Lescap Group Pty Ltd v Pacific Resort Holding Pty Ltd

Option Deed and sale contract 13The Option Deed of 10 October 2007 described Pacific Resort as the "Owner" and Lescap Group as the "Grantee". Recital A to the deed was: "A. The Owner is the legal owner of the Assets." 14"Assets" was defined as follows: "Assets means the Assets for sale under the Contract which, for the avoidance of doubt, includes the Property." 15The "Contract" was the contract for the sale of land to be entered into on the exercise of the put or call option. The "Property" was defined as the real estate of the property at Bulwara Road, Ultimo. 16The contract for sale was an attachment to the option deed. Clause 52 of the contract for sale provided: "52. Warranties 52.1 Vendor's Warranties The vendor represents and warrants to the purchaser that each of the Warranties is true and accurate and not misleading. 52.2 Purchaser's rights to rescind In the event that prior to completion the purchaser discovers a breach of any of the Warranties, the purchaser may, by notice in writing to the vendor, rescind this contract and the provisions of clause 19 shall apply." 17Counsel for Lescap Group emphasised the width of clause 52.2, that is, that the purchaser was entitled to rescind if it discovered "a breach of any of the Warranties" (emphasis added). There was no argument about the construction of clause 52.2. Pacific Resort did not argue that there was an implied qualification to clause 52.2 that the right of rescission arose only if a breach of warranty was serious, or substantial, or material. Parties are free to agree that literal performance of an obligation of apparently little importance should be essential (Battini v Gye [1876] 1 QBD 183 at 187; L Schuler AG v Wickman Machine Tool Sales Limited [1974] AC 235 at 251, 255-256, 263). Nor did Pacific Resort argue that the right of rescission had to be exercised before the contractual date for completion. 18"Warranties" was defined as: "'Warranties' means each of the representations and warranties listed in schedule 1." 19The warranties in schedule 1 included: "Item 2 Assets Subject to the Licence Deed and anything done by the Licensee or the purchaser as at the date of the Option Deed: 2.1 The vendor is the legal owner of the Assets. 2.2 The vendor is entitled to sell and transfer the full legal and beneficial ownership of the Assets to the purchaser on the terms set out in this contract. 2.3 The vendor has not parted with the ownership, possession or control of, or disposed or agreed to dispose of, or granted or agreed to grant any option or right of pre-emption in respect of, or offered for sale, its estate or interest in the Assets. 2.4 None of the Assets is subject to any encumbrance (including, without limitation, any debenture, mortgage, charge, lien, deposit by way of security, bill of sale, lease, hire-purchase, credit-sale or other agreement for payment on deferred terms, option or right of pre-emption) or any agreement of commitment to give or create any of the foregoing. Item 3 Plant and Equipment Subject to the Licence Deed and anything done by the Licensee or the purchaser as at the date of the Option Deed: 3.1 The Vendor makes no warranty, expressly or otherwise, as to any aspects whatsoever or howsoever relating to the depreciation or the depreciated value of the Plant and Equipment and the property. 3.2 The Fixtures, Fittings and Equipment and the Plant and Equipment as at the date of the Option Deed: (a) will all be located at the property; and (b) are in the physical possession or control of the vendor." 20In the sale contract "Assets" was defined to mean the property and the "Additional Assets". "Additional Assets" was defined as follows: "(a) the Fixtures, Fittings and Equipment; (b) the Operating Equipment; (c) the Plant and Equipment; (d) the Liquor Licence; and (e) all other property and goods owned by the vendor and situated at and used in connection with the Assets; but (f) excludes the Excluded Assets." 21"Fixtures, Fittings and Equipment" was defined as follows: "(a) all furniture, plant, fixtures, fittings, finishings, wall coverings, and hotel equipment and systems (including, without limitation, the Fidelio front office system, Micros food and beverage system, TABS telephone call accounting, Wage Easy payroll system, LANmark accounting programme and RESPAK conference and catering booking package and any information contained thereon and any operating manuals in the possession or control of the vendor) located at or used in connection with the operation of the Business, including without limitation all equipment and systems required for the operation of a Car Park, kitchens, bars, laundry, administrative offices, function and meetings [sic] rooms and dry cleaning facilities, dining room, material handling equipment, cleaning and engineering equipment owned by or leased by or on behalf of the vendor including, without limitation, the Plant and Equipment, and (b) including, without limitation, replacements, substitutions, for and/or additions to any of the items referred to in paragraph (a) above and whether paid for or acquired or supplied by the vendor or the Licensee." 22"Plant and Equipment" was defined as follows: "'Plant and Equipment' means all fixed plant, equipment, hotel equipment and systems, machinery, spare parts, furniture, fixtures, fittings and other assets, fittings or chattels owned by the vendor and located at the property or owned by the vendor and used in connection with the operation of the Business considered by the purchaser as necessary for the operation of the hotel business operated from the property including, but not limited to, those listed in Schedule 5." 23"Excluded Assets" was defined as follows: "'Excluded Assets' means all property and assets, goodwill and stock owned by the Manager and all stock (including but not limited to all alcoholic and non alcoholic beverage stock including canned, bottled and bulk alcoholic and non alcoholic beverage stock, food items including tinned, fresh, and frozen food items) owned by the vendor." 24"Manager" meant AAPC Properties Pty Limited. It was the manager of the hotel before Lescap Operations took over. It traded under the name "Accor". Under its management the hotel was called The Mercure Hotel. When Lescap Operations took over the hotel was renamed The Aspen Hotel. 25There were 171 items listed in schedule 5. The schedule had been annexed to the contract whereby Pacific Resort acquired the hotel in 2004. Mrs Mina Lloyd was a director of Pacific Resort. She obtained the list from the 2004 contract for the purchase of the hotel (T287). She provided the list to Mr Allan Chung, a real estate agent acting on the sale. Mr Chung supplied the list (or three of the four pages, it is not clear which) to Mr Caplan on 20 April 2007, in response to Mr Caplan's request for a depreciation schedule. 26This being the provenance of the list, it would not be surprising if some of the assets that were in the hotel in 2004 and included on the list, might not be there in 2007. Although Pacific Resort gave a warranty as to the ownership and location of the assets in the list, it did not prepare the list at the time the warranty was given. Nor did its employees carry out a check in 2007 as to the ownership and location of the items in the list that were the subject of the warranty. 27Lescap Group asserted that there were 29 items missing. The claim was narrowed in final submissions. In final submissions, it contended that Pacific Resort was in breach of the warranties in clauses 2.1, 2.2, 2.3 and 3.2 of schedule 1 concerning the following assets: "i. Item 5: 'Video cassette recorders and players' (when considered by itself or with item 79); ii. Item 6: 'Projectors' (when considered with items 81, 85, 86, 102 and 152); iii. Item 10: 'Barbeques'; iv. Item 31: 'Garden Watering Systems'; v. Item 53: 'General Laundry Plant'; vi. Item 54: 'Washing machines' (when considered by itself or with Item 76); vii. Item 76: 'Washing machine' (when considered by itself or with Item 54); viii. Item 79: 'Video Player' (when considered by itself or with item 5); ix. Item 84: 'Slide Lens - Hotel'; x. Item 85: 'Slide projector - Hotel'; xi. Item 93: 'Portable sound system - Hotel'; xii. Item 96: '3 PC's [sic] = 1 scanner vertex comp - Hotel' (in relation to the scanner); xiii. Item 107: 'Laminating Machine' (considered by itself or with item 169); ... xv. Item 123: 'Coffee Machines - Brewmaster'; xvi. Item 141: 'Dry vacuum valet' (when considered by itself or with item 69); xvii. Item 143: 'Netbridge Computer'; xviii. Item 146: 'IDE Tech - computer'; ... xxi. Item 169: 'Laminator'." 28Lescap Group also alleged that Pacific Resort was in breach of the warranties in clauses 2.1 and 2.3 of schedule 1 in respect of "Item 38: 'Coffee making machines (expresso)'" (sic). 29Other relevant terms of the sale contract are clause 10.2 and clause 19 of the general conditions of contract. Clause 10.2 provided that "the purchaser cannot rescind or terminate only because of a defect in title to or quality of the inclusions". However, clause 41(b) of the special conditions (called "additional provisions") provided that if there were a conflict between those provisions and the printed provisions of the contract (that contained the general conditions), the additional provisions prevailed. 30By general condition 19.1.2 a party could exercise an express contractual right to rescind in spite of making a claim or requisition. 31Special condition 56 stated that the Additional Assets were included in the sale at no extra cost to the purchaser. Clause 54.7 provided that the contract was not to be construed to the disadvantage of a party because that party was responsible for its preparation.

Licence Deed 32The parties to the Licence Deed were Pacific Resort (described as the "Owner"), Lescap Group Operations (described as the "Licensee"), and Lescap Group (described as the "Guarantor"). The recitals were as follows: "A The Owner is the registered proprietor of the Assets. B The Owner and the Guarantor are parties to the Option Deed. C In consideration of the payment of the Licence Fee and of the covenants set out in this deed, the Owner has agreed with the Guarantor and the Licensee to grant a licence to the Licensee to occupy the Property and to use the Assets for the Operating Term or until its cancellation or annulment as the case may be and operate therefrom and therewith a Hotel Business. D The Licensee has represented to the Owner that it has inspected the Assets and that it was fully satisfied with their state of repair. E The Licensee has made the representations, admissions, assertions and acknowledgments herein before set out to the Owner intending the Owner to act upon them to its prejudice by granting this licence to the intent that the Licensee shall be stopped from denial or refusing to admit the matter as so set out or any of them." 33"Assets" were defined in the Licence Deed as follows: "Assets means the Property, the Fixtures, Fittings and Equipment, the Operating Equipment and the Liquor Licence." 34"Fixtures, Fittings and Equipment" was defined in the same terms as that expression was defined in the sale contract (save that the reference to "Vendor" in the definition of that expression in the sale contract was changed to "Owner"). 35By reason of the inclusion of "Plant and Equipment" as defined in the sale contract in the expression "Fixtures Fittings and Equipment", there was included in the definition of "Assets" the subject of the recitals, the items listed in schedule 5 to the sale contract. 36Clause 2.5 of the Licence Deed provided that the licence could be terminated on not less than 30 days' notice in writing if the Option Deed or the sales contract was determined, cancelled or annulled for any reason. Lescap Operations undertook to carry out refurbishment works. It was required to provide its own funds for the operation of the Hotel Business and was to pay a licence fee for the right to do so. Lescap Group guaranteed the payment of all money payable by Lescap Operations under the deed and the performance of Lescap Operations' other obligations under the deed. It agreed to indemnify Pacific Resort against any claim, loss, liability or expense incurred by Pacific Resort that was caused or contributed to by Lescap Operations' failure to comply with any obligation under the deed, or incurred because the deed was rescinded or terminated (clause 21). 37Pacific Resort does not allege that Lescap Operations was in breach of any of the obligations it assumed under the Licence Deed, except for an implied term referred to at para [11] above.

