Macquarie International Health Clinic Pty Ltd v Sydney Local Health District - [2019] NSWSC 1199 - NSWSC 2019 case summary — Zoe

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Macquarie International Health Clinic Pty Ltd v Sydney Local Health District

[2019] NSWSC 1199

Supreme Court of NSW|2019-04-02|Before: Ward CJ

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2019-04-02

Before

Ward CJ

Source

Original judgment source is linked above.

Judgment (54 paragraphs)

[1]

Background

Although the background to the present dispute has already been canvassed at length in other decisions of this Court, it is necessary here to set out that background in some detail; not least because both parties have raised issues as to the scope of the development/building approvals obtained by Macquarie now some years ago in relation to the proposed private hospital development.

[2]

Initial Proposal

In 1988, SLHD (then known as the Central Sydney Area Health Service) conducted a tender process for the selection of the preferred tenderer to build a private hospital and car park on vacant land adjoining the site of the Royal Prince Alfred Hospital in Camperdown.
On 21 December 1988, Macquarie Hospital Services Pty Ltd, in conjunction with Macquarie Health Corporation and The Mirvac Group, submitted to SLHD a proposal for the development of the Site (as defined) (the Initial Proposal).
The summary section of the Initial Proposal stated that: The proposed operational concepts and design plans seek to integrate, through functional design and the use of the latest developments in communication technology, the following components: (a) An ambulatory patient care component, providing responsive, cost effective service through a 24 hour medical centre, special purpose clinics, diagnostic facilities and a day care unit. Retail outlets will also be located here. (b) A 200 bed in-patient component providing true "centre of excellence" care to a comprehensive range of specialties with the flexibility to expand, if necessary, in the longer term. (c) A 129 bed high quality hotel to serve the main facility in a number of ways especially for interstate and overseas demands. A medical centre providing private suites for medical specialists will also be provided as part of the overall plan. Generous car parking facilities will be included.

[3]

Heads of Agreement

Macquarie was selected as the preferred tenderer for the proposed private hospital development and, on 18 September 1989 (though I note that in subsequent agreements the parties have incorrectly referred to this agreement as being dated 15 September 1989), the parties entered into a Heads of Agreement (the Heads of Agreement), to record the matters then agreed between the parties regarding the Project (as there defined) and related transactions (the parties expressly acknowledging that the Heads of Agreement did not reflect the whole agreement between them and only contained "the principles in so far as they have already been negotiated and agreed") (see cl 1).
The Heads of Agreement recited the parties' agreement that Macquarie would carry out a development of the Site (as defined) and construct a 200 bed private hospital and ancillary facilities on the Site at its cost (recital B); that a 99 year head lease of the Site would be granted (for the operation of the Hospital, hotel and ancillary facilities) (Recital C); and that a 99 year lease would be granted jointly with SLHD over the balance of the "Designated Block" (Recital D). The Heads of Agreement contemplated the finalisation of an agreement to develop the Complex and Car Park (as defined) and to undertake other related transactions "in a legally effective Heads of Agreement" (Recital E).
The Heads of Agreement also contemplated the execution of various transaction documents in the future, including an Agreement to Lease with Head Leases for the Site and Car Park annexed thereto; and Car Parking Agreements (see cl 7). It was further contemplated that various approvals would be required for the carrying out of the Works (see, for example, cl 4.2), the "Works" being defined in cl 2.1 as: … the works to be carried out in accordance with the Initial Proposal as amended or varied, the Plans and Specifications, the Schedule of Finishes, the acceptable Development Approvals [and] any relevant building approvals and the requirements of any other regulatory authorities including: (a) the excavation of the Site and removal of materials; (b) the construction of the Complex and the Car Park; and (c) the fitting out of the Complex, including all ancillary works and activities associated therewith.

[5]

