Event of Default (cl 20.2(a)), including that Darlinghurst P&C has not complied with any term or condition of the Licence Agreement or the Operating Guidelines (cl 20.2(e)(i)) and the Minister believes that to continue the Licence Agreement may bring into disrepute or affect the reputation of, or be detrimental to, the Minister (cl 20.2(e)(viii)).
The Notice of Termination at [7] stated:
The Licensor considers that there is sufficient information to establish that the Operator has breached the Licence in numerous respects and that to continue the Licence would bring the Licensor into disrepute, as outlined below.
What follows in the Notice of Termination in sections 8 to 13 (under a series of headings) are the “numerous respects” relied upon by the Minister to establish that there have been Events of Default under the Licence Agreement. Although these matters appear to be informed by the Audit Report (to which reference was made in the Notice of Termination at [2] as outlined above), a copy of the Audit Report was not attached to the Notice of Termination.
In summary, the matters stated in the Notice of Termination as being relied upon by the Minister were as follows:
Darlinghurst P&C charged session fees in excess of that prescribed for before and after school care and development days as the Maximum Session Fees specified in item 11 of the Schedule to the Licence Agreement, resulting in estimated overcharges of $44,608 in contravention of cl 11.4 of the Licence Agreement and cl 4.3 of the Operating Guidelines.
While Shane Warren served as president of Darlinghurst P&C, it employed and engaged persons who were related to Mr Warren (personally and/or through business interests) in contravention of cll 18 and 28.4 of the Licence Agreement.
Darlinghurst P&C paid the Licence Fee to the Minister late on various occasions, ranging between 4 to 522 days late, in contravention of cl 6 of the Licence Agreement and item 8 of the Schedule to the Licence Agreement.
Darlinghurst P&C failed to meet with the OSHC Committee at least once per term to discuss operations and raise matters for action and it failed to issue regular newsletters on such matters to the school community in contravention of item 16 of the Licence Agreement.
Darlinghurst P&C cited a different ABN to that identified in the Licence Agreement across numerous documents, reducing transparency and potentially affecting compliance with governance and reporting obligations.
Ms Wong and Ms Catzel had accrued significant leave entitlements as at 17 December 2025 and the audited financial statements failed to include any provision for these employee entitlements.
Darlinghurst P&C paid Ms Wong and Ms Catzel above the award rate, paid Ms Catzel ordinary wages during non-term time (contrary to her employment contract), paid bonus payments to all licensee staff where there was no evidence that such bonuses were required or permitted, and paid Ms Catzel approximately $21,000 as reimbursement for expenses.
Darlinghurst P&C maintained significant surplus funds ranging between $133,292.61 and $266,494.34 and, despite this, none of these funds were used to support its ongoing activities or community initiatives. This practice diminished the quality of facilities and services provided to students, undermined transparency and exposed the Minister to reputational and compliance risks.
In addition to the findings in the Audit Report, the Department of Education had received numerous complaints from parents of Darlinghurst P&C’s OOSH service regarding safety concerns, supervision, food handing and management of the service, which were passed on to the NSW Early Learning Commission.
On 25 May 2026, Mr Yardley sent a lengthy letter to Mr Futia (Darlinghurst P&C Response) requesting that, within 7 days of the date of the letter, the Minister withdraw the Notice of Termination on the basis that the Minister had terminated the Licence Agreement without notice and had denied Darlinghurst P&C the opportunity to respond to, address or remedy any of the alleged Events of Default.
In the Darlinghurst P&C Response it was alleged that the Minister had acted in breach of the express obligation to act in good faith and the implied duty to cooperate to achieve the benefit of the Licence Agreement. The Darlinghurst P&C Response also alleged that a court was likely to find that the Notice of Termination was invalid and that the Minister had not exercised the termination power reasonably and in good faith or afforded Darlinghurst P&C the benefit of the Licence Agreement because, amongst other things, it had been denied any right of reply to the allegations made against it.
In the Darlinghurst P&C Response, it was noted that Darlinghurst P&C had not been provided with a copy of the Audit Report and requested that the Minister provide it. I observe here that the Minister declined to provide a copy of the Audit Report to Darlinghurst P&C and it did not receive a copy of the Audit Report until the Minister served evidence on the hearing of this application.
The Darlinghurst P&C Response expressed several detailed grounds upon which it alleges that the Minister erred in exercising the right to terminate the Licence Agreement. In summary, these are as follows:
The Minister failed to engage with Darlinghurst P&C in connection with any of the allegations set out in the Notice of Termination.
The Minister denied Darlinghurst P&C the right to remedy the alleged Events of Default or to be heard before the Licence Agreement was terminated as required by cl 7.7 of the Operating Guidelines.
The Minister’s unilateral decision to terminate the Licence Agreement was inconsistent with the obligation to act reasonably and with fair dealing having regard to the interests of the parties.
The Minister’s decision to issue the Notice of Termination was based, at least in part, upon breaches that had occurred more than four years ago and, in many instances, predated the current Darlinghurst P&C Executive and occurred before the Licence Agreement was varied in October 2023.
The Minister’s reliance on overcharged session fees is unfounded insofar as the increase in session fees was the result of general inflationary pressures experienced across the Australian economy in 2022 and 2023, the fees charged at similar OOSH services in the local area, and that Darlo Play Centre’s board and Darlinghurst P&C made the joint decision to increase fees for the OOSH service from the start of term 1 2024. In any event, Darlinghurst P&C admitted that it overlooked the formal requirement to seek the consent of the Minister, however considered that this oversight could be easily remedied.