Admissibility of evidence of missing assets 38Counsel for Pacific Resort submitted that Lescap Group's evidence of breach of warranty was inadmissible as it contradicted the recitals to the Licence Deed and the Option Deed. Counsel nonetheless accepted that the admissibility of the evidence should be determined at the conclusion of the hearing and the evidence was adduced without my being asked to rule on that objection. 39I do not accept this submission. In his work "Estoppel by conduct and election", Thomson Sweet & Maxwell 2006 ed at 7-002 and 7-003, Mr Justice Handley said of estoppel by deed: "This type of estoppel is created when a deed contains one or more statements of specific fact which are adopted as the basis of the transaction. Such a statement is commonly made in a recital but can appear in the operative provisions. ... The statement must be certain to every intent, without any ambiguity. ... The estoppel only has effect between the parties and their privies in proceedings on the deed as Parke B said: 'If a distinct statement of a particular fact is made in a recital of [an] ... instrument under seal, and a contract is made with reference to that recital, it is unquestionably true that, as between the parties to the instrument and in an action upon it it is not competent for the party bound to deny the recital.' [Carpenter v Buller (1841) 8 M&W 209 at 212] When a recital or other statement in a deed is made and accepted by all parties the estoppel binds all. If the statement is only made by some the others will not be estopped." 40The relevant statements of fact in the Licence Deed relied on were the statements in Recital A that Pacific Resort was the registered proprietor of the Assets and Recital D that Lescap Operations had represented to Pacific Resort that it had inspected the Assets and had represented that it was fully satisfied with their state of repair. 41The Licence Deed was a schedule to the Option Deed. The recital to the Licence Deed that Pacific Resort was the registered proprietor of the Assets provides a context that displaces the definition of "Assets" in that recital as meaning "the Property, Fixtures, Fittings and Equipment, Operating Equipment and Liquor Licence". The Assets referred to in Recital A could only be assets, title to which was conferred by or recorded in a register. It could not apply to the items of plant and equipment for which there was no such register. 42Recital D was not that the Assets were owned by Pacific Resort, or that they were all located at the property and in the physical possession or control of Pacific Resort. Rather, the statement in the recital was that an earlier representation had been made by Lescap Operations that it had inspected the Assets and was fully satisfied with their state of repair. It can be implied from the representation that Lescap Operations had inspected the Assets, that it satisfied itself that all the assets existed. It can also be implied that it was satisfied that the Assets were located at the property as that is where any inspection was to occur. It cannot be further implied from that representation that Lescap Operations had satisfied itself that Pacific Resort owned the Assets. 43I need not decide whether, in an action on the deed, an estoppel could arise that precluded the admission of evidence contrary to the implications in the recital. That is because an estoppel by deed applies only to an action on the deed. In other proceedings the recitals can operate as an admission, but not as an estoppel. The present proceedings are not an action on the deed. The recitals to the Licence Deed do not prevent Lescap Group from proving that assets were not located at the property or owned by Pacific Resort at the date of the Option Deed. 44Nor does Recital A to the Option Deed preclude the tender of such evidence. That recital is not a statement as to what assets were physically located at the property, but only as to ownership. Clause 8.1 of the Option Deed provided that on the exercise of the put or call option the parties were regarded as having entered into the sale contract. I think the action on the sale contract is an action on the Option Deed. But as item 2 of schedule 1 of the sale contract includes a warranty by Pacific Resort that it is the legal owner of the Assets, Recital A to the Option Deed containing the same statement, must be construed as a representation by Pacific Resort only, and not as a statement made and accepted by both parties. 45Accordingly, the recitals to the Licence Deed and the Option Deed do not make the evidence relied on by Lescap Group inadmissible.

What items have been proved to be missing or not owned by Pacific Resort? 46From about May 2007 an employee of a company associated with Mr Caplan, a Mr Rajeev Dani, inspected the hotel and its contents on a number of occasions. He was manager of the hotel for a short time up to about December 2007. As earlier noted, Mr Caplan asked for a depreciation schedule for the hotel and in response received the list of assets from Mr Chung that included at least the first three of four pages of the list that became schedule 5 to the sale contract. I think it probable that all four pages were enclosed. The covering fax referred to a transmission of five pages including the cover page. It is probable that the missing page was a page missing from the exhibit to Mr Chung's affidavit, rather than from the original fax. In any event, it was open to the purchaser to obtain the whole of the schedule. There is no evidence, except for what can be implied from Recital D to the Licence Deed, as to whether Lescap Group or someone on its behalf carried out an inspection at the time of the Option Deed to check if the items or Plant and Equipment in schedule 5 were at the premises. There was a handover meeting from Accor to Lescap Operations on 13 November 2007. At that time there was a stocktake, but it does not appear that there was a check of the listed items of plant and equipment. Mr Nathan McIntosh was the Reservations Manager of the hotel in October 2007. In his oral evidence he said that he was provided with a list (which corresponds with schedule 5) to look over at the end of the changeover of operation of the hotel from Mercure when Lescap Group took control (T304). He was given the list by a Mr Tony Filippi who was the general manager while the property was run by Accor. Counsel for neither party took this evidence any further. Mr McIntosh did not say what, if anything, he did with the list. 47On or about 17 September 2008 Mr Caplan arranged for a check of which of the listed items of Plant and Equipment were still at the hotel. He was then investigating the possibility of rescission in reliance upon the warranties. That task was carried out by Ms Hayley Smith who had become the de facto manager of the hotel, and by Mr Maika Qalulu, a Duty Manager at the hotel. After Lescap Group gave notice of rescission, an inspection was made by an owner's representative, Ms Belinda Li, and by an accountant retained by Pacific Resort, Mr Victor Wong. This inspection took place on 15 October 2008. They looked for assets corresponding with the asset listing that was schedule 5 to the sale contract. Another such inspection took place on 28 October 2008 in connection with the handover of operations from Lescap Operations to a new manager, Transmetro Corporation Pty Limited. It traded under the name Metro Hospitality Group. Ms Smith and Mr Caplan undertook a further search on 20 November 2009. 48In a number of cases there is uncertainty as to precisely what is denoted by the list. There are also instances in which items of similar description appear in more than one place on the list. Lescap Group asserts in some cases that either one item number or another item number is missing. 49It was common ground that the time at which the existence of the assets is to be determined was 10 October 2007, being the date of the Option Deed. 50I will deal with the items individually.

Items 5 and 79: Video cassette recorders and players 51Item 5 stated "Video cassette recorders and players $150". Item 79 stated "Video player $100". 52The evidence of all those involved in the day-to-day operation of the hotel was that they had not seen any video cassette recorders or players in the hotel. Mr Qalulu worked at the hotel from about 2003 or 2004, except for a 12-month period between 2005 and 2006. As at 10 October 2007 he was working as the conference and catering co-ordinator. He said that during the time he worked in the hotel he had never seen video cassette recorders and players. On the occasions that a conference wished to use equipment of that nature, the hotel either had to hire or to borrow the equipment from outside sources, or the conference organisers supplied their own equipment. This was the case both before and after 10 October 2007. 53No evidence was called by Pacific Resort that such items were on the premises. There was evidence from a Mr Ladislo Blum who worked as the maintenance manager that after Lescap Operations took over management of the hotel, he arranged a cleanout of various items of equipment which he considered to present potential health or safety issues for the hotel. He said that in total there would have been a truckload of material that was moved. Neither he nor anyone else said that video recorders or players were included in this material. There would be no reason to think that they would be materials of the kind that Mr Blum was concerned about. Ms Smith said that there was a cleanup of rubbish, general boxes and cardboard, when Lescap Operations took over the hotel and offices were relocated. She denied that items such as computers, scanners, projectors, video players, or anything of that kind were thrown out (T91). One laminator, which did not work, was removed from the property within days of her arriving. 54Lescap Group has discharged its onus of showing that there were no video cassette recorders and players in the hotel at the date of the Option Deed. 55Counsel for Pacific Resort submitted that Lescap Group had not shown that these items were "Excluded Assets", that is, that it had not been shown that such equipment was owned by Accor and had been removed by it. I do not agree. Mr Qalulu's evidence establishes that there were no such items at the hotel at all, whether owned by Accor or not. 56It is unnecessary to decide on whom the onus lies of establishing that an asset was an "Excluded Asset". A similar question arises in relation to the construction of the warranties in item 2 when read with the definition of Fixtures, Fittings and Equipment that includes leased assets. I deal with the question of onus in that context below at paras [163]-[164]. 57Counsel for Lescap Group argued that even if it were found that these items were an "Excluded Asset" (or it was not established that they were not Excluded Assets) that would not be an answer to the claim for breach of the warranties in item 3.2 of schedule 1 because those warranties are given in respect of Fixtures, Fittings and Equipment and Plant and Equipment, whereas "Excluded Assets" only qualify "Additional Assets". Items may be Fixtures, Fittings and Equipment and Plant and Equipment even though they are also Excluded Assets. Whilst this argument is correct so far as it goes, it does not go far enough. I agree with the submission for Pacific Resort that the warranties in item 3.2 are given only in respect of those assets within the definitions of Fixtures, Fittings and Equipment and Plant and Equipment as are included in the contract for sale. There would be no point in the vendor giving a warranty about assets that were not being sold to the purchaser. "Excluded Assets" were not included in the sale. The warranties did not apply to them. Nonetheless, Lescap Group has established that the video cassette recorders and players were not Excluded Assets. 58For these reasons I conclude that Lescap Group has established the factual foundation for its argument that there was a breach of the warranties in respect of these items. I deal below with the question of whether the warranties do have the meaning for which Lescap Group contends.

Items 6, 81, 85, 86, 102 and 152: Projectors 59Schedule 5 included the following items and stated consideration: "6. Projectors $2,500 81. Overhead Projector - Hotel $ 100 85. Slide Projector - Hotel $ 600 86. Overhead - Hotel $ 150 102. Dir - dilkon dual lamp projector - Hotel $ 300 152. Mitsubishi Multimedia Projector $3,000" 60In her first affidavit Ms Smith set out a table which she said was a list of the Plant and Equipment referred to in the schedule which did not exist and had not existed since she commenced working in the hotel, that is, from 13 November 2007. In respect of item 6, Ms Smith said: "Overhead and other projectors do exist in the Hotel, however they are mentioned and accounted for elsewhere on the list of Plant and Equipment in Annexure 'A' as Items numbered 81, 86, 102 and 152." 61The necessary implication is that Ms Smith intended to convey that there were only four projectors in the hotel. In a later affidavit sworn on 1 September 2010 she deposed that at the inspection undertaken on 20 November 2009 she found six projectors that she knew had not been purchased by either Lescap Group or Transmetro. She said that none was a slide projector. In cross-examination she admitted that she was aware when she swore her first affidavit of there being two further overhead projectors other than those she referred to in her first affidavit. There was no satisfactory explanation for her failure to refer in her first affidavit to the existence of two further projectors. 62Mr Wong deposed that when he inspected the assets of the hotel on 28 October 2008 he identified six projectors. Mr Wong classified one of the projectors, a Dukane projector, as being a slide projector. Lescap Group submits that either there was no slide projector so that item 85 was not satisfied, or if there were a slide projector, there was only one additional projector beyond those identified in items 81, 85, 86, 102 and 152 and this did not satisfy the description in item 6 "Projectors", which, it was submitted, required the existence of at least two further projectors. 63I do not accept that the use of the plural in item 6 "Projectors", when read in the context of other items in Schedule 5 that referred to particular projectors, meant that there had to be at least two further projectors than the five listed in items 81, 85, 86, 102 and 152. Clause 1.3(a) of the Option Deed provides that unless the context otherwise requires in the Deed of Option words importing the singular include the plural and vice versa. The sale contract was part of the Option Deed. The sale contract came into existence immediately on exercise of the option. Schedule 5 of the sale contract is to be construed in accordance with clause 1.3(a) of the Option Deed. The context does not displace the canon of construction that the plural includes the singular. 64In any event, Lescap Group has not established that there were not at least seven projectors. I prefer Mr Wong's evidence to Ms Smith's. Her first affidavit dealing with this item was misleading, as she must have known. I accept Mr Wong's evidence that there was a slide projector at the hotel. Assuming that compliance with the warranty required that there be at least seven projectors in total, I am not satisfied that as at 10 October 2007 there were not seven such projectors. Ms Smith referred to the existence of other projectors than the six she ultimately identified, but said that these had been acquired by Lescap Operations or Transmetro. There was no corroborative evidence as to Lescap Operations' or Transmetro's acquiring any such projectors. 65Mr Qalulu said that other than the three projectors he identified, which he said were items numbered 81, 86 and 152, there were no other projectors at the hotel either as at 10 October 2007 or since that date. But that evidence was wrong. On Ms Smith's evidence there were at least a further three projectors. Mr McIntosh worked at the hotel in 2007. He said that during the time he worked at the hotel there had only ever been one data projector, a Mitsubishi. Clearly he did not have complete knowledge because there were admittedly other projectors. 66The evidence of Lescap Group in relation to this item does not persuade me that there were not at least seven projectors satisfying the descriptions in items 6, 81, 85, 86, 102 and 152.

Item 10: Barbecues 67Item 10 read "10 Barbecues $50". 68Mr Qalulu said that he did not recall there being any barbecues in the hotel. Ms Smith was more definite. She said there was none when she swore her affidavit in October 2008, and there was none when she commenced working at the hotel. Mr McIntosh said that he had never seen a barbecue in the hotel and had never observed a function which used a barbecue. 69However, Mr Wong found and photographed a barbecue (that appears to be of some antiquity) that was used as a benchtop. Mr Blum gave evidence that there was also an old barbecue that was stored in the parking area that was thrown out when there was a clearout of rubbish. Whilst the other witnesses do not recall that item being thrown out, I accept Mr Blum's evidence. I do not consider that he was making things up. He had a definite recollection of a barbecue being thrown out. The fact that the other witnesses did not have such a recollection does not mean that the event did not happen. It is more likely that either they were never aware of the existence of the barbecue, or had forgotten it, than that Mr Blum reconstructed in his own mind something that never happened. 70Mr Sundeep Chatterjee, who runs the food and beverage operations of the hotel, describes the equipment which Mr Wong identified as a barbecue, as a 6-burner cooking stove. He says that in his experience such an item is always used in a kitchen as a stove and not outdoors as a barbecue. That may be. But if the same equipment can be classified as a stove if used indoors, or as a barbecue if used outdoors, it is properly classified as both a stove and a barbecue. It is not the less a barbecue because it is also a stove. 71Lescap Group has not established the factual foundation for its submission that there was a breach of warranty by reason of the absence of barbecues.