The Construction Deed

The Recitals to the Construction Deed record that SLHD (there defined as the Landlord) and Macquarie (there defined as the Tenant) entered into a Heads of Agreement on 15 September 1989 [sic] under which it was agreed that Macquarie would develop the Hospital and a Car Park and "for that purpose" SLHD would grant Macquarie a lease of the Land (Recital A); and that Macquarie had agreed to erect the Hospital and ancillary services in accordance with the deed (Recital B).
Clause 1.1 of the Construction Deed contains, relevantly, the following definitions: Building Application means the building applications to be lodged by the Tenant with the Landlord and the Council as required under clause 4.1. [SLHD emphasises the use of the plural "applications" in the definition] … Complex means the Hospital to be erected on Lot 12 in Deposited Plan 809663 and the Car Park to be erected on Lot 11 in Deposited Plan 809663. ... Development Application means the development applications to be lodged by the Tenant with the Landlord and the Council as required under clause 4.1. It is acknowledged that the first development application lodged by Tenant with Council shall comprise the Development Application and any subsequent replacement or modification shall not constitute the Development Application unless the Landlord approves to [sic] same under clause[s] 4.13 and 4.14. … Hospital means the proposed private hospital and other facilities to be erected on Lot 12 in Deposited Plan 809667 and operated by or on behalf of the Tenant in accordance with the Initial Proposal. … Initial Proposal means the proposal by the Tenant dated 21 December 1988 exhibited to the parties at the execution of this deed and initialled by each party for purposes of identification. … New Hospital Road is the road to be constructed, at the election of the Tenant, in accordance with clause 3.2. … Plans and Specifications means the plans and specifications (including a construction time program) to be prepared by the Tenant in accordance with clause 3 of this deed. … Timetable means the timetable set out as annexure "A" to this deed. … Works [in substance being in accord with the corresponding definition in the Heads of Agreement but not in terms identical] means the works to be carried out in accordance with the Initial Proposal as amended or varied, the Plans and Specifications, the Schedule of Finishes, the relevant development approvals, any relevant building approvals and the requirements of any other regulatory authorities including: (a) the excavation of the land comprised in Folio Identifiers 11 and 12/809663 and removal of materials; (b) the construction of the Complex; and (c) the fitting out of the Hospital including all ancillary works and activities associated therewith.
There is no definition in the Construction Deed of the terms "Development Approval" or "Building Approval".
Clause 1.2 sets out various interpretation rules to be applied unless the contrary intention appears in the Construction Deed, including that references to statutes or the like include amendments or replacements of any of them ("at any time before or after the date of this lease [sic]").
Clause 1.3 of the Construction Deed provides that: This deed contains obligations of Tenant which relate to both this deed and the Hospital Lease and Car Park Lease. The inclusion of obligations in this deed which relate to the Hospital Lease and Car Park Lease is deliberate because it is intended that a breach of those obligations included in this deed that relate to the Hospital Lease or Car Park Lease will give the Landlord certain rights under this deed, including in certain circumstances a right to terminate this deed.
Part 2 of the Construction Deed (headed 'Timetable') commences with cl 2.1 (an essential term of the deed - see cl 7.1; hence the significance of the issue as to whether SLHD was entitled, contractually, to promulgate the revised September Timetable). Clause 2.1 provides that: The Tenant must commence, carry out and complete the Works in accordance with the Timetable.
For its part, Macquarie contends that its current legal obligation under the Construction Deed is (simply) to complete the Works within a reasonable period of time (see the declaration sought at prayer 2.3 of the fourth further amended statement of claim) since the requisite steps or activities in the original Timetable prior to "Construction of Hospital" have been completed; and that the correct and necessary first step required to complete the Works is now the lodgement with SLHD of an application pursuant to s 96AA of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) to modify the conditions of consent for the Hospital Development Approval obtained in 1997 (DA 097-00154) (as to which, see further below) (see the declaration sought at prayer 2.4 of the fourth further amended statement of claim).
Clause 2.2 contains provisions (applicable up until the Rent Commencement Date, as defined, that being the last step in the Timetable) relating to "extension of the times in the Timetable" where compliance with the Timetable is "prevented or delayed" by reason of any one or more of the events or circumstances referred to in cl 2.3 (i.e., "loss or damage to the Works by war, act of God, national emergency, fire, earthquake, explosion, lightning, storm or tempest or other like cause"). In those circumstances, provided Macquarie has used reasonable endeavours to carry out the obligations and agreements and to observe the conditions and stipulations contained in the Construction Deed and on its part to be carried out or observed, cl 2.2(a) provides that "in any such case, a fair and reasonable extension of time in respect of those matters will be allowed to the Tenant and the times or periods stipulated in the Timetable, will be extended accordingly". (In other words, once the conditions of cl 2.2 are satisfied, there is an entitlement on the part of Macquarie to a "fair and reasonable" extension of time.) If there is dispute as to that entitlement or as to the period of such extension, this is to be determined by an independent construction programmer selected by SLHD, acting as an expert and not as an arbitrator. Clause 2.2(b) provides that any request by Macquarie for an extension of time is to be made in writing and to state the circumstances and period of extension required.