The Minister’s reliance on assertions of conflicts of interest is unfounded insofar as the allegations were historical and the existing members of Darlinghurst P&C’s Executive were elected in July 2022. Relevantly, no current member of Darlinghurst P&C Executive was, at the time of the Minister’s decision, alleged to have a conflict of interest and, to that extent, any concern had already been remedied by the time of the decision.
The Minister’s reliance on late payment of Licence Fees is unfounded. It was not made clear to Darlinghurst P&C when it is alleged that Darlinghurst P&C were late in paying Licence Fees. In any event, at the time of the Minister’s decision, Darlinghurst P&C was not in breach of the Licence Agreement due to non-payment.
The Minister’s reliance on the failure of Darlinghurst P&C to hold meetings was based on false or misleading information. Darlinghurst P&C’s Executive, the director of Darlo Play Centre and Darlinghurst Public School’s relieving principal(s) meet once or twice a term and, during those meetings, an update on Darlo Play Centre’s operations and performance is provided to all attendees. In addition, meetings between the director of Darlo Play Centre and the relieving principal(s) have been held regularly since the Variation Agreement was entered into.
The Minister’s reliance on Darlinghurst P&C’s failure to provide regular newsletters to the Darlinghurst Public School parents and community is misplaced because it could be easily remedied and does not justify the extreme measure of termination.
The Minister’s reliance on the allegation of alleged irregularities in financial reporting is misplaced in two ways:
(a) There are two ABNs associated with Darlinghurst P&C and Darlinghurst P&C is not aware of any instances of the wrong ABN being cited across Darlinghurst P&C’s financial reporting, tax records and insurance documents. In any event, the Minister did not specify which documents included an incorrect ABN to enable Darlinghurst P&C to address these alleged deficiencies. (b) Darlo Play Centre’s audited financial statements do not include provisions for employee entitlements because, having regard to Darlinghurst P&C’s small revenue base, Darlinghurst P&C’s accounts are prepared on a cash accounting basis, not an accruals basis, and therefore no such provision is required.
(a) Darlinghurst P&C is unaware of any reason why it cannot pay staff above award rates, particularly where Darlo Play Centre is in an affluent high socio-economic area, where the cost of housing is high and Darlinghurst P&C is motivated to retain high-performing and dedicated staff to ensure the highest quality care for children by remunerating Darlo Play Centre’s staff at approximately 25% above the Children’s Services Award. (b) The Darlinghurst P&C Executive made a decision in December 2024 to pay a Christmas bonus totalling $1,200 to four staff members of $150 each and $300 each to Ms Catzel and Ms Wong. This was the first bonus they had received since Christmas 2020 and it was paid in recognition for their performance throughout 2024. (c) The expenses incurred by Ms Catzel in the sum of $21,000 for which she was reimbursed is standard practice for an employee or volunteer. These reimbursements were approved by Darlinghurst P&C’s accountant, Darlo Play Centre’s board or Darlinghurst P&C’s Executive. Further, the sum of $21,000 appears to refer to a multi-year period and includes, among other things, attendance at professional development/OOSH-related conferences, membership of professional bodies, groceries for service use, IT equipment, stationery and art and craft materials.
The Minister’s reliance on the allegation that Darlinghurst P&C had “surplus funds” was misplaced because that fund, understood by Darlinghurst P&C, was an unencumbered cash balance (as distinct from an operating surplus). In recent years, Darlo Play Centre has only earned a limited trading surplus which it could distribute because of declining student enrolments at the Darlinghurst Public School and Darlo Play Centre. For the first four months of 2025 the service ran at a small loss. Darlinghurst P&C retains the unencumbered cash balance as a risk mitigation measure to ensure that it can meet all liabilities for any reason. This is prudent financial practice.
The Minister acted improperly in relying on the “numerous complaints from parents of the OOSH service regarding safety concerns, supervision, food handling and management of the service” insofar as there is an insufficient basis for that proposition. Darlinghurst P&C is aware of only one written complaint received in July 2024 and passed onto the NSW Early Learning Commission. That complaint related to a specific incident involving one child and was fully resolved in June 2025. It is unclear why the Department did not notify Darlinghurst P&C of these “numerous complaints” if they had, in fact, received “numerous complaints”.
The Minister has failed to provide sufficient transparency and access to documents. The allegations made in the Notice of Termination are of a vague and generalised nature and, despite being particularly serious, the Audit Report and complaints on which the allegations made were based were not provided to Darlinghurst P&C.
The Darlinghurst P&C Response also observed that the Minister’s decision had caused reputation damage and prejudice, referencing: an article published by the Daily Telegraph on 21 May 2026 titled “Darlinghurst childcare centre to lose licence over child safety fears”; and an article published by the Sydney Morning Herald on 24 May 2026 titled “The inner Sydney school, the warring parents and a missing principal”. Both articles refer to and canvass the Minister’s termination of the Licence Agreement. The Darlinghurst P&C Response suggested that the Minister’s decision had generated significant angst within the community and amongst local parents, and negative publicity, which is likely to exacerbate already declining enrolments at Darlinghurst Public School and Darlo Play Centre.
On 26 May 2026, the Member of Parliament for Sydney, Alex Greenwich, sent a letter to the Minister on behalf of Darlinghurst P&C regarding the Notice of Termination. Mr Greenwich stated that that he had “met with over thirty concern parents, including the P&C Executive members” and that “[a]ll of them had reiterated that the OOSH is operated professionally, is a pillar of the school community, and is staffed by trusted persons who provide an essential service”.