Item 31: Garden watering systems 72The item in schedule 5 read "31 Garden watering systems $150". 73Mr Qalulu deposed that no such watering system existed at 10 October 2007 or at any time shortly prior to that date. He said that at that time Mercure contracted a person to attend at the hotel and water and maintain the gardens and that person supplied her own hose and other equipment as the hotel did not own any such equipment. He said that that person retained the equipment when her contract was terminated. However, in cross-examination Mr Qalulu admitted that he had never actually looked in the garden beds. His positive assertion of the absence of a garden watering system when he did not inspect the garden beds is adverse to his credit. By contrast, Mr McIntosh said that he was aware that there had been a hose at the hotel but was not aware of who owned the hose. He said that there were never any drippers or similar equipment. Ms Smith said there was no garden watering system in the hotel, nor was there one when she commenced working in the hotel. She also said that all watering of the garden had been done by hose supplied by the gardening contractor. 74Ms Li deposed that during her inspection of the hotel in October 2008 she located several hoses on top of a locker in the locked storeroom next to the staff canteen. She provided a photograph. Mr Wong also located four sprinklers in a storeroom. Mr Blum has been employed as the maintenance manager of the hotel since he commenced work on or about 13 November 2007. He deposed that shortly after commencing work at the hotel he saw that there was a watering system consisting of black plastic water pipes, plastic stakes and small plastic sprinklers set up in the garden beds to the south of the driveway. He produced a photograph showing a watering system that was taken shortly before the hearing. He deposed that the watering system had been in place when he commenced his employment and remained in place throughout the time he was maintenance manager of the hotel. This evidence is disputed. 75Counsel for Lescap Group submitted that Mr Blum's evidence should be rejected as mistaken. Given that Mr Blum was the maintenance manager, I do not think it likely he was mistaken. I think it is more likely that other witnesses failed to observe a watering system that was in place in the garden. In any event, the hoses and sprinklers located elsewhere in the hotel by Ms Li and Mr Wong would answer the description of a garden watering system. 76Lescap Group has not established that garden watering systems were not located at the hotel on 10 October 2007.

Item 38: Coffee making machines 77Item 38 of schedule 5 states "38 Coffee making machines (Expresso)$4,000". 78Lescap Group does not dispute that there were coffee-making machines at the hotel answering this description. It says that the only machines were owned by Nestlé. Lescap Group says that there was a breach of items 2.1, 2.2 and 2.3 of schedule 1 because the machines were not owned by Pacific Resort. 79In October 2007 Mr Chatterjee was running a restaurant business including operating the food and beverage facility at another hotel owned by a company of which Mr Caplan was a director. In late October 2007 Mr Caplan asked him whether or not he was interested in running the food and beverage operations of the hotel in Ultimo. After inspecting the kitchen and restaurant and equipment, he agreed to do so. He established that the equipment in the hotel was owned by Nestlé. Nestlé agreed to lend the equipment to him on terms that Nestlé products be used exclusively with the equipment. 80Mr Chatterjee deposed that there were no coffee machines in the hotel other than a Sanmarino Expresso coffee machine and a Fettco brand coffee machine used for brewing coffee. Both items of equipment are owned by Nestlé. Lescap Group has established the factual foundation for its allegation that there was a breach of clauses 2.1, 2.2. and 2.3 of schedule 1 in relation to the coffee-making machines in that the machines were not owned by Pacific Resort.

Item 53: General laundry plant 81Item 53 states "53 General laundry plant $3,500". 82Mr Qalulu deposed: "53 General Laundry Plant As at 10 October 2007 and since, most laundry was outsourced to commercial laundries. The only laundry equipment existing at 10 October 2007 and now was one (1) washing machine (which still exists in a little room in the basement) and is referred to elsewhere on the list of Plant and Equipment in Annexure 'A' at Items numbered 54 and 76 and a clothes dryer (not working) which is referred to on the Plant and Equipment List at number 52. The one (1) washing machine that is and was at 10 October 2007 in the Hotel was and is used mainly to wash tea towels and shower curtains. During the time that I have worked at the Hotel there has never been any other laundry plant." 83Ms Smith also gave evidence that the only laundry equipment had been one washing machine and one clothes dryer, which was broken. 84Ms Li and Mr Wong identified as the General laundry plant large trolleys on which linen was kept. Ms Li said that during the time she resided at the hotel she recalled seeing numerous large linen trolleys at the hotel. She resided at the hotel from January 2006 where she oversaw expenditure on a refurbishment that commenced in June 2006 and was completed in September 2006. 85There is no reason that the large linen trolleys could not be described as "General laundry plant". This is particularly so as the schedule refers to other laundry items such as washing machines and drying equipment. 86Mr Blum gave evidence, which I accept, that he was frequently involved in repairing the wheels for the large linen trolleys. 87In her second affidavit Ms Smith responded as follows: "53 General Laundry Plant We inspected trolleys for linen of the description referred to in Ms Li's Affidavit. The word 'Ensign' appears on the side of some of these trolleys. These particular trolleys were not in the Hotel during the time that Lescap Group Operations operated the Hotel. When Lescap Group Operations took over the operation of the Hotel in November 2007, the supply and cleaning of linen was contracted by the previous operator of the Hotel to a company Pearl Linen and Valet Services ('Pearl'). Upon taking over the Hotel operations, Lescap Group Operations continued the contracting of the supply and cleaning of linen to Pearl. Pearl delivered the linen on trolleys similar to the ones provided by 'Ensign' and then took the trolleys away again with the dirty linen. Those trolleys were not owned by Lescap Group Operations or Lescap Holdings. Annexed hereto and marked 'G' is a copy of the contract between Lescap Group Operations and Pearl dated 12 October 2007. Annexed hereto and marked 'H' is a copy of photographs of the linen trolleys. During the inspection of the Hotel, I did not see any other general laundry plant." 88The photographs of the trolleys annexed to Ms Smith's second affidavit are of different trolleys from those referred to by Mr Blum. Counsel for Lescap Group submitted that if the large linen trolleys constituted laundry plant, then there was a breach of the ownership warranty established by reason of Ms Smith's evidence. I do not agree. Ms Smith refers to the trolleys delivered by Pearl Linen and Valet Services pursuant to a contract made with Lescap Operations. The trolleys supplied by Pearl were similar to, but different from, the trolleys referred to by Mr Blum. The fact that the trolleys used by Lescap Operations after it took over operation of the hotel in November 2007 were owned by Pearl does not mean that the trolleys described by Mr Blum were not owned by Pacific Resort. There is no evidence that the trolleys to which he referred were not owned by Pacific Resort. The evidence of Mr Blum that he carried out maintenance work on those trolleys rather suggests that they were trolleys owned either by the hotel or by Accor, rather than trolleys supplied by a third party provider of linen services. If they were owned by Accor, they would be Excluded Assets and not the subject of the warranties in clauses 2.1-2.3. 89Lescap Group has not established a factual foundation for this alleged breach of warranty.

Items 54 and 76: Washing machines 90Items 54 and 76 state "54 Washing machines $1,500" and "76 Washing machine $100" 91The evidence of Mr Qalalu, Ms Smith and Mr McIntosh was that there was only ever one washing machine in the hotel. There was no contradictory evidence. Only one washing machine was found by Ms Li and Mr Wong on their inspections. If item 54 had stood alone the description "Washing machines" might have been read in the singular (see para [63] above). But the repetition of the item provides a context requiring the presence of at least two washing machines. Accordingly, Lescap Group has established the factual foundation for its contention that there was a breach of warranty in that there was only one washing machine at the hotel.

Item 84: Slide lens 92Item 84 stated "84 Slide lens - Hotel $100". The next item was item 85 "Slide projector - Hotel $500". 93Mr Qalalu, Ms Smith and Mr McIntosh said that they had not seen such an item. However, Mr Wong deposed that he identified a slide lens that belonged to a projector in a storage room at the hotel. He identified the slide lens as being an attachment to a projector (Exhibit K - T331). I accept Mr Wong's evidence. I see no reason that the slide lens does not qualify merely because it was attached to a projector. In any event, there was no evidence as to whether it was attached to the projector in October 2007. Mr Wong's note of his inspection records the slide lens and the slide projector, which was item 85, as being located in the conference storeroom. 94Lescap Group has not established the factual foundation for its argument that there was a breach of warranty in relation to item 84.

Item 85: Slide projector 95Item 85 has been considered in conjunction with item 6. I am satisfied that there was a slide projector. The description "Slide projector" is ambiguous. There is no reason it could not refer to a projector that throws the image of a plastic slide laid down flat onto a screen, as distinct from a more old-fashioned type of slide projector. There was no breach of warranty in relation to item 85.

Item 93: Portable sound system 96Item 93 stated "93 Portable sound system - Hotel $850". 97Mr Qalulu said that as at 10 October 2007 no such item as a portable sound system existed in the hotel and none has existed since. Ms Smith said that since she commenced working in the hotel she had never seen such an item in the hotel. Mr McIntosh said that he had never seen a portable sound system and that the only sound system in the hotel was satellite music that was heard through built-in speakers on the ground floor. On her inspection in October 2008 Ms Li located a Phillips portable CD player that was sitting on a shelf in the staff canteen in clear view. The plaintiff's response was that this was not a portable sound system. Ms Smith and Mr Caplan said that the Phillips player was a small, old radio cassette/CD player whose electric cord had been cut and without a rear battery cover and without batteries. 98The alleged breach of warranty was not that the portable sound system was not in working order or that it was not worth $850. The alleged breach is that no portable sound system was in place in October 2007. There is no evidence as to the condition of the cassette/CD player in 2007. I do not see why a portable cassette/CD player would not properly be characterised as a portable sound system. Lescap Group has not established that a portable sound system owned by Pacific Resort was not in the hotel in October 2007.

Item 96: Scanner 99Item 96 read "3 PCs + 1 scanner vertex comp - Hotel $3,400". 100Mr Qalulu deposed that as at 10 October 2007 the hotel did not have a scanner. He said that as he worked in the office area and also in conferences and frequented all areas of the hotel he would have seen such an item if it existed. He said that prior to 10 October 2007 Mercure had purchased a combined printer, fax, and scanner, but the equipment did not work properly and was returned before 10 October 2007. Ms Smith said that since she commenced working in the hotel she had never seen a scanner in the hotel. Mr McIntosh gave evidence to the same effect and said that if there had been a scanner, he would have used it in his day-to-day duties at the hotel. 101However, Ms Li said that during the handover from Accor to Lescap Group and during her inspection in October 2008 a photocopier/scanner was in the back office. She said that during her inspection in October 2008 she saw a scanner in the conference storeroom as well. Mr Blum produced photos taken shortly before the hearing that showed a silver coloured scanner and a second scanner then located in a storeroom behind the housekeeping office. Mr Wong saw a photocopier/scanner in the office are during his inspection on 15 October 2008. 102In response to the evidence of Ms Li and Mr Wong, Ms Smith said that during her inspection with Mr Lasky and Mr Caplan in November 2009 they located a scanner that Lescap Group purchased after it took over management of the hotel in November 2007. She said that during the time that Lescap Operations operated the hotel the only scanner at the hotel was the one that it purchased. This evidence was inconsistent with her earlier affidavit that stated "since I commenced working in the Hotel, I have never seen a scanner in the Hotel." In his second affidavit Mr Caplan also gave evidence that at the inspection on November 2009 he and Ms Smith and Mr Lasky only located one scanner. Mr Caplan did not say that this was an item that had been purchased by Lescap Group or Lescap Operations. Lescap Group produced no corroborative evidence that it had purchased a scanner for the hotel. The evidence that the scanner was purchased by Lescap depends on the evidence of Ms Smith. I do not consider her a reliable witness. Mr Qalulu's evidence and Mr McIntosh's evidence that there was only ever one scanner (apart from the combined printer/fax/scanner that had been returned to the seller before 10 October 2007) is inconsistent with the evidence that there were two scanners at the hotel located during the inspection in October 2008. 103Lescap Group has not established that a scanner owned by Pacific Resort was not located at the hotel on 10 October 2007.