There is no suggestion that cl 2.2 was here applicable. However, its provisions provide relevant context that may assist informing the construction of the critical clause here in issue - cl 2.5 (as to which see below.)
Clause 2.4, which is also an essential term of the Construction Deed, obliges Macquarie to provide to SLHD evidence of compliance with the Timetable on or before each date of substantial commencement or completion as stated in the Timetable.
Importantly, for present purposes, cl 2.5 then provides that: The Landlord may grant an extension to any date in the Timetable in its absolute and unfettered discretion if there is any delay to the Works caused by an event beyond the control of the Tenant.
There is no dispute that, in the events which have transpired, there has been delay to the Works caused by an event beyond Macquarie's control (namely, the purported (and ultimately held to be invalid) termination by SLHD in 2000 of the Transaction Documents and its wrongful taking of possession on the Hospital and Car Park Sites at that time.
Part 3 of the Construction Deed (headed 'Construction') includes cl 3.1, which provides that: The Tenant must at its own cost and expense and as expeditiously as possible carry out and complete or cause to be completed the Works in a proper and workmanlike manner in accordance with the Plans and Specifications approved by the Council and any other relevant authority, the terms of the development and building approval approved under clause 4.2 and the requirements of any other relevant authority. …
The reference in cl 3.1 to cl 4.2 appears to be in error (since cl 4.2 deals with the content of applications to be made under cl 4.1 of the Construction Deed) but nothing turns on this.
Clause 3.4 of the Construction Deed (headed 'Delays') provides that: If the Tenant fails to complete the Works and has not admitted its first patient so that the Rent Commencement Date does not occur on or before Scheduled Rent Commencement Date then the Tenant must pay to the Landlord on the same day in each successive month until the Rent Commencement Date additional rent of $33,000 per month (and a proportional amount calculated on a daily basis for any part of a month) for the period from and including the Scheduled Rent Commencement Date until but excluding the Rent Commencement Date. Such additional rent shall be paid in advance in monthly instalments, the First of which shall be on the Scheduled Rent Commencement Date and each subsequent instalment on the same day in each successive month until the Rent Commencement Date and the Landlord shall refund any proportion overpaid within 14 days of the Rent Commencement Date.
Part 4 of the Construction Deed (headed 'Approval for construction of the Works') contains provisions in relation to the preparation and lodgement of all necessary applications for the carrying out of the Works. Relevantly, it includes the following provisions: Plan Preparation 4.1 The Tenant must commence to prepare promptly, and when prepared, lodge all necessary applications (including the Plans and Specifications and Schedule of Finishes) to the Council and all other necessary authorities for the carrying out of the Works including the Development Application and Building Application in accordance with the Timetable. Statutory Approvals 4.2 The applications to be made under clause 4.1 of this deed must be prepared by the Tenant for a development of a standard as required under clause 3.2 of this deed and containing at least the services set out in the Initial Proposal PROVIDED THAT: (a) the Landlord must review the application prior to lodgement (including any variations thereto) and if they accord with this deed and the Heads of Agreement must comply with clause 4.4 of this deed in respect of that application; (b) if the Landlord fails to exercise its right to refuse to approve any application within 28 days, that right shall lapse and the Tenant shall be entitled to lodge the applications without the approval of the Landlord PROVIDED THAT this clause shall not release the Tenant from its obligations regarding the form of applications as set out in clause 4.1 of this deed. … 4.4 The Landlord must provide all consents authorisations and approvals and take all other steps necessary and reasonably requested by the Tenant to assist in obtaining the approvals referred to in clause 4.1 of this deed. Criteria for plan preparation 4.5 It is agreed that the Development Application, Building Application, Plans and Specifications and Schedule of Finishes will be prepared having regard to the following considerations and criteria: (a) the Complex and Car Park must be considerate and harmonious with the other proximate improvements owned by the Landlord; (b) traffic flows of both private and public roads must be optimised and of an acceptable appearance; (c) access and egress including underpasses and overpasses for services, visitors, patients and employees must be optimised to facilitate flow between the Hospitals; (d) adequate sign posting must be provided by both parties; (e) open space must be maximised in area and utilisation; (f) noise levels must be minimised; (g) mechanical and other services in common with the other proximate improvements owned by the Landlord must be integrated so far as is possible; (h) the provision of community faculties and services will be provided for; and (i) car parking spaces will be maximised during the construction of the Complex, in each case so far as is reasonably practical having regard to commercial and technical considerations reasonably necessary to ensure the viability of the Project and must also satisfy the following criteria: (j) provide for at least 200 beds; (k) be consistent in nature and standard with the Initial Proposal; and (l) have facilities and finishes of a similar standard to St George Private Hospital and the Sydney Adventist Hospital.