Mr Greenwich said that Darlinghurst P&C is seeking an independent review of the termination, a copy of the Audit Report, a right of reply and a meeting with the Minister, ministerial or departmental staff, to discuss the matter. Mr Greenwich concluded (emphasis in original):
Could you please ensure natural justice is upheld, meet with the P&C and review the termination to ensure that the Darlo P****lay Centre remains parent-controlled?
I appreciate you taking the time to outline your concerns and to share the perspective of your family and the broader school community. I acknowledge the significant role that OOSH services play in supporting children, families and school communities, and I recognise the long-standing contribution that DPC has made over many years.
I also acknowledge the distress and uncertainty this matter has caused for students, parents, carers, staff and volunteers associated with the service. It is clear from your letter that the school community values the relationships, continuity of care and community-based model that DPC has provided.
The Department must ensure that all services operating on NSW public school sites comply with the governance, financial, contractual and regulatory requirements expected of organisations entrusted with the care of children in the operation of services on government premises.
An audit undertaken by the Department identified a range of concerns relating to the governance and operation of the service. These matters were considered seriously and inform the Department’s decision to terminate the existing license agreement effective 3 July 2026. The decision to terminate the license agreement was not made lightly and followed careful consideration of the matters identified.
In addition to concerns identified through the audit process, child safety concerns have been reported to the NSW E****arly L****earning Commission. The safety, rights and best interests of children must remain the paramount consideration in every decision concerning early childhood education and care services operating on NSW public school sites.
I note your concerns regarding transparency, the opportunity for DPC to respond to the issues raised, and the impact of the decision on families and staff.
The Department will ensure clear communication is provided to families regarding next steps, continuity of care arrangements, and the process for future service provision at the school.
On 5 June 2026, the Department appointed Whoosh Care as the interim OOSH provider for Darlinghurst Public School. Whoosh Care are to commence operations from Day 1 of Term 3 2026 (being 20 July 2026). Mr Futia sent an undated letter to parents and carers advising them of that fact.
On 10 and 18 June 2026, Whoosh Care sent an email to parents and carers introducing Woosh Care as the incoming OOSH provider for Darlinghurst Public School.
This involves a private provider, Whoosh Care, replacing the community based provider, Darlinghurst P&C.
On 19 June 2026, Mr Yardley sent an email to Mr Futia stating that unless the Termination Notice was withdrawn by 4pm on 22 June 2026, Darlinghurst P&C would approach the court by filing a summons (a draft copy of which was attached to that email).
On 19 June 2026, Mr Futia sent a letter by email to Mr Yardley replying to the Darlinghurst P&C Response in which he stated that the Minister’s position as set out in the Notice of Termination “remains final” (Minister**’**s Reply).
Part of the Minister’s Reply addresses a number of the matters contained in the Darlinghurst P&C Response, including amongst other things that:
None of the matters raised in the Darlinghurst P&C Response, including reference to comparable charges or inflationary pressures, justify the disregard of the fees process as provided in the Licence Agreement, which is fundamental in ensuring that the Minister (as licensor) has oversight and control of fees charged to families. The Minister’s Reply notes that “[t]he fact that families may not have formally complained is not relevant”.
Darlinghurst P&C fundamentally misunderstood its obligations under the Licence Agreement in respect of conflicts of interest, further noting that “[t]he fact that the [Minister] entered into the Variation Agreement subsequent to [a breach of confidentiality obligations] is irrelevant” because the Minister “only became aware of these conflicts of interest in the Audit Report …”.
The nine instances of late payment identified in the Audit Report demonstrate a sustained pattern of non-compliance with a fundamental contractual obligation under the Licence Agreement and it is irrelevant whether the Minister notified Darlinghurst P&C of these shortcomings.
The Darlinghurst P&C Response failed to address the fact that the Licence Agreement was issued to it under a particular ABN and, despite that, various documents including audited financial statements, BAS and insurance records, referenced a different ABN in connection with Darlinghurst P&C’s operations. This raised considerable issues concerning governance and reporting obligations.
Regardless of the concession available to P&C Darlinghurst for the purposes of financial reporting on leave accruals (as identified in the P&C Darlinghurst Response), the existence of employee leave entitlements of $98,922.25 nonetheless represent a real and growing financial liability which should have been disclosed in audited financial statements presented to the P&C Annual General Meeting.
The concerns related to the absence of documented justification for over-award payments, payments to Ms Catzel during non-term time that appear inconsistent with her contract, and bonus payments without contractual basis or Board approval reflect inadequate and opaque payroll controls (as opposed mere generous remuneration). Rather, these payments “demonstrate that funds that otherwise would be invested back into the school were being diverted”.
Despite an absence of any documented policy governing surplus fund management and Darlinghurst P&C’s obligations to the P&C Association under the licence, a private rationale that is both undocumented and undisclosed does not satisfy the Licence Agreement’s governance requirements. In any event, despite the surplus fund of Darlinghurst P&C totalling approximately $156,666.15 in December 2025, there has not been any contribution to the P&C Association to support its ongoing activities or community initiatives.
Also on 19 June 2026, the solicitors for the Minister (Holding Redlich Solicitors) sent an email to Mr Yardley informing him that they had instructions to accept service of the summons.