Items 107 and 169: Laminators 104Items 107 and 169 stated "107 Laminating Machine $300" and "169 Laminator $300". 105The separate listing of two laminators means that there was a warranty given in respect of two such machines. Mr Caplan said that on his inspection in November 2009 only one laminating machine was located. 106In his affidavit Mr Qalulu said that at all relevant times, including at 10 October 2007, the hotel had only one laminator. Mr McIntosh also said that during the time he worked at the hotel there had only been one laminating machine in the hotel which he used from time to time. He said it was stored in the back office on the ground floor. In her oral evidence Ms Smith said that one laminator was removed from the property as it did not work. She said it was removed within days of her arriving (that is, a few days after 13 November 2007). Although she did not say so in her first affidavit, nor give the whole of her version of events in either of her affidavits, according to Ms Smith there had been one laminating machine in place when she arrived on 13 November 2007 that did not work, and it was replaced by another laminating machine that she said in her second affidavit had been purchased by Lescap Operations. There was no corroboration of her evidence that a replacement laminator was acquired by Lescap Operations. Mr Caplan did not say so. Ms Smith's evidence was inconsistent with the evidence of Mr Qalulu. He said in cross-examination (T143-144) that there was one laminator in the back office that was there on 10 October 2007 and was still there when he left in 2010. I prefer that evidence to Ms Smith's uncorroborated evidence that Lescap Operations acquired that machine in place of an earlier machine. Accepting Mr Qalulu's evidence and the admission made by Ms Smith in her oral evidence that a laminating machine was thrown out, and rejecting her evidence that the machine to which Mr Qalulu and others referred was acquired by Lescap Operations, I conclude that there was no breach of the warranties in relation to laminators.

Item 123: Coffee machines - Brewmaster 107Item 123 stated "123 Coffee Machines - Brewmaster $7,000". 108All the evidence is that the only coffee making machines at the hotel were a Sanmarino Expresso machine and a Fettco brewer, both of which were owned by Nestlé. Lescap Group has established the factual foundation for this claim of breach of warranty.

Item 141: Dry vacuum valet 109Item 141 states "141 Dry Vacuum Valet $800". 110Item 69 states "69 Vacuum cleaners $1,000". 111Lescap Group's case in relation to item 141 depends on its contention that the item refers to a vacuum cleaner that sucks up water. In their inspection in October 2008 Ms Li and Mr Wong found several vacuum cleaners in the hotel. They were dry vacuum cleaners, that is to say, they sucked up dry material, not liquids. 112Mr Qalulu said in reference to item 141, "I understand this to be a vacuum cleaner that sucks up water." He said that no such item existed in the hotel on 10 October 2007 and he had not seen one subsequently. As he worked in housekeeping he would have known if such an item existed. Ms Smith said that she had never seen such an item which she understood to be a vacuum machine that sucked up water. Mr McIntosh said that he assumed that this item referred to a dry cleaning/water extracting vacuum machine. He said that if that were the case, he had not seen such a machine belonging to the hotel. 113The evidence that the item "Dry Vacuum Valet" refers to a vacuum cleaner that sucks up water is no more than Mr Qalulu and Ms Smith's statement that that is their understanding of the expression. That is not evidence that that is the common understanding of the expression in the hotel or cleaning industries. Nor was that Ms Li's understanding of the term. 114One would expect a vacuum cleaner that sucked up water to be called a wet vacuum cleaner, not a dry vacuum cleaner. The word "Valet" is not descriptive of a machine that sucks up water. It could well be a brand name, in which case the reference to a dry vacuum cleaner would clearly not be to a vacuum cleaner that picked up water. 115During the October 2008 handover to Transmetro Ms Li and representatives of Transmetro went through the list of items. The list referred to there being three Henry vacuum cleaners against item 69 located in the basement/carpark. Against that item was written the word "broken". The list as prepared for the handover to Transmetro also included item 141 which was described as brand and model "Henry". That item was crossed out and the crossings out initialled by Transmetro. Ms Li said that Transmetro did not want item 141 in the list because it was not functioning. She said the reason the item was crossed out was not because there was nothing answering the description "Dry Vacuum Valet", but because it was not functioning (T169). I accept that evidence. 116Lescap Group has not established the factual foundation for breach of warranty in relation to this item.

Items 143 and 146: Netbridge and IDE Tech computers 117Items 143 and 146 stated "143 Netbridge Computer $2,600" and "146 IDE Tech - Computer $2,500". 118Lescap Group's contentions in relation to these items is that the equipment referred to are computers bearing a brand or a mark "Netbridge" and "IDE Tech". Mr Qalulu said that he was not aware of such brands of computers being owned or used by the hotel. Ms Smith's evidence was to the same effect. She said that the brand did not exist in the hotel and had not existed since she commenced working in the hotel. Mr Caplan said that on inspection of the items shown in the photograph, none of the items was a "Netbridge" computer. I understand this to mean that none of the computers that he saw included a "Netbridge" brand. Mr McIntosh was more circumspect. He said that he was not sure what these items referred to. Ms Li also said that she did not know what the items were. Mr Wong said that during his inspection on 15 October 2008 he identified a DV1600 computer located at reception fitting the description "IDE Tech-computer". He took photos of the computer network system at the hotel. He said that he identified at least 17 different computers at the hotel, including computers utilising "Netgear" brand routers and firewalls and "Netcom" brand routers. 119Lescap Group's case depends on the assumption that the words "Netbridge" and "IDE Tech" refer to a brand or model or mark of a computer. It was suggested to witnesses in cross-examination that the word might refer to a distributor. Lescap Group submits that the words clearly refer to a brand or a manufacturer. However, it produced no evidence of the existence of such a brand or manufacturer. 120The words "IDE Tech" might refer to the interface known as Integrated Drive Electronics between the storage space on the computer (the hard drive or CD Roms) and the controller. The reference to "IDE" might distinguish the interface from either earlier or later devices that perform the same function. Netbridge might be a reference to a distributor, or to software installed on the computer that provided a bridge between the operating system and the internet. There may be other possibilities. 121In the absence of evidence that there are models or brands of computers called "Netbridge" or "IDE Tech", I do not accept that the evidence that there was no computer bearing that brand or mark establishes that there was no item of the kind described in item 143 or 146 owned by Pacific Resort at the hotel.

Conclusion on the facts 122For these reasons Lescap Group has established that the following items referred to in schedule 5 were not located at the hotel on 10 October 2007. Items 5 and 79: Video cassette recorders and players Item 54 or 76: Washing machine Item 123: Coffee machines - Brewmaster 123It has established that the coffee machines referred to in item 38 were not owned by Pacific Resort, but were owned by Nestlé. They were provided by Nestlé to Mr Chatterjee from about December 2007 pursuant to an agreement called "Equipment Loan Agreement". I deal with that agreement below at para [166] when dealing with the claim of breach of the warranties in item 2 of schedule 1.