On 26 June 2026, I granted leave to Darlinghurst P&C to file in court the summons dated 26 June 2026 and the supporting affidavit of Mr Yardley affirmed 26 June 2026, abridged time for the service of the summons and stood over the hearing of the summons to 30 June 2026.
At the hearing on 30 June 2026, I granted leave to Darlinghurst P&C to file the amended summons. In the amended summons, Darlinghurst P&C seeks the following substantive and final relief:
Substantive interlocutory orders
Upon the Plaintiff giving the usual undertaking as to damages:
5 orders that the defendant be restrained until 5pm on the date of the final hearing or until further order, from:
a. taking any steps to enforce the purported termination made on 14 May 2026 of the Licence (as varied) for out of school hours service at a NSW school between the plaintiff and the defendant (Licence); and
b. preventing the plaintiff from operating the OSHC Service from the Premises at the School as defined in the Licence.
6 An order that the defendant pay the plaintiff’s costs of the interlocutory application.
FINAL RELIEF
7 A declaration that the defendant has not validly terminated the Licence.
8 A declaration that the defendant is not entitled to terminate the Licence on the bases set out in the notice dated 14 May 2026.
9 Relief against forfeiture.
10 Costs.
11 Such further or other order as this Court sees fit.
The task of a court determining whether to exercise the power to grant an interlocutory injunction is to do so in a manner which achieves justice between the parties pending the final hearing of the proceedings.
This was expressed in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63, Gleeson CJ at [12] stating:
… The justice and convenience of imposing interim restraint, pending the hearing of the final action, if it exists, lies in the need to prevent the practical destruction of that right before there has been an opportunity to have its existence finally established.
The principal inquiries to be made in deciding whether to grant an interlocutory injunction have been expressed in slightly different terms, but to the same effect.
In Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1986] HCA 58, Mason ACJ at [11] said:
… In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction.
… the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. …
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:
The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.
By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring [sic] to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.
The inquiry involving the balance of convenience is determined by whether the inconvenience or injury the plaintiff is likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury the defendant is likely to suffer if an injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1, Kitto, Taylor, Menzies and Owen JJ at 622–623. The plaintiff bears the onus of establishing that the balance of convenience lies in favour of granting the interlocutory injunction: O’Neill, Gummow and Hayne JJ at [65], [71].
While the factors to be taken into account in determining where the balance of convenience lies will vary with the circumstances of each case, they most often include the strength of the plaintiff’s case, the hardship to the parties and third parties, delay, the utility of the proposed orders and the sufficiency of the plaintiff’s undertaking as to damages.
The strength of the party’s case for final relief is an important consideration in determining where the balance of convenience lies, there being a connection between the inquiry about the serious question to be tried and the balance of convenience. In Warner-Lambert Company LLC v Apotex Pty Ltd (2014) 106 IPR 218; [2014] FCAFC 59, Allsop CJ, Jagot and Nicholas JJ at [70] said:
Whether an applicant for an interlocutory injunction has made out a prima facie case and whether the balance of convenience favours the grant of such relief are related questions. It will often be necessary to give close attention to the strength of a party’s case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief especially if the outcome of the interlocutory application is likely to have the practical effect of determining the substance of the matter in issue or if other remedies, including an award of damages, or an award of compensation pursuant to the usual undertaking, are likely to be inadequate.
The stronger the prima facie case for final relief and therefore the likelihood of success, the less is needed for the balance of convenience in favour of the grant of the interlocutory injunction: BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45, Edelman J at [216].
The hardship to the parties, and the nature of that hardship, is a central feature in the discretionary considerations to be addressed in the balance of convenience. It requires the court to assess the harm to the plaintiff if there is no injunction and the prejudice or harm to the defendant if the injunction is granted: Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156, Dowsett, Foster and Yates JJ at [62]. The question of whether damages would be an adequate remedy for the plaintiff must always be considered as part of this inquiry, which “involves an assessment by the court as to whether the plaintiff would, in all material respects, be in as good a position if he were confined to his damages remedy, as he would be in if an injunction were granted”: Samsung at [62].
The interests of third parties are also relevant to the balance of convenience, including any disadvantage or hardship caused to them if an injunction were refused, and whilst the weight of those matters depends on the circumstances of the case, they will rarely be decisive: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1; [1998] HCA 30, Brennan CJ and McHugh, Gummow, Kirby and Hayne JJ at [65]–[66].
The giving of an undertaking as to damages by the plaintiff is an essential condition to the grant of an interlocutory injunction, unless there are exceptional circumstances: First Netcom Pty Ltd v Telstra Corp Ltd (2000) 101 FCR 77; [2000] FCA 1269, Beaumont, Burchett and Emmett JJ at [22]; Goater v Commonwealth Bank of Australia [2014] NSWCA 265, Ward JA at [92]. If it is demonstrated that the plaintiff has no assets, the undertaking offered may be of no assistance, although there is no inflexible rule that the plaintiff should be denied interlocutory relief if a meaningful undertaking cannot be given: Organic Marketing Australia Pty Ltd v Woolworths Ltd [2011] FCA 279, Katzmann J at [69], citing Caravelle Investments Ltd v Martaban Ltd (1999) 95 FCR 85; [1999] FCA 1505, Finkelstein J at [25]. If it is known that a plaintiff does not have sufficient resources to satisfy an undertaking as to damages, that may provide a basis on which to refuse an interlocutory injunction: Bond v Gray [2013] NSWSC 1793, Lindsay J at [29]–[30].
Clause 28.2 of the Licence Agreement provides for an express obligation that the parties will act in good faith in connection with the Licence Agreement, including to resolve any disputes.
As observed by the authors of Cheshire & Fifoot, Law of Contract (12th ed) at [10.44] (citations omitted) (italics in original):
[10.44] … Many commercial contracts contain express provisions requiring a party to act in good faith. Such provisions have been enforced in a number of cases. It would seem that the meaning of good faith is the same whether the obligation is implied or express, unless this is clearly not intended.
The precise content of the duty to act in good faith has been the subject of much judicial and extra-curial debate: see Cheshire & Fifoot, Law of Contract (12th ed) at [10.44] and the authorities cited there.
The content of the duty of good faith is context dependent and “will not call for the same acts from all contracting parties in all cases”: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 383 ALR 577; [2010] NSWCA 268, Allsop P at [17].
In Macquarie International, Allsop P observed at [12] that the usual content of an obligation of good faith that can be extracted from the authorities is as follows:
[12] …
(a) obligations to act honestly and with a fidelity to the bargain;
(b) obligations not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for;
(c) an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.
The usual content of the obligation of good faith can be extracted from cases such as Renard Constructions, Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; 69 NSWLR 558; Alcatel Australia v Scarcella [1998] NSWSC 483; 44 NSWLR 349, and United Group Rail Services Ltd is an obligation to act honestly and with fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and the provisions, aims and purposes of the contract, objectively ascertained.
There is a duty to cooperate in all classes of contract under Australian law, which is expressed in positive terms (what a party must do) and in negative terms (what a party must not do). The duty is conditioned by both what is necessary in the circumstances and by the notion of reasonableness: Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at [28]–[29] (French CJ, Bell and Keane JJ). The basis for its existence has progressed through several historical strands and been the cause of much debate.
In Barker, French CJ, Bell and Keane JJ at [24]–[25] observed that debates about characterising terms implied in law in all contracts as implications or rules of construction do not necessarily result in practical differences, and used the statements of principle in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51 by Mason J at 607 as an example where:
It has been accepted in this Court that some rules treated as implications of terms in law in particular classes of contract, or contracts generally, can also be characterised as rules of construction...
As mentioned above, the criterion of “necessity” as supporting the implication of a term was identified in Barker by French CJ, Bell and Keane JJ at [28]–[29] as connecting implications in law and implications in fact.
The majority in Barker at [37] describe the duty to cooperate as applying to contracts generally, by universal implication, and that it directly relates to contractual performance, which explains why it could be characterised as a rule of construction. The duty is confined by necessity, as described above, regardless of whether that implication is characterised as a rule of construction (at [29]).
It has been emphasised that care must be exercised in identifying the content and operation of an implied duty to cooperate so that it is not at odds with the express terms agreed by the parties: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (Campbell High Court decision), Gummow, Hayne, Heydon and Kiefel JJ at [168].
The duty to cooperate is informed by the express terms of the contract so as to afford the other party the benefit of what they contracted for; it is not an obligation to act generally in the other party’s best interests or to act as if contractual provisions exercisable to one party’s advantage and the disadvantage of another party had ceased to exist: see Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1; [2012] VSCA 209, Nettle JA at [54], citing Mackay v Dick (1881) LR 6 App Cas 251; Butt v M***’*Donald (1896) 7 QLJ 68; Secured Income and Australis Media Holdings Pty Ltd v Telstra Corp Ltd (1998) 43 NSWLR 104; [1999] NSWSC 246. Another way of saying the same thing is that the duty of cooperation “does not extend to being nice”: Beerens, Nettle JA citing Council of the City of Sydney v Goldspar Australia Pty Ltd (2006) 230 ALR 437; [2006] FCA 472, Gyles J at [162].
In Wolfe v Permanent Custodians Ltd [2013] VSCA 331, Warren CJ, Neave and Whelan JJA at [28] said:
Although the duty to co-operate is broadly stated in Butt v McDonald, the scope of the duty is defined by what has been promised under the contract; it is not a general duty to ensure another party obtains an anticipated benefit.
[117] … the law will imply, in appropriate circumstances, a positive obligation to take action (to co-operate and to do all such things as are necessary to enable the other party to have the benefit of the contract), and a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract.
[118] The relevant duty ‘is a duty to afford the other party the benefit of what he has contracted for; not a duty to act generally in the other party’s best interests. A term implied by law cannot be used as a basis for imposing on a party something commercially advantageous to the other party but for which the contract does not provide. The implied term is necessarily informed by the express terms of the contract. Thus, this Court has not accepted contentions that a term implied by law can, in effect, turn a contractual non-exclusive licence into an exclusive one; or require a party to act as if an express contractual right did not exist. As the Court of Appeal of the Supreme Court of Western Australia recently observed, the term implied by law, whether expressed positively or as a negative covenant, is not only limited by the criterion of necessity but must relate to bringing about something which the contract requires to happen. Even more recently, the Court of Appeal of the Supreme Court of Queensland has held that the implied duty to co-operate is ’conditioned’ by the concept of reasonableness.
[278] The above decisions make clear that the obligation to ensure that the other party has the ‘benefit of the contract’ is not an obligation to ensure that the contracted arrangement is broadly to the other party’s benefit, nor an obligation to ensure that the arrangement operates in the most commercially beneficial way for the other party. Nor is it an obligation to act so that the other party receives benefits which the contract anticipates but does not promise — it is simply an obligation to cooperate so that the other party gets the fundamental promises they have contracted for, and a corresponding negative obligation not to deprive the other party of that benefit.