Was there a breach of warranty? 124The warranties were not as simple as a promise that the items listed in schedule 5 were owned by Pacific Resort and located at the hotel at the date of the Option Deed. Each of the warranties in items 2 and 3 of schedule 1 was expressed to be "Subject to the Licence Deed and anything done by the Licensee or the purchaser." That was notwithstanding that the warranties were given "as at the date of the Option Deed". The Licence Deed and the Option Deed were entered into at the same time. 125Counsel for Lescap Group recognised the unbusinesslike consequences of its argument that it was entitled to rescind the contract for the purchase of a hotel for $18.2 million merely because there were a few items, or even only one item that might be of trivial value, that were or was missing when the Option Deed was entered into. If more than one construction of the sale contract is reasonably open, a construction that would give a commercial and businesslike operation to the contract should be preferred (McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at [22]-[23]). But where the language is unambiguous, a court must give effect to the language unless it can be concluded that the parties must have made a mistake in their language that leads to absurdity (Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Export Services Inc [2011] NSWCA 137 at [55]). As Macfarlan JA said in the paragraph cited: "A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted." 126The consequence that Lescap Group can rescind if there is any breach of warranty is not an absurdity. It simply arises from the terms of clause 52.2. The parties provided a right of rescission if there were any breach of any of the warranties, without qualification as to the seriousness of the breach or its effect on the purchaser. 127There is no issue about the principles for construing the warranties. The question is whether the contract has the meaning contended for. 128Counsel for Pacific Resort emphasised both the recitals to the Licence Deed and the Option Deed. Recital A to the Option Deed stated that Pacific Resort was the legal owner of the Assets. The recitals to the Licence Deed stated that Lescap Operations had represented to Pacific Resort that it had inspected the assets and was fully satisfied with their state of repair. By necessary implication Lescap Operations represented that the Assets existed when it made its inspection. Lescap Group was a party to the Licence Deed that contained that recital. 129The definition of Plant and Equipment (quoted at para [22] above) down to the words "operated from the property" describes only the equipment and other assets owned by the vendor and located at the property or used in the Business that are considered by the purchaser to be necessary for the operation of the hotel business operated from the property. None of the items that is subject of the claim of breach of warranty that was missing, or was claimed to be missing, from the hotel, was considered by the purchaser to be necessary for the operation of the hotel business. The purchaser was satisfied with such equipment as was there. There is an issue as to whether those qualifying words apply also to the items listed in schedule 5, or whether schedule 5 expands the class of items otherwise within the definition of Plant and Equipment. 130Counsel for Pacific Resort submitted that if items were missing from the hotel premises at the date of the Option Deed, there was a contradiction between the list in schedule 5 and the words in the definition of "Plant and Equipment" that referred to Assets "owned by the vendor and located at the property". Counsel submitted that the contradiction should be resolved by deleting the missing assets from the list in schedule 5. The part to be rejected was any of the items in schedule 5 as would falsify the recitals to the put and call option and the representation in the Licence Deed, namely those which were not in fact present at the date of the Option Deed. 131I do not think this is an available construction. It is not supported by the recitals to the Licence Deed. The implication from Recital D to the Licence Deed that the Assets were at the hotel premises is only that that was the position when the inspection occurred. The warranties were given as at the date of the Option Deed. The argument that the definition of "Plant and Equipment" contains its own contradiction does not accommodate the fact that the definition of Plant and Equipment, whilst containing words of limitation in the general description, goes on to say that the items falling within the definition include, but are not limited to, those listed in schedule 5. The word "includes" is properly used to expand the meaning of words or the class of things which precede it. (The phrase "including, but not limited to" guards against the possibility that the list of things taken to be included would be interpreted as exhaustive.) Because the use of the word "includes" can properly expand a definition of things to include that which would otherwise not be included, there is no contradiction. Nor do the qualifying words in the part of the definition down to "operated from the property" qualify the assets listed in schedule 5. 132Counsel for Pacific Group relied on Bonython v The Commonwealth (1948) 75 CLR 589 per Dixon J at 625 as supporting a proposition that the contract should bear the construction which the parties as reasonable people would have agreed upon if there were missing items, namely that the items would be taken to be deleted from schedule 5. The price was struck without reference to the list. 133I do not think that Bonython v The Commonwealth takes the matter any further. There the question was as to the meaning of debentures issued in 1895 by the Government of Queensland in pounds sterling when the monetary system of the colony of Queensland was the same as that of Great Britain. The question was whether in 1945 the obligation to pay a sum in pounds sterling was to pay in the currency of the Commonwealth of Australia or of Great Britain. In holding, with the majority of the Court, that the obligation was to pay in the money of account that then obtained in Australia, Dixon J applied observations of Lord Watson in Dahl v Nelson (1881) 6 App Cas 38 at 59 that: "... when the parties to a mercantile contract ... have not expressed their intentions in a particular event, but have left these to implication, a Court of Law, in order to ascertain the implied meaning of the contract, must assume that the parties intended to stipulate for that which is fair and reasonable, having regard to their mutual interests and to the main objects of the contract. In some cases that assumption is the only test by which the meaning of the contract can be ascertained. There may be many possibilities within the contemplation of the contract ... which were not actually present to the minds of the parties at the time of making it, and, when one or other of these possibilities becomes a fact, the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding it), but that which the parties, as fair and reasonable men, would presumably have agreed upon if, having such possibility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence." 134Dixon J asked which of the two moneys of account would the parties have presumably adopted as fair and reasonable men if, having the possibility of a separation of the two money systems in view, they had expressly provided for its occurring (at 626). The answer was that both the Queensland Government and the purchaser of debentures from it must be taken to have assumed that they would abide by the monetary system of Australia. 135This is far removed from the present case. This is not a case of the occurrence of an unforeseen event that changed the landscape in which the contract was made. If there is no contradiction between the general words in the definition of Plant and Equipment and the list in schedule 5 because the word "including" expands what would otherwise be included in the definition, then one cannot strike items out of the list on the ground that the parties, as reasonable persons, would have agreed to their deletion if the matter had been raised at the time of the contract. That would be to rectify the contract, not to construe it. 136The question remains what effect is to be given to the words "Subject to the Licence Deed and anything done by the Licensee or the purchaser" which qualify the warranties in items 2 and 3. Counsel for Pacific Resort submitted that the warranties in items 2 and 3 of schedule 1 were qualified by those words so that the warranties had no relevant operation. Counsel submitted that because, in the Licence Deed, Lescap Operations had said it had inspected the Assets and was satisfied with their state of repair, and Lescap Group was also a party to the Licence Deed in which that was recited, Lescap Group could not assert a breach of warranty. The warranties were themselves subject to the Licence Deed. Counsel for Pacific Resort submitted that: "The words 'subject to the Licence Deed' show that the warranties themselves are given subject to the Licence Deed, which records at its outset a relevant representation made by a company related to the plaintiff. If that representation was false, as it must have been on the assumed facts, then the warranty was not operative at all. The alleged breach of warranty is inconsistent with the truth of the representation." 137Counsel for Lescap Group submitted that the significance of those words was that they provided protection to Pacific Resort if Lescap Group or Lescap Operations went into occupation before execution of the Option Deed, either pursuant to the Licence Deed or otherwise. If that had occurred, there was a risk that conduct on the part of Lescap Operations could materially have affected Pacific Resort's ability to comply with the warranties. Lescap Operations might have removed assets. The same words qualified other warranties (namely relating to the liquor licence (item 4), the absence of litigation (item 5), absence of restrictions on use of the property and notices from any competent authority (item 8), and absence of contamination (item 9)). It was submitted that all of those warranties could be affected by things done by Lescap Operations that could materially have affected Pacific Resort's ability to comply with the warranties. Counsel submitted that although the Option Deed and the Licence Deed were entered into at the same time, the parties did not contemplate that that would necessarily be so. In the Licence Deed the Option Deed was defined as a deed entered into "on or about the same date as this deed". The Licence Deed was a schedule to the Option Deed. 138The consequence of this argument would be that the qualifying words "Subject to the Licence Deed and anything done by the Licensee and the purchaser" or at least the words "Subject to the Licence Deed" would have no operation in relation to items 2 and 3 of schedule 1, because the warranties spoke of the position at the date of the Option Deed and nothing done under the Licence Deed could affect the warranties. 139I do not accept either submission. 140The difficulties with the submission of Lescap Group are twofold. First, the Licence Deed and the Option Deed were entered into at the same time. The fact that the Licence Deed was a schedule to the Option Deed indicates that the draftsman contemplated that it might be entered into after the Option Deed, but not before. As the warranties were given as at the date of the Option Deed there would be no need for the qualifying words if the concern was that things done by Lescap Operations under the Licence Deed might affect the warranties. 141Secondly, the warranties were qualified not only by being subject to the Licence Deed, but also by being subject to anything done by the Licensee or the purchaser. If the only concern of the draftsman was to protect against the position that compliance with the warranties might be adversely affected by things done by Lescap Operations (or Lescap Group), that concern was addressed by the warranties being subject to "anything done by the Licensee or the purchaser". The statement that the warranties were also subject to the Licence Deed indicates a further qualification to the warranties. 142The words "Subject to the Licence Deed and anything done by the Licensee or the purchaser" express two separate concepts. They are not an hendiadys, that is to say a single concept composed of two distinct phrases joined by the word "and". The qualification expressed by those words is not that the warranties are subject to the Licence Deed and anything done under it, which might be construed as a hendiadys. The second part of the qualification is as to anything done either by the Licensee or by the purchaser, and is not confined to things that might be done under the Licence Deed. There would be nothing that could be done by the purchaser under the Licence Deed that could qualify the warranties because the Licence Deed conferred no rights on the purchaser. It only imposed obligations on the purchaser as guarantor and indemnifier. Hence the words "Subject to the Licence Deed" have an operation beyond that conveyed by the words "Subject to ... anything done by the Licensee or the purchaser". 143Nor do I accept the submission of counsel for Pacific Resort that the qualifying words negate the warranties in items 2 and 3. That construction cannot be adopted if it is possible to give work to all parts of the clauses. 144Initially both parties took an "all or nothing" approach to the qualifying words and did not make submissions on the detail of how the qualifying words and the warranties should be construed so as to give work to all of the provisions. They did not address the conflict between the warranties of ownership in item 2 and the definition of Fixtures, Fittings and Equipment that referred to leased assets. They made submissions on the onus of proof only in relation to the application of the definition of "Excluded Assets". After judgment was reserved I invited and received written submissions on these questions. 145Counsel for Lescap Group noted that Recital D to the Licence Deed was not a term of the deed, and that the party making the representation was Lescap Operations, whereas the warranties in the sale contract operated in favour of Lescap Group. Counsel also submitted that Recital D concerned only the state of repair of the Assets as they were to be used in the operation of the hotel. Counsel submitted that Recital D could not be elevated to a term that determined the scope of application of the warranties. 146I do not accept these submissions. The warranties are expressly qualified as being subject to the Licence Deed. Recital D is not "elevated". The Sale Contract states that the warranties are subject to the Licence Deed. The recital is not limited to a statement that Lescap Operations is satisfied with the state of repair of the assets it inspected. Rather, Lescap Operations represented that it had inspected the Assets (a defined term), and thus represented that at the date of inspection the Assets existed. 147Recital D was part of the Licence Deed, even though it was not an operative term of that deed. Hence the question is whether it qualifies the warranties in the Sale Contract. The fact that Recital D contains a representation by Lescap Operations and not Lescap Group does not answer the question whether the recital qualifies the warranties in Items 2 and 3, and if so, how it does. That depends on the meaning of the words "Subject to the Licence Deed ..." in Items 2 and 3 of Schedule 1 to the Sale Contract. 148A construction that would give a commercial and businesslike operation to the Sale Contract is to be preferred. 149The warranties in item 2 are as to ownership of the Assets, as to the vendor's not having parted with ownership, possession or control of the Assets, and as to the Assets being unencumbered. The Licence Deed qualifies these warranties in two ways. The first is by clause 16 of the Licence Deed. The second is by Recital D. Clause 16 provides: "16. Title to Hotel 16.1 Management and Operation The Owner covenants that the Licensee, upon fulfilling its obligations hereunder, shall have subject to the terms of this deed, full occupation, management and operation of the Property and the Hotel Business and the use of the Assets free of disturbance or hindrance by the Owner in its operation, management or control of the Property during the term of this deed. Except as stated in clause 16.2 the Owner will not be liable under this clause for disturbance by third parties, act of God, accident, or for exercise of the Owner's rights arising from this deed. 16.2 Perform All Obligations The Owner covenants that throughout the term of this deed it will use all reasonable endeavours to ensure that the Licensee is not without prior written notice disturbed by any mortgagee of the Property or other deed affecting the Land, the Building or the Furniture, Fixtures and Equipment or Operating Equipment except that they may exercise their rights to enter, view and carry out their statutory obligations." 150The warranty in item 2.4 of schedule 1 was that none of the assets was subject to any encumbrance. That is qualified by clause 16 that contemplates that assets may be subject to a mortgage or other deed, but that Pacific Resort will use all reasonable endeavours to ensure that Lescap Operations is not disturbed by any mortgagee otherwise than by a mortgagee's exercising a right to enter, view and carry out statutory obligations. Thus Lescap Group could not complain if an asset were encumbered, provided Pacific Resort complied with clause 16.2. 151The second qualification is from Recital D to the Licence Deed. The implication from Recital D is that Lescap Operations had satisfied itself that the Assets existed at the time of inspection. Prima facie, this is directed to the physical presence of assets and not to their ownership. However, if it could be inferred from evidence that particular items were not situated at the hotel at the date of the Option Deed that the assets did not exist at all (in breach of the warranties in items 2.1 and 2.2) or that the vendor had parted with possession of them (in breach of the warranty in item 2.3) the words "Subject to the Licence Deed" would qualify the warranties in item 2 in the same way as they qualify item 3.2. 152There are two parts to item 3 of schedule 1. The first is the exclusion of any warranty in relation to the depreciation or depreciated value of Plant and Equipment and the property. There is no provision of the Licence Deed that could qualify that exclusion. Nor did counsel suggest otherwise. Hence the qualification to item 3 is as to the warranty in clause 3.2 that as at the date of the Option Deed the Fixtures, Fittings and Equipment and the Plant and Equipment were all located at the property and in the physical possession or control of the vendor. The only part of the Licence Deed that could qualify that warranty is Recital D, that Lescap Operations had represented that it had inspected Assets (which included the Fixtures, Fittings and Equipment (which in turn included Plant and Equipment)) and was fully satisfied with their state of repair. The necessary implication of that provision is that Lescap Operations had inspected the Fixtures, Fittings and Equipment and Plant and Equipment. The qualification to the warranty in clause 3.2 by the words "Subject to the Licence Deed" should be given work to do. That work is that the warranty in clause 3.2 does not apply except in relation to any Fixtures, Fittings and Equipment (which includes Plant and Equipment) that had been made available for inspection, but had been removed (otherwise than by the Licensee or purchaser) as at the date of the Option Deed. 153Such a construction of the warranties in items 2 and 3 mitigates the unbusinesslike consequences of clause 52.2. Lescap Operations had been given the list that became schedule 5 to the Sale Contract. It had had the opportunity to check that all of the items on the list were present at the property. It made the representation recorded in the recital to the Licence Deed that it had inspected the Assets and was satisfied with their state of repair, which must mean it was satisfied the Assets existed. If something was missing when it carried out its inspection, it could be expected to have drawn that to the owner's attention. A sensible commercial construction of the warranties is that the warranty that the Fixtures, Fittings and Equipment and Plant and Equipment would all be located at the property and in the physical possession or control of the vendor would not apply in so far as Lescap Operations had had the opportunity to satisfy itself as to the existence and location of those assets. In my view, that is the qualification meant by the words "Subject to the Licence Deed" in item 3. The warranty in item 3.2 would still have work to do. It would apply if Lescap Group could show that items that had been present when it inspected the Assets were not present as at the date of the Option Deed. 154Accordingly, to establish a breach of the warranties, Lescap Group must show that the items in schedule 5 that were not present at the hotel at the date of the Option Deed had been removed from the premises subsequent to the inspection or opportunity for inspection provided to Lescap Operations, or that the vendor had parted with the ownership, possession or control of assets after inspection or Lescap Operations' opportunity for inspection, or that Pacific Resort did not own the items. 155In the last case, Lescap Group must also show that the items were not Fixtures, Fittings and Equipment located at or used in connection with the operation of the hotel business that were leased by or on behalf of the vendor, or that if the assets were leased, that there was a breach of the warranty so far as it is capable of applying to leased assets. The reason for this qualification is that the definition of Fixtures, Fittings and Equipment includes such items, that is items leased by or on behalf of the vendor. (Items of Plant and Equipment in schedule 5 are also Fixtures, Fittings and Equipment.) It would be absurd if the warranty that the vendor was the legal owner of the Assets and entitled to sell and transfer full legal and beneficial ownership of them applied to leased assets. That absurdity is dealt with by construing the warranty as not applying to the ownership of leased assets, but (so far as the words permit) to the vendor's leasehold interest in such assets. In other words, leased assets included within Fixtures, Fittings and Equipment are included within the assets sold, and the vendor warrants that it has not parted with or encumbered its leasehold interest in such assets and is entitled to transfer such interest. 156Counsel for Lescap Group submitted that the absurdity should be resolved but rejecting the words "leased by or on behalf of" in the definition of Fixtures, Fittings and Equipment, in the context of the warranties in Item 2 of schedule 1. Counsel submitted that those words could not stand when read in the context of the overall purpose and object of the contract, namely, that the purchaser acquire the Assets that were owned by Pacific Resort. 157I do not agree. The key provision of the contract was the clause in the general conditions that "the vendor sells and the purchaser buys the property for the price under these provisions...". "Property" was defined to include "the inclusions". Clause 56 provided that "Included in the sale at no extra cost to the purchaser are the Additional Assets". The definitions of Additional Assets, and relevant components of Additional Assets are quoted at paras [21]-[23]. 158It is not absurd that assets within the definition of Fixtures, Fittings and Equipment that were leased should be included in the sale. The only assets excluded from the sale were the Excluded Assets as defined, namely, assets owned by the manager and stock owned by the vendor. 159If leased assets were excluded from the sale, then the warranties would not apply to such assets. It would be absurd for the vendor to give warranties about assets that were not the subject of the sale. 160But if leased assets are included in the sale, as they are by the definition of Fixtures, Fittings and Equipment, it would be absurd if the purchaser could rescind because those assets were not owned by the vendor. 161The warranties do not dictate what is to be understood by the definitions of the assets sold, because the warranties are subsidiary to the main object of the contract, which is to identify what is sold for the price. But if the warranties did dictate what is included in the definitions of the assets sold, it would not assist Lescap Group, because the warranties would not apply to assets not included in the sale. 162The better construction is that the warranties apply to leased assets, in so far as they are capable of applying. 163Lescap Group has the onus of establishing a breach of warranty. It has the onus of establishing both the positive and negative elements of its cause of action (Currie v Dempsey (1967) 69 SR (NSW) 116 at 125). The onus of proving or disproving that the coffee machines were leased assets would rest on Pacific Resort if that were a true exception to or exemption from liability, or on Lescap Group if the words define the scope of the warranties (Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 at [214]). 164In my view, Lescap Group has the onus of showing that the coffee machines were not leased assets because it has the onus of showing that the items were Assets to which the warranty of ownership was capable of applying. 165In any event, Pacific Resort did not have an onus to adduce evidence to show that the machines were leased because Lescap Group's evidence in chief included the affidavits of Ms Smith and Mr McIntosh. Ms Smith deposed that at the time she commenced working in the hotel (13 November 2007) the coffee-making machines "were leased from outside sources". Mr McIntosh deposed: "During the time that I have worked at the Hotel, the only espresso machine in the Hotel was located in the bar area. I believe that the machine is leased from Nescafe." 166Mr Chatterjee gave evidence of having executed the document headed "Equipment Loan Agreement" on 5 December 2007 with Nestlé. Counsel for Lescap Group submitted that this was not a lease. That question would only be relevant if it could be inferred that an agreement in the same terms was in place with Pacific Resort, or someone on its behalf. There was no evidence of Nestlé's arrangements with the previous operator of the food and beverage department (if there were a separate operator), or with Pacific Resort, except the evidence of Mr McIntosh and Ms Smith that the machines were leased. 167If the equipment had been provided by Nestlé to Pacific Resort or someone on its behalf on the same terms as the Equipment Loan Agreement made with Mr Chatterjee, in my view the equipment would have been leased by or on behalf of the vendor within the meaning of the definition of "Fixtures Fittings and Equipment". The equipment was provided to Mr Chatterjee free of charge, but on terms that he agreed to use the equipment only for dispensing Nestlé products. The equipment could not be removed from the site and signage could not be altered. Payment of rent is not a necessary criterion for the existence of a lease (Peter Butt, Land Law, 6th ed Lawbook Co at [15.03] and cases cited at footnote 5). What is essential is that the lessee be granted the exclusive right of possession of the goods. Nestlé could terminate the Equipment Loan Agreement at any time, but for so long as it remained on foot, it was necessarily implied that Mr Chatterjee should have the exclusive right of possession of the equipment. The regulation of Mr Chatterjee's use of the equipment did not deprive him of the exclusive right of possession. 168Hence, if it could be inferred that Nestlé had made the coffee-making equipment available to Mr Chatterjee on the same terms as it had formerly been made available to Pacific Resort or someone on its behalf, the warranty in clause 2 would not apply because it was equipment leased by the vendor or on its behalf. The lease would be terminable at any time, but termination of the lease by Nestlé would not be a breach of Pacific Resort's warranty. 169The substance of the matter is that the coffee-making machines owned by Nestlé were available for the exclusive use of the food and beverage operator appointed by Lescap Operations. Lescap Group has not established that Pacific Resort breached the warranties in items 2.1-2.3 of schedule 1 in relation to the coffee-making machines. 170There is no evidence that any of the assets that were not present as at the date of the Option Deed had been present when Lescap Operations inspected or had the opportunity to inspect the assets. 171For these reasons I conclude that Lescap Group has not established a breach of warranties. It follows that it was not entitled to rescind.