[279] It follows that an alleged obligation to afford the other party the benefit of the contract cannot conflict with any express term of the contract. In Campbell v Backoffice Investments Pty Ltd, Gummow, Hayne, Heydon and Kiefel JJ stated that care must be taken in identifying ‘both the content and operation of an implied obligation to co-operate lest it be at odds with the terms upon which the parties have expressly agreed’.
[280] The cases also illustrate that the ‘benefit of the contract’ is distinct from, and does not always precisely coincide with, the contract’s apparent commercial purpose. The ‘benefit of the contract’ is performance of the fundamental contractual promises. The commercial purpose may be described in terms that extend beyond the performance of the contract to include things which the parties hope or expect, but are not obliged, to achieve. Outcomes which a party is not obliged to provide lie beyond the scope of the ‘benefit of the contract’.
[127] The reference to the bargain being ‘seriously undermined’, and the references to ‘hinder’, or ‘impede’ show that a test of impossibility of performance sets the bar too high. In our opinion, conduct may hinder or prevent the fulfilment of a condition and constitute a breach of contract even though it does not render performance impossible.
[128] As already observed, the term is implied because it is necessary in order to make the contract effective. Freedom to engage in conduct that substantially impedes the opportunity of the other party to satisfy the conditions of the contract would entirely undermine the bargain. The term is implied because it is necessary for the integrity of the bargain to prevent the parties from engaging in such conduct.
In summary, the duty to cooperate implied by law into contracts generally consists of two aspects: a positive aspect and a negative aspect, broadly formulated as follows:
It is a general rule applicable to all contracts that each party agrees, by implication, to do all things reasonably necessary on their part to enable the other party to have the benefit of the contract (positive aspect): see Secured Income at 607; Australis at 123; Peters at [36]; Barker at [25], [29] and [37]; Adaz Nominees at [117].
The law also implies a negative covenant into contracts not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract (negative aspect): Peters at [36]; Australis at 123; Ada**z Nominees at [117]; Bensons at [127]–[128].
In all of these variously expressed principles, it should not be forgotten that what is “necessary” to be done by the party under the implied duty to cooperate in contracts generally must depend on the circumstances (to adopt the words used in Mackay v Dick) and the intention of the parties as manifested by the contract itself (to adopt the words used in Secured Income).
As mentioned, the duty of a party to cooperate is informed by the express terms of the contract such that it only requires cooperation in providing the benefits promised by that party, and does not extend to bringing about something which the contract does not require to happen: Australis at 124; Beerens at [54].
It was raised, albeit not pressed, by the Minister that the declarations sought at prayers 7 and 8 as the final relief sought in the amended summons are inappropriate in these circumstances. It was put that it is not appropriate for the court to declare that the Minister is not entitled to terminate the Licence Agreement in circumstances where final injunctive relief restraining the Minister from doing so is not also sought (T26–27).
Whilst I agree that the final relief desired by Darlinghurst P&C could be better effected as an injunction (as opposed to mere declaratory relief), that does not suggest that there is no serious issue to be tried at the final hearing. Rather, with every declaratory order there is an implied liberty to apply reserved so that the court can make any appropriate consequential order that may be required to enforce it, including an injunction. This point was discussed recently in Palmer v Australian Securities & Investments Commission (No 2) [2025] FCA 1425 by McElwaine J at [35]–[36] in the following terms:
[35] … An applicant having secured declaratory relief is at liberty to apply for consequential coercive relief: Royal Insurance Co Ltd v Mylius (1926) 38 CLR 477 at 497, Isaacs J; EB 9 and 10 Pty Ltd v The Owners Strata Plan 934 [2018] NSWCA 288; (2018) 98 NSWLR 889 at [39], Barrett AJA. Isaacs J in Royal did not reference injunctive relief as the coercive measure. Nor did Barrett AJA in EB 9 at [39]:
The making of the declaration therefore causes the right of the plaintiff that the declaration has exposed to be “enforced” not merely according to the ordinary parlance already noticed but also because the declaration carries within it an entitlement of the plaintiff to obtain specific and coercive relief in further vindication of the right should the need to do so arise.
[36] This is not to overlook the subsequent decision of the High Court in Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 276 CLR 519 at [48] and [53], where Gageler and Gleeson JJ stated that a binding declaration of right conclusively determines the rights of the parties, and its efficacy does not depend on ancillary coercive relief. That says nothing about the character of ancillary coercive relief which may in some cases be by way of an injunction, but need not be.
Turning to the substance of the issues relating to whether there is a serious question to be tried that the Minister has acted in breach of the Licence Agreement, I consider that there is a strong case on a seriously arguable basis that the Notice of Termination is invalid because of the failure of the Minister to adhere to the procedure contained in the Licence Agreement when an Event of Default arises, which transgressed the Operating Guidelines (which are terms of the Licence Agreement), the express obligation of good faith and the implied duty to cooperate in the Licence Agreement.
Clause 20 of the Licence Agreement provides for the exercise of the Minister’s rights to terminate it. In circumstances where there is an Event of Default as defined in the Licence Agreement, cl 20.2(c) provides the Minister with the discretion to do any one of three things: suspend all or part of the rights of Darlinghurst P&C, exercise any of the Minister’s rights under the Licence Agreement or end the Licence Agreement. In the present case, the Minister has decided to end the Licence Agreement based on alleged Events of Default as detailed in the Notice of Termination.