Additional basis for termination 172 Lescap Group pleaded that if it was not entitled to exercise a contractual right of rescission pursuant to clause 52.2 of the sale contract, nonetheless, it validly terminated the sale contract by accepting a repudiation of the contract by Pacific Resort. The alleged repudiation by Pacific Resort was its giving notice of termination dated 23 September 2008 purportedly on the basis that Lescap Group had failed to complete the contract on 22 September 2008 after time had been made of the essence. Lescap Group said that time had not been made of the essence because the notice to complete was invalid. The reason for this contention was that the notice to complete required the purchaser to complete the purchase of "the Property" which was described as the property in Bulwara Road, Ultimo and did not refer to completion of the purchase of the Additional Assets. 173In their opening submissions, counsel for Lescap Group submitted that the notice to complete was invalid as it purported to require only partial completion. Counsel submitted that the consequence of that invalidity was that time was not made of the essence. This claim was not addressed in final submissions, although it was not formally abandoned. The claim has no merit. If Lescap Group had completed the purchase of the Property by paying the purchase price, it would have acquired title to the Additional Assets. Nothing more was required to be done on its part to acquire title to the Additional Assets than was stipulated in the notice to complete, namely, completing the purchase of the Property. 174In any event, Lescap Group had repudiated the contract by service of its notice of rescission. Pacific Resort was entitled to bring the contract to an end by accepting that repudiation. Pacific Resort did not do so immediately. In a facsimile dated 19 September 2008 Pacific Resort's solicitors said that if Lescap Group did not complete the sale on 22 September 2008, Pacific Resort would rely upon all of its rights. The notice of termination dated 23 September 2008 was expressed to be given "in consequence of your default under the said Contract in completing the purchase in accordance with the requirements thereof and of the Notice to Complete ...". Even if time had not been made essential, Lescap Group was in default in not completing the contract and had repudiated the contract. Even if the notice to complete were invalid, Pacific Resort was entitled to terminate the contract. It did so on 23 September 2008. It is entitled to rely on any breach (including repudiation) to justify the termination (Carter, Breach of Contract, The Law Book Co Ltd, 2nd ed at [1006]). 175Lescap Group pleaded that Pacific Resort could not rely on an acceptance of its repudiation as bringing the contract to an end because Pacific Resort had elected not to accept the repudiation. This election was said to be the termination of the contract relying on non-compliance with the notice to complete. That was not an election to affirm the contract. It did not preclude Pacific Resort from relying on any other ground for terminating the contract for Lescap Group's breach. Pacific Resort was not faced with a choice between inconsistent courses of action. Lescap Group also pleaded that Pacific Resort elected not to accept the repudiation by not doing so within a reasonable time. However, Pacific Resort terminated the contract promptly after service of the notice of rescission. 176In case I am wrong in my conclusion that Lescap Group was not entitled to rescind under clause 52.2, I will deal with other issues raised by Pacific Resort before dealing with questions of damages.

Absence of readiness and willingness to perform 177Pacific Resort put in issue the readiness, willingness and ability of Lescap Group to perform the sale contract as an answer to the relief sought in the statement of claim. No submissions were made on behalf of Pacific Resort in support of that claim. It is clear that Lescap Group was not able to complete the contract. However, if it had a contractual right of rescission, the fact that it was not ready, willing and able itself to complete the contract would not have been an impediment to its exercising that right (Lantry v Tomule [2007] NSWSC 81 at [77]-[79]).

Election to affirm the contract 178Pacific Resort pleaded that if it breached the warranties, Lescap Group was not entitled to rescind as it had earlier elected to affirm the sale contract by, inter alia, exercising its right to make requisitions under the sale contract. It also said that Lescap Group elected to affirm the contract by serving a signed memorandum of transfer, making an appointment for completion and providing adjustments for the purposes of settlement. 179On 13 May 2008 the solicitors for Lescap Group submitted requisitions on title. General condition 19 provides that a party can exercise a right of rescission in spite of making a requisition (clause 19.1.2). 180On 23 May 2008 the solicitors for Lescap Group enclosed an unstamped transfer for execution by the vendor in anticipation of settlement on 4 September 2008. This was subject to receipt of satisfactory replies to requisitions. 181The notice to complete was served on 5 September 2008 under cover of a letter of that day in which the solicitor for the vendor asked the solicitor for Lescap Group to arrange a convenient appointment for settlement within the "time limitations of the notice". The notice to complete required completion by 22 September 2008 in respect of which time was of the essence. The purchaser's solicitor booked settlement for 18 September 2008 at 2.00 pm. On 11 September 2008 the purchaser's solicitor provided a settlement adjustment sheet for completion on 18 September 2008. 182Before Lescap Group would be precluded from serving a notice of rescission by having elected to affirm the contract, it would be necessary that it know of the material facts which gave rise to the right to rescind. Further, it would only be taken to have elected to affirm the contract if it acted in a way which was inconsistent with its later being able to rescind the contract, so that it elected to abandon the right of rescission (Sargent v ASL Developments Limited (1974) 131 CLR 634 at 641, 642, 646, 656, 658; Immer (No 145) Pty Limited v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 30, 38, 41-43). 183Mr Caplan was the sole director of Lescap Group. His knowledge was its knowledge. He did not become aware of missing items, or of the fact that two of the coffee-making machines were owned by Nestlé, until 17 September 2008 or shortly thereafter when, having taken legal advice, Ms Smith and Mr Qalulu undertook an inspection to identify what, if any, items from schedule 5 of the sale contract were missing. The following day he gave instructions to his solicitor to serve the notice of rescission. 184Counsel for Pacific Resort argued that Ms Smith was the agent of Lescap Operations for the purposes of managing the daily operations of the hotel and had a duty to communicate to Mr Caplan as the sole director of Lescap Operations her knowledge that the disputed items in schedule 5 to the sale contract had not been located at the hotel as at 10 September 2007 when she commenced work. Counsel submitted that her knowledge was knowledge of the material facts giving Lescap Group the right to rescind and was to be imputed to Mr Caplan and hence to Lescap Group. 185I do not accept this argument. There is no evidence that prior to 17 September 2008 Ms Smith was provided with the list which was in schedule 5 and asked to verify whether all of the items of plant and equipment shown on the list were located at the hotel or were owned by Pacific Resort. She did not commence work at the hotel until 13 November 2007, that is, more than a month after the date as at which the warranties were given. It was not part of her duty to check that items listed in schedule 5 were present in the hotel and owned by Pacific Resort. Ms Smith did not know that items of plant and equipment were not present when they ought to have been. Even if her knowledge could be imputed to Lescap Group, she did not have knowledge of the facts that would show that Lescap Group had the right to rescind. 186Mr McIntosh gave evidence in cross-examination that prior to the changeover of management from Mercure to Lescap Operations the then general manager, Tony Filippi, gave him the list of plant and equipment (T304). He was then employed by Accor (T308). After Lescap Operations assumed management of the hotel he became employed by a company associated with it. Mr McIntosh gave no evidence as to what he was asked to do when he was given the list prior to Lescap Operations taking control. He gave no evidence of carrying out an inspection at that time to ascertain what, if any, items were missing. That question was not broached in the course of cross-examination. 187Counsel for Lescap Group did not submit that Mr Chatterjee's knowledge that the coffee-making machines were owned by Nestlé should be imputed to Lescap Group. 188Mr Caplan gave evidence (T47-48) that a list of assets was made up of what had been purchased. He said it was made up in relation to the operation of the hotel. He assumed that the list was prepared by Ms Smith. He said it may have been prepared by a Mr John Andrews. Mr Andrews was employed to run two Aspen hotels. The manager as at November 2007, Mr Darni, reported to Mr Andrews. Mr Darni left in December 2007, although he remained as an employee of a company associated with the Aspen Hotel Group until late June 2008. Ms Smith was not formally appointed as manager. Mr Andrews took over Mr Darni's role when Mr Darni left, and at some time, which is not clear, Ms Smith became responsible for management, possibly in conjunction with Mr Andrews. Mr Caplan assumed that both Mr Andrews and Ms Smith would have a copy of the Licence Deed (T48). However, schedule 5, being the list of plant and equipment, was not an attachment to the Licence Deed. The fact that at some unknown time a list was prepared of the assets in the hotel does not show that prior to 17 September 2008 anyone had checked the assets that were in place against the list that was schedule 5 to the sale contract. Ms Smith was not asked whether she had done so. 189In the absence of evidence that anyone associated with Lescap Group or Lescap Operations was aware that there were items missing from the list of plant and equipment that was schedule 5 to the sale contract, or that some items in the schedule were not owned by Pacific Resort, it is unnecessary to decide whether knowledge of persons in the position of Ms Smith or other employees working in the day-to-day operations of the hotel could be imputed to Lescap Group. If it were necessary to decide, I would not accept the submission. Ms Smith was not acting as Lescap Group's agent, although she was Lescap Operations' agent in managing the operations of the hotel. She had no authority to act in relation to the completion of the sale contract. She was not appointed as Lescap Group's agent to make any enquiry as to the accuracy of the list prior to 17 September 2008. 190In any event, Lescap Group was not confronted with a choice that required it to abandon its right of rescission. In Sargent v ASL Developments Limited Mason J said (at 656): "A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other. ... So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract." 191The only acts said to amount to an affirmation of the contract that involved the exercise of a contractual right was the making of requisitions. However, the contract expressly provides that that act does not preclude rescission. The other matters relied on were consistent with the purchaser's keeping the contract on foot, but were not inconsistent with its later exercising a contractual right to rescind. In Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) the plurality said (at 39) that a party can only be held to have elected if he had so communicated his election to the other party in clear and unequivocal terms. It could not be inferred from Lescap Group's conduct in nominating a settlement time as required by the notice to complete and providing figures for settlement that the purchaser had abandoned its right to rescind. 192For both reasons, if Lescap Group were entitled to rescind, it had not lost that right by election.