By virtue of cl 9 of the Licence Agreement, the Operating Guidelines form part of the Licence Agreement. As a result, the rights in cl 20.2 of the Licence Agreement must be read in light of the obligations contained in the Operating Guidelines.
Clause 7.7 of the Operating Guidelines sets out the procedure which the Minister “proposes” would occur upon an Event of Default. In summary, that procedure states that the Minister contacts Darlinghurst P&C by email to inform it of the Event of Default and, depending on the circumstances, for the Minister to ask Darlinghurst P&C to immediately remedy the Event of Default, provide a plan with a timeframe for remedying the Events of Default, advise how Darlinghurst P&C will ensure that the Events of Default do not occur again and give reasons why the Minister should not take steps to terminate the Licence Agreement due to the occurrence of the Events of Default. Following these steps, the procedure in cl 7.7 of the Operating Guidelines further elaborates on the process by which the Events of Default are to be remedied, including by meetings to be held with Darlinghurst P&C.
As well as being express terms of the Licence Agreement by reason of cl 9 of the Licence Agreement, the procedure in cl 7.7 of the Operating Guidelines appears to inform the express obligation of good faith as outlined in Macquarie International and Paciocco insofar as it establishes the manner by which the Minister is to act reasonably and use fair dealing in engaging with Darlinghurst P&C in relation to Events of Default under the Licence Agreement, having regard to the objectively ascertained interests of the parties and to the provisions, aims and purposes of the Licence Agreement. It is seriously arguable that even though cl 7.7 uses the word “proposes”, it does not prevent the proposed procedure from being used to inform the Minister’s good faith obligation.
In the same way, applying the principles described in Secured Income, Australis, Peters, Barker and Adaz Nominees, the implied duty to cooperate is also informed by the proposed procedure in cl 7.7 of the Operating Guidelines because it goes to the heart of what the Minister has outlined as a process to be followed if an Event of Default occurs to enable Darlinghurst P&C to have the benefit of the licence granted to it under the Licence Agreement. In light of the fact that it is the power of the Minister to terminate the Licence Agreement, which is purported to have been exercised, the failure of the Minister to adhere to the contractually proposed procedure for dealing with Events of Default is a seriously arguable breach of the implied duty to cooperate under the Licence Agreement.
The fact that the Minister proposed to follow the procedure in cl 7.7 of the Operating Guidelines with respect to the Events of Default as part of the express obligation of good faith and the implied duty to cooperate is further reinforced by the objectives of the Licence Agreement as expressed in cl 3 of the Licence Agreement: to support Darlinghurst P&C to conduct a high quality OSHC Service that is compliant with the Applicable Laws, to provide continuity of care for the benefit of the children receiving such services, parents of the children, and Darlinghurst Public School; and to establish an ongoing collaborative relationship to enable Darlinghurst P&C to utilise its expertise and resources, in combination with Darlinghurst Public School’s provision of the Premises, to conduct the OSHC Service.
On a serious question to be tried basis, none of the steps set out in cl 7.7 of the Operating Guidelines appear to be inconsistent with the right of the Minister to terminate the Licence Agreement under cl 20.2 but are instead consistent with it and inform the basis on which the right to terminate the Licence Agreement for an Event of Default is to be exercised. Accordingly, cl 11.1 of the Licence Agreement appears to have no force to suggest that cl 7.7 of the Operating Guidelines is inconsistent with cl 20.2 of the Licence Agreement.
In the present case, the evidence reveals that the Minister did not remotely follow the proposed procedure in cl 7.7 of the Operating Guidelines. Instead, the Notice of Termination was issued based on multiple Events of Default, none of which had been advised previously to Darlinghurst P&C. The Minister did not then provide Darlinghurst P&C with any opportunity to:
remedy the Events of Default;
provide a plan for the Events of Default to be remedied;
state how it would ensure that the Events of Default would not occur again; or
give any reasons why the Minister should not terminate the Licence Agreement.
In further seriously arguable breach of the procedure in cl 7.7 of the Operating Guidelines, there was also no attempt by anyone on behalf of the Minister to meet with Darlinghurst P&C “as required” until the Minister was satisfied the Event of Defaults were remedied and steps had been taken to prevent similar Events of Default occurring in the future.
These failures appear to be all the more egregious when the Audit Report expressly states that each of the issues which had been identified as arising from Darlinghurst P&C’s operation of Darlo Play Centre were capable of remedy within a specified timeframe by recommended actions which could be undertaken by Darlinghurst P&C. Notably, the Audit Report was never provided to Darlinghurst P&C to assist it in participating in the procedure identified in cl 7.7 of the Operating Guidelines.
The Minister’s failure to follow the procedure in cl 7.7 of the Operating Guidelines is also a seriously arguable breach of the objectives enumerated in cl 3 of the Licence Agreement because it does not demonstrate support for Darlinghurst P&C in conducting Darlo Play Centre nor does it demonstrate a collaborative relationship with Darlinghurst P&C to enable it to do so.
I do not regard the mere fact that Mr Futia met Mr Yardley at some unspecified date before the Notice of Termination was issued as any evidence of compliance with the procedure in cl 7.7 of the Operating Guidelines. On Mr Futia’s scant version of the meeting, he simply informed Mr Yardley that the Minister had determined to terminate the Licence Agreement and the Notice of Termination would be issued: in other words, a fait accompli. That could hardly be assessed as any meaningful engagement with Darlinghurst P&C of the type contemplated by the terms of the Licence Agreement.
Nor did the engagement between the Department and Darlinghurst P&C after the Notice of Termination had been issued meet the requirements of the procedure in cl 7.7 of the Operating Guidelines. To suggest that any communications after the dark shadow of the Notice of Termination had been cast over the relationship between the Minister and Darlinghurst P&C met what was required under the Licence Agreement would make a mockery of the contractual standards of cooperation and good faith that they were required to meet.
The Minster also submits that I must take into account the overarching public interest in the smooth and effective discharge of the Minister's functions as a regulator and that this is not just a commercial transaction, which does not require it to volunteer the Audit Report (T34). Even if that argument is correct, I consider that it is seriously arguable that the Minister was required to engage with Darlinghurst P&C to put all of the matters contained in the Audit Report on which reliance was placed as Events of Default and provide it with an opportunity to remedy them before the right to terminate in cl 20.2 of the Licence Agreement could be exercised. That did not happen in the present case.
Considered in the most essential way, it appears that the Minister has never given Darlinghurst P&C the proper opportunity to address and take steps to remedy the matters which the Audit Report generally categorised as “Improvement Required”. These apparent failures by the Minister should be tested at a final hearing.
Applying the principles in BMW Australia, because I consider that Darlinghurst P&C has a strong prima facie case for final relief and a likelihood of success, less is needed to satisfy me that the balance of convenience lies in favour of granting the interlocutory injunction in the present case.
If the interlocutory injunction is not granted, then Darlinghurst P&C will suffer monetary loss, although much of that loss will in all likelihood be compensable by damages after a final hearing, as a long term operator of Darlo Play Centre it is unlikely that Darlinghurst P&C could ever be adequately compensated for the loss of reputation or intangible goodwill it has built with the local community as a provider of childcare services to meet their needs. This is demonstrated in the strong terms of the letters sent in May and June 2026 by the school community after they heard of the termination of the Licence Agreement and the community representations made to Mr Greenwich MP, which he relayed to the Minister on 26 May 2026. Such matters are notoriously difficult to quantify and I am satisfied that damages would not be an adequate remedy in respect of them.
There are additional balance of convenience factors in favour of the interlocutory injunction being made in the present case by way of the detriment which is likely to be suffered by third parties if such relief is not granted. These third parties and their likely detriment are:
The two employees of Darlinghurst P&C who are likely to be made redundant if the Licence Agreement is terminated at an estimated cost to Darlinghurst P&C of $52,000 in statutory entitlements. Those employees have no redress against the Minister if the Notice of Termination is ultimately found to be invalid after the final hearing.
The children currently attending Darlo Play Centre will have their continuity of care severely disrupted by the loss of their current carers and the replacement with new carers employed by Whoosh Care.
The parents of the children currently attending Darlo Play Centre will also be disrupted by having to re-enrol their children with a private provider, Whoosh Care, on different terms and conditions than those offered by the community provider, Darlinghurst P&C.
As part of the balance of convenience, the Minister points to the likelihood it will lose Whoosh Care as the proposed operator of Darlo Play Centre if an interlocutory injunction was granted and anticipates that it will have to compensate Whoosh Care for a significant amount. However, those consequences sound in money alone for which the Minister is able to pay and for which the undertaking as to damages from Darlinghurst P&C will compensate the Minister. It is also loss which has been brought about by the Minister’s own actions. There is no suggestion by the Minister that Darlinghurst P&C will not be able to meet that undertaking (T39).
For these reasons, I consider that the balance of convenience tilts heavily in favour of granting the interlocutory injunction restraining the Minister from taking any steps to act or rely upon or enforce the Notice of Termination as the basis for terminating the Licence Agreement until the final determination of these proceedings.
The status quo is that Darlinghurst P&C holds a valuable right, which is to operate Darlo Play Centre under licence from the Minister, and the Minister seeks to change that status quo by terminating that right. I consider that this status quo should remain until the final hearing.
I am satisfied that this interlocutory relief achieves justice between the parties pending the final hearing of these proceedings.
I make the following orders:
Upon the plaintiff by its counsel giving the usual undertaking as to damages, until the final determination of these proceedings, the defendant is restrained from taking any steps to act or rely upon or otherwise enforce the notice of termination dated 14 May 2026 from the defendant to the plaintiff as the basis for terminating the Licence Agreement dated 8 December 2020 between the plaintiff and the defendant (as varied by the Variation Agreement dated 24 October 2023 between the plaintiff and the defendant).
The costs of the plaintiff’s application for interlocutory relief are the parties’ costs in the cause.
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Darlinghurst Public School Parents and Citizens Association
Department of Education
[2001] HCA 63
[2006] HCA 46
[1968] HCA 1
[2012] VSCA 209
[1986] HCA 58
[1998] HCA 30
(2001) 208 CLR 199
(2006) 227 CLR 57
(1968) 118 CLR 618
(2012) 39 VR 1
(2019) 269 CLR 574
(1995) 185 CLR 410
(2001) 205 CLR 126
(2009) 238 CLR 304
(1999) 95 FCR 85
(1986) 161 CLR 148
(2014) 253 CLR 169
(2006) 230 ALR 437
(2000) 101 FCR 77
(2010) 383 ALR 577
(2015) 235 FCR 199
(1998) 195 CLR 1
(2011) 217 FCR 238
(1979) 144 CLR 596
(2014) 106 IPR 218
(1993) 31 NSWLR 91
(1998) 43 NSWLR 104
(1926) 38 CLR 477
(2018) 98 NSWLR 889
(2022) 276 CLR 519