Conventional estoppel 193The plea of estoppel was based on the representations contained in the Licence Deed. Counsel for Pacific Resort submitted that although these were not proceedings on the deed, nonetheless, Lescap Group being a party to the Licence Deed, itself made a representation to the effect of Recital D to the Licence Deed and this provided the conventional basis upon which the parties contracted, so that Lescap Group was estopped from asserting the contrary. 194I do not accept that contention. In Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) Aust Contract R 90-255 (89,904); NSW ConvR 56-172 (56,205) Brereton J said (at [32]): "[32] ... In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff." 195This statement was approved and adopted by the Court of Appeal in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at [200]. 196Brereton J also observed in Moratic Pty Ltd v Gordon (at [37]) that it is a requirement of a conventional estoppel that each party know or intend that the other act on the relevant assumption. Reliance on the assumption as to the conventional basis of the parties' relationship, and detriment to the party claiming the estoppel if the opposite party is permitted to depart from that assumption, are necessary elements of the conventional estoppel (MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 at [72]; Ryledar Pty Ltd v Euphoric Pty Ltd at [202]-[203]). 197The defence relying on conventional estoppel assumes there was a breach of warranty. As the plaintiff's case was presented, the recitals to the Licence Deed did not qualify the warranties. If that were the position, the recitals could not give rise to a conventional estoppel. First, the recitals did not go so far as was contended. There was no representation in the recitals that the assets listed in schedule 5 were owned by Pacific Resort. Moreover, I agree with the submissions of counsel for Lescap Group that the presence of the warranties indicates that the parties did not share a common assumption about the ownership or location of the assets. If, as is assumed for the purposes of the argument, the recitals do not qualify the warranties, then there is no basis for saying that the parties shared an assumption that all of the assets listed in the schedule were located at the property. To the contrary, on this construction of the sale contract, the parties had agreed that the purchaser could rescind if any of the assets were not present. In other words, the terms of the warranty (so construed) negate the suggestion that there was a shared common assumption. 198Nor was there any evidence that any representative of either party turned his or her mind to the question of whether all of the Assets were located at the hotel and owned by Pacific Resort. The highest the evidence went for Pacific Resort in this respect was in the affidavit of Mrs Lloyd. Whilst she was a director of Pacific Resort, she was not its controlling mind. She acted on instructions from a Mr Walter Marr of Hong Kong. In her affidavit she deposed that before signing the Licence Deed she was aware of the representation contained in it that Lescap Operations had inspected the assets of the hotel and was fully satisfied with their state of repair. She deposed that she signed the Licence Deed based on those representations and had she known that they were untrue, she would not have caused Pacific Resort to enter into the Licence Deed. That evidence did not withstand cross-examination. In cross-examination Mrs Lloyd admitted that she was not the decision-maker. She did not see it as her job to check the terms of the agreements. She did not read the recitals "word by word". She just "roughly" saw the page. She did not understand from the documents she signed that Lescap Operations had checked through the list and was satisfied that each of the items was present on the property. She did not understand Lescap Operations to be saying that they were either satisfied or dissatisfied (T293-294). 199The relevant mind of Pacific Resort was a Mr Walter Marr of Hong Kong who used the services of a Mr Andrew Chan, also of Hong Kong, to deal with the solicitors acting on the sale. Neither of them gave evidence. Mrs Lloyd left matters concerning the terms of the sale to Mr Chan and to Mr Marr. 200It was not put to Mr Caplan in cross-examination that he entered into the sale contract on the assumption that all of the assets listed in schedule 5 were owned by Pacific Resort and located at the hotel. That may well have been his belief, but it might also have been his belief that he did not know whether that was so or not, but was happy to rely upon what he understood to be the effect of the warranties. Or he may simply have not addressed his mind to the question. There is no evidence that Lescap Group knew or intended that Pacific Resort would act on the basis of the shared assumption. 201Having regard to the concessions made by Mrs Lloyd in cross-examination, I would not accept that Pacific Resort acted to its detriment in reliance upon the assumption. 202For these reasons, had a breach of warranty been established, Lescap Group would not have been estopped from rescinding the contract.

Quantum of damages 203As noted above there was disagreement between the valuers called for each party as to the market value of the property when completion was due. Mr Bell valued the hotel with its inclusions at $13.2 million as at 19 and 23 September 2008. Mr Foley-Jennings valued the hotel at $16.75 million. Both values were exclusive of GST which would not be payable on the sale of the hotel as a going concern. Both valuations were made as at 19 and 23 September 2008. Neither party contended that damages should be assessed as the date completion was due (4 September 2008) rather than the date the contract was terminated. In any event, the evidence as to the value at the later dates is the only available evidence. 204Both valuations were based on the capitalisation of estimated future earnings. Mr Bell's valuation was prepared in April 2010. He had valued the hotel for Pacific Resort in about June 2008. That valuation had been made as at 10 October 2007 and 31 March 2008. He had valued the hotel at those dates in the sums of $16.2 million and $16.4 million respectively. His lower valuation as at September 2008 reflected the impact of the Global Financial Crisis that emerged during 2008. Mr Bell did not have income and expense figures for the hotel for 2008. He had regard to trade figures up to 31 October 2007 and budgeted figures for revenue and expenses up to 31 December 2007. His projected operating profit before interest, taxes, depreciation and amortisation for 2009 was $1,124,503. This was based upon projected occupancy rate of 77 per cent and a projected average room rate of $122. Projected room revenue for that year was $3,291,658. The projected total revenue for 2009 (including revenue from food, beverage, telecommunications and other income) was $4,258,481. Projected gross operating profit was $1,657,827. Other expenses were estimated to be $533,324 comprised of an incentive management fee of $132,626 (3.1 per cent of revenue), rates and taxes of $241,436, insurance of $31,507, and a fixtures, fittings and equipment reserve of $127,754, being three per cent of revenue. Mr Bell also forecast earnings for years 2010, 2011, 2012 and 2013. In making a valuation based on capitalising projected future earnings, Mr Bell forecast EBITDA for 2009, 2010 and 2011 of $1,124,503, $1,310,850 and $1,422,428 respectively. The figures for 2010 and 2011 were discounted for estimated future inflation. Projected earnings for 2009 were capitalised at 9.25 per cent, giving a capitalised value $12,156,790. Projected future earnings in 2010 and 2011 after being discounted for inflation were capitalised at 10.1 and 11 per cent to give an assessed capitalised value of $14,239,841 rounded up to $14,240,000. This represented an initial yield of 7.9 per cent on the projected first year's earnings, 9.2 per cent on projected second year's earnings and ten percent of the projected third year earnings. Mr Bell then deducted $1,053,000 for projected capital expenditure works to produce a valuation that was rounded to $13,200,000. 205Mr Foley-Jennings projected a net profit before interest, tax, depreciation and amortisation for 2009 of $1.3 million. He considered revenue and expenses for 2005 and 2006 and adjusted figures for 2007 and 2008. He projected an occupancy rate in 2009 of 85 per cent, whereas Mr Bell had projected an occupancy rate for 2009 of 77 per cent, rising to 80 per cent in 2010 and subsequent years. Mr Foley-Jennings projected an average room rate for 2009 of $115 which was lower than Mr Bell's projected average room rate of $122. He considered that there was the potential to increase the net profit to this level without any refurbishment or capital expenditure in the short term. Mr Foley-Jennings applied a capitalisation rate of 7.75 per cent to net earnings of $1.3 million to calculate a value of $16,774,000. He rounded this figure to $16.75 million which was his assessment of the current market value of the hotel as at 18 to 23 September 2008. 206Counsel for Pacific Resort submitted that Mr Bell's evidence should be preferred to Mr Foley-Jennings' evidence for a number of reasons. These included the fact that Mr Bell had greater experience in hotel valuations than did Mr Foley-Jennings. Counsel also attacked the way in which Mr Foley-Jennings arrived at his projections of net earnings. In his report Mr Foley-Jennings set out figures for 2007 and 2008 which he described as "interpolated". These figures were a mixture of revenue from rooms, an estimate of net profit for food and beverage and related sources of revenue, certain expenses, and other deductions expressed as a simple percentage (12 per cent) of gross revenue. Mr Foley-Jennings accepted that rather than using actual results for the year ending December 2008, he extrapolated revenue for the three months of July, August and September 2008 for a full year. This had the effect of materially increasing the results for 2008 from the actual results for that 12-month period because occupancy rates and revenue in the three months of July, August and September 2008 were significantly higher than other periods in that year. Mr Foley-Jennings had actual figures from 13 November 2007 to 31 August 2008; a period of 245 days. Using the three-month period from July to September 2008 rather than the full 245 day period made a significant difference in the statement of occupancy rates in 2008. The average occupancy rate for a period of 275 days from 13 November 2007 to 31 August 2008 was 75.08 per cent. Mr Foley-Jennings stated the rate to be 80 per cent and projected an occupancy rate for 2009 of 85 per cent. 207In his projections for 2009 Mr Foley-Jennings estimated a net profit from food and beverage and related functions of $280,000 and a net profit from parking of $220,000. This was said to be supported by an emerging stream of profitable trading for the period from July to September 2008. In his report Mr Foley-Jennings said that at the relevant date of valuations, breakfast was the only meal being provided at the hotel, but food was provided for individual conferences. It was his opinion that this was a business that could be built on with spin-offs in catering, beverage sales and the like. However, he noted that typically for a hotel of the standard in question (3½ stars) food and beverage was not perceived as a particularly strong revenue source. Mr Foley-Jennings noted that the business centre and internet provision and in-house movies showed growth throughout 2008. He believed this would become a viable income source "albeit nominal to overall income". He understood that the car park was full and considered that car parking charges could be increased with minimal operational costs. In his projections, Mr Foley-Jennings allowed for a 70 per cent increase in car park revenue which was higher than his proposed increases in pricing. Nor did the actual results for the periods from July to September 2008 support his projection of profits of $380,000 earned on car parking, conferences and hotel food and beverage and related items in 2008. 208Counsel for Lescap Group did not seek to support Mr Foley-Jennings' opinion, save for his opinion on particular topics on which Mr Bell was cross-examined. Counsel accepted that Mr Bell's approach might be accepted, subject to specific matters put to him in cross-examination. Having regard to Mr Bell's greater experience and the justified criticisms of Mr Foley Jennings' methodology, I agree that this is the proper approach. 209The most significant issue is Mr Bell's deduction of $1,053,000 for capital expenditure works in addition to the utilisation of the projected reserve for fixtures fittings and equipment. Mr Foley-Jennings was criticised for not making any such allowance. Lescap Group proposed to spend $1.1 million on capital expenditure. Mr Bell had been told by Mr John Andrews that it was proposed to spend possibly $700,000 to $1.1 million on the hotel. This possibly involved moving the restaurant, and opening up a frontage to the street. It was also proposed to refurbish the bedrooms. Mr Bell was provided with a schedule of costings that included proposals to spend $13,248 on air-conditioning, $144,000 on lifts, $55,000 on carpet, $20,000 on plumbing, $228,480 on painting, and $807,102 on interior decoration. This would have involved refurnishing of all of the bedrooms. 210There had been a refurbishment in 2006. If the moneys allowed for by Mr Bell in his report were spent, the refurbishment would have improved the standard of the hotel. It was intended to bring the hotel to a 4-star, rather than a 3½ star, standard. Mr Foley-Jennings said that such expenditure should result in a higher achievable room rate which would increase the net profit and hence the value. Mr Bell made no allowance for this in his valuation. Mr Bell said that he believed that the hotel's business would have deteriorated if the money had not been spent on the bedrooms, but there was no evidence that the capital expenditure envisaged by Mr Bell had been spent, or that business had deteriorated as a result. It is clear from Mr Bell's file note of his discussion with Mr Andrews of 4 June 2008 that Mr Andrews said that the hotel was looking eventually to push up the average room rate to between $140 and $150. It was then hoped that the average room rate in 2008 to 2009 would be $126 (that is, before the expenditure). Mr Bell's projection for 2009 was an average room rate of $122 rising to $136 by 2011 (these being the three years of projected earnings used by Mr Bell in his valuation based on capitalising projected earnings, as distinct from discounting projected cash flows). 211In my view there is substance to the criticism of Mr Bell's deduction of $1,053,000 from the assessment of value, in the absence of an allowance for increased revenue attributable to the expenditure. A subsidiary criticism of Mr Bell in this respect was how he dealt with this matter in his valuation of June 2008 and in his valuation for the purposes of these proceedings. In his valuation of June 2008, being a valuation as at 10 October 2007 and 31 March 2008, Mr Bell said that as a result of his discussions with Mr Andrews he considered that a capital expenditure program of approximately $500,000 in addition to the fixtures, fittings and equipment reserve at 3 per cent of total revenue could be utilised for the works of exterior redecoration, refurbishment of public areas and bedrooms, upgrading of passenger lifts and replacement of a boiler. By far the most significant area of expenditure was on proposed refurbishment. Mr Bell had been told that the proposed expenditure was not $500,000, but $700,000 to $1.1 million. 212In his valuation for these proceedings Mr Bell said he considered that as at the dates of valuation the capital expenditure programme totalled approximately $1,320,000. He considered that a capital expenditure balancing sum of $1,053,000 (in addition to the Fixtures, Fittings and Equipment reserve) could be used to fund the works. This sum was then deducted in the determination of value. 213Mr Bell sought to explain the different treatment of this item between the two valuations by saying that a purchaser in September 2008 would expect a full deduction of the projected capital expenditure, whereas a purchaser as at March 2008 or October 2007 would have adjusted the price he or she was prepared to pay by only $500,000 to allow for such future expenditure. This reasoning does not appear in Mr Bell's reports. 214Whether the figure is $500,000 or $1,053,000, I do not consider that the valuation should be discounted, unless either there is an allowance for increased revenues that could be expected to be derived from the higher standards of the hotel, or it was shown that the projections of revenue in Mr Bell's report depended upon such expenditure. No such allowance for increased revenue is made. Nor is there evidence that Mr Bell's projection of revenue was dependent upon such expenditure. His projections of revenue increased in a linear fashion. Mr Bell did not seek to demonstrate that the projection of revenues was dependent upon the projected expenditure. I agree with the submission of counsel for Lescap Group that Mr Bell's deduction of $1,053,000 should be rejected. 215Counsel for Lescap Group also criticised Mr Bell's assumptions as to future expenditure on insurance, rates and taxes. The insurance expense incurred by the operators of the hotel between 2005 and 2007 was approximately $11,000 per annum. Mr Bell assumed an insurance cost of $31,507 in 2009 increasing in subsequent years. The reason for the difference was that he assumed that the insurance premium that a purchaser would pay would be above that being paid by Accor which had a global advantage in obtaining favourable premiums. It was submitted that this involved an unwarranted assumption that a new operator would not have similar global advantages, or that there would not be other adjustments, for example to the management or incentive fee structures. Mr Bell also allowed for an increase in land tax as a result of an increase in assessed land value. The increase was under appeal as at September 2008. The appeal was ultimately unsuccessful. 216These were comparatively minor matters. They involved questions of judgment that are part of a valuer's expertise. Mr Bell was not required to assume that a hypothetical purchaser would have access to the same insurance arrangements as Accor. He was not required to assume that a hypothetical purchaser would proceed on what proved to be an incorrect basis that an appeal from a land valuation would succeed. I see no error in his approach in either of these respects. 217A further criticism made of Mr Bell was that he reached his assessment of yield having regard to a sale that did not take place until December 2008. Apparently he had knowledge of the sale. He said that the terms had been agreed in September 2008. The yield adopted by Mr Bell was a matter dependent upon expertise and experience, as well as analysis of comparable sales. I do not consider that he erred in having regard to a sale, the details of which were negotiated in September 2008, even though contracts were not exchanged until December 2008. In my view, as a matter of principle the weight to be placed upon such material should be a matter for the valuer. In any event, Mr Foley-Jennings was of the view that there was no material difference between the yield he applied and the yields used by Mr Bell. 218Accordingly, I adopt Mr Bell's assessment of value, except for his deduction of $1,053,000 for projected capital expenditure. I conclude that the market value of the hotel at the time completion was due, that is, 4 September 2008, was $14.24 million. This is in accordance with Mr Bell's valuation based on stabilised earnings. Pacific Resort is entitled to damages against Lescap Group in the sum of $2,140,000. Interest is payable on that sum at the rates prescribed for the purposes of s 100 of the Civil Procedure Act 2005 from the date completion was due. This was not the date specified in the notice to complete, but the date completion was due under the Option Deed, being 120 days after service of the "Put Option Advance Settlement Notice". That date was 4 September 2008. Hence, interest should be calculated at the prescribed rates from 5 September 2008.

Cross-claim against Lescap Operations and Mr Caplan 219The cross-claim against Lescap Operations and Mr Caplan was an alternative to Pacific Resort's cross-claim against Lescap Group for damages for failing to complete the sale contract. Because the cross-claim against Lescap Group has succeeded, the cross-claim against Lescap Operations and Mr Caplan will be dismissed. 220In case I am wrong in my conclusion that Lescap Group is liable to Pacific 221Resort, I will deal with the cross-claim against Lescap Operations and Mr Caplan on the assumption that Pacific Resort failed in its claim against Lescap Group and that Lescap Group was entitled to the return of the deposit. 222Pacific Resort alleged that the recitals to the Licence Deed conveyed a representation by Lescap Operations and Mr Caplan that the Additional Assets were physically located at the hotel premises, and that Lescap Operations had inspected the Additional Assets and was fully satisfied with their state of repair. Pacific Resort pleaded that it entered into the put and call option and the Licence Deed in reliance upon those representations. It alleged that if the warranties asserted by Lescap Group to have been false were false because as at 10 October 2007 Pacific Resort did not have physical possession or control of all of the Additional Assets, or that all of the Additional Assets were not located at the hotel premises, then Lescap Operations and Mr Caplan engaged in misleading and deceptive conduct, or conduct likely to mislead or deceive in making the representations. This conduct was said to be contrary to s 52 of the Trade Practices Act and s 42 of the Fair Trading Act. 223A further claim was made against Mr Caplan that he was liable as an accessary to the alleged misleading and deceptive conduct engaged in by Lescap Operations. 224Pacific Resort pleaded that it suffered loss and damage by the alleged misleading and deceptive conduct. The loss or damage was said to be that Pacific Resort would have only agreed to the inclusions in schedule 5 of the sale contract if Lescap Group and Lescap Operations had acknowledged that the assets were in the physical possession or control of Pacific Resort at the hotel premises. Pacific Resort alleged that it lost the chance of securing the put and call option in that form. If it had done so, Lescap Group would not have been able to assert an alleged right to rescind the contract. The loss and damage claimed was the loss of a chance to retain the benefits of the sale contract. 225Counsel for Lescap Operations and Mr Caplan submitted that the recitals to the Licence Deed did not convey the alleged representation. Part of their submission in this respect was that the Licence Deed contained no reference to the list of Plant and Equipment that is schedule 5 to the sale contract. However, Recital D to the Licence Deed stated that the licensee had represented to the owner that it had inspected the "Assets". "Assets" included Fixtures, Fittings and Equipment. "Fixtures, Fittings and Equipment" included Plant and Equipment defined in the sale contract, being the contract referred to in the Option Deed. "Plant and Equipment" included the items in schedule 5. Hence, the representation in Recital D to the Licence Deed included a representation that the Licensee had inspected the items in schedule 5. 226Counsel for Lescap Operations also pointed to the fact that Recital D is a statement that the Licensee had made a prior representation. There is no evidence that any such prior representation had been made. The final version of the Option Deed, including the schedules, was not provided to Mr Caplan until the day the agreement was signed. On the other hand, the list that became schedule 5 to the Option Deed had been provided to Mr Caplan in April 2007. 227Counsel for Pacific Resort submitted that no prior representation as referred to in Recital D to the Licence Deed could have been made that the Licensee had inspected the Assets as defined because, without complete schedules to the deed, it would not be known what was encompassed by the definition of "Assets". I agree with that submission. But that is a reason for reading Recital D as itself containing a representation that the Licensee had inspected the Assets and was fully satisfied with their state of repair and not being merely a statement that that representation had been made on a prior occasion. The representations alleged in the cross-claim against Lescap Operations and Mr Caplan were conveyed by the recital to the Licence Deed. 228However, I do not accept that Pacific Resort relied upon that representation in deciding to enter into the Option Deed. The only evidence of reliance was that given was by Mrs Lloyd. That evidence is referred to at paras [198] and [199] above. She did not pay attention to the recitals. She only "roughly" read the page. There was nothing that conveyed to her whether Lescap Operations was satisfied or dissatisfied with the list of assets. In any event, as previously noted, she was not the decision-maker. She agreed that nothing in the documents she signed said to her that Lescap Operations had checked through the list of assets attached to the sale contract and was satisfied that each of the items was present on the property. I do not accept the evidence she gave in para 29 of her affidavit referred to at para [198] above. As counsel for Lescap Operations submitted, that paragraph was apparently based on a conversation with Pacific Resort's former solicitors. They asked her if she would have signed the deed if she had had any concerns. She said "Of course not". She did not appreciate that paragraph 29 of her affidavit might be relied on as conveying something more. 229The making of the representation in the recital was capable of misleading Pacific Resort if a relevant agent of Pacific Resort thought, from the recital, that Lescap Operations had satisfied itself that all of the items listed in schedule 5 were present at the hotel. However, no evidence was given that anyone from Pacific Resort did draw that conclusion. It has not been shown that anyone from Pacific Resort was misled. 230Pacific Resort has not established that it suffered loss "by" the conduct complained of. Apart from the absence of evidence of reliance, Pacific Resort has not established that had it known that Lescap Operations had not inspected the assets and was satisfied that they existed at the hotel, it would have sought to amend the warranties. Nor was there evidence that if it had attempted to amend the warranties, Lescap Group would have agreed to such amendments. If there were evidence of reliance and evidence that Pacific Resort would have sought to amend the warranties, but for the conduct complained of, there might be a basis for concluding that either the warranties would have been amended so that Lescap Group could not rescind on the basis on which it purportedly did, or, that the contract would have gone off. There is no evidence that Pacific Resort would have been worse off if it had not entered into the Option Deed and the Licence Deed. 231Further questions would have arisen in relation to the claim against Mr Caplan. He did not purport to make any representation personally when he signed the Licence Deed for Lescap Operations. He gave evidence, which I accept, that he understood the effect of the recitals was that Lescap Operations was representing only that it was satisfied that the assets necessary for the operation of the hotel were present and in a satisfactory state of repair. The representation in the Licence Deed went beyond that. It is unnecessary to decide whether Mr Caplan could be liable as an accessary under s 75B of the Trade Practices Act if he did not appreciate that the representations made by Lescap Operations were misleading. 232Pacific Resort made no final submissions in support of its pleading that it was an implied term of the Licence Deed that Lescap Operations would ensure that all of the assets coming within the definition of "Additional Assets" that were made available by Pacific Resort to Lescap Operations remained physically located in the premises. Such an implied term would not take the matter further. If Lescap Group succeeded, it would be because it established the assets were not physically located in the hotel at the commencement of the Option Deed, which was the same time as the commencement of the Licence Deed. If the assets were not there, there could be no breach of the alleged implied term. 233For these reasons, the cross-claim against Lescap Operations and Mr Caplan would have failed if Pacific Resort had failed in its claim against Lescap Group.

Conclusion 234For these reasons, the plaintiff's claims for relief in the amended statement of claim should be dismissed. Pacific Resort is entitled to judgment against Lescap Group on its cross-claim in the sum of $2,140,000 plus interest at the rates prescribed for the purposes of s 100 of the Civil Procedure Act 2005 from 5 September 2008. Pacific Resort's cross-claim against Lescap Operations and Mr Caplan should be dismissed. I will stand the matter over to a convenient time for the defendant to bring in short minutes of order, including the calculation of pre-judgment interest. 235I will hear the parties on costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 May 2012