Pursuant to cl 4.11 of the Construction Deed, Macquarie is obliged to provide to SLHD a written monthly report reporting on the progress of the Works including delivering a report in "Gantt Chart" format showing progress (historical and projected) of each major component of the Works as against the Timetable, together with a narrative detailing performance of contractors, reasons for any delays and any steps taken to alleviate delays, such report to be delivered by the 14th of the month succeeding the month to which the report relates.
Clauses 4.13-4.16 deal with modification or replacement of the development application or building application in the following terms: Modification or Replacement of Development Application 4.13 The Tenant may modify or replace the Development Application or the Building Application if it: (a) first submits the modification or replacement to the Landlord for approval; and (b) the Landlord approves the same. 4.14 The Landlord must approve the modification or replacement if it: (a) complies with this deed including without limitation clause 4; (b) has been developed in consultation with the Joint Working Party; (c) in the opinion of the Landlord provides for a development which, having regard to the date upon which the application will be lodged with the Council and approved by the Council, will enable the Tenant to carry out the Works in accordance with the modified or replaced Development Application and comply with the Timetable. 4.15 The Tenant agrees not to lodge with the Council any modification of or replacement of the Development Application unless the Landlord has approved the same under clause 4.13. 4.16 The Landlord agrees to provide such consents and authorisations as may be required of it as owner of the Land to enable the Tenant to lodge the Development Application, the Building Application, any modification or replacement of the Development Application approved under clause 4.13 and any other application for approval of any authority and must provide full co-operation in this regard.
Part 7 of the Construction Deed (headed 'Default') includes, relevantly, the following: Essential terms 7.1 Each obligation of the Tenant to pay money and its obligations under clauses 2.1, 2.4 and 3.7 are essential terms of this deed. Other obligations under this deed may also be essential terms. 7.2 The obligations under clauses 6, 8, 11 and 12 of the Hospital Lease and clauses 5, 7, 10 and 11 of the Car Park Lease are essential terms of this deed. Landlord's right to terminate 7.3 The Landlord may terminate this deed by giving the Tenant notice if an Event of Default occurs. 7.4 An Event of Default occurs if the Tenant (a) repudiates its obligations under this deed; (b) does not comply with an essential term of this deed; (c) repudiates its obligations under a Transaction Document or does not comply with an essential term of a Transaction Document; (d) does not comply with an obligation under this deed or a Transaction Document (which is not an essential term) and, in the Landlord's reasonable opinion: (i) the non-compliance can be remedied, but the Tenant does not remedy it within a reasonable time after the Landlord gives the Tenant notice to remedy it; (ii) the non-compliance cannot be remedied or reasonably compensated for; or (iii) the non-compliance cannot be remedied but the Landlord can be compensated and the tenant does not pay the Landlord compensation for the breach within a reasonable time after the Landlord gives the Tenant notice to pay it; (in determining what is a reasonable time to remedy or pay compensation the Landlord must have regard to whether the non-compliance arose due to events outside the control of the Tenant); … Opportunity to rectify 7.5 The Landlord must not exercise its powers under clause 7.3 unless it first gives the Tenant notice of the particular Event of Default on which the Landlord relies and the clause under this deed under which the default arises. 7.6 The Landlord waives the Event of Default specified in the notice under clause 7 so that this deed continues in full force and effect as if no such Event of Default has occurred, if the Tenant: (a) in respect of a breach remediable by payment of money, pays the Landlord all money necessary to remedy the Event of Default within: (i) 14 days of service of that notice; (ii) 28 days of service of that notice in any other case. (b) in respect of a breach remediable other than by payment of money: (i) gives the Landlord a written undertaking, within 28 days of the service of that notice, to remedy the Event of Default; and (ii) remedies it within a reasonable time having regard to the nature and extent of the breach (but in any event within 3 months of giving the undertaking), (c) in respect of a breach which is not remediable … (d) completes the sale and assignment of the Tenant's interest in this deed, the Car Park Lease and the Hospital Lease in accordance with clause 7.7 within 6 months of the Event of Default being given to the Tenant. 7.7 If the Tenant wishes to sell and assign its interest in this deed, the Car Park Lease and the Hospital Lease pursuant to clause 7.6(d) it must do so on the following grounds: (a) its interest in this deed, the Car Park Lease and the Hospital League [sic] are assigned to the same assignee; (b) the assignee is not a Parent of the Tenant or the Guarantor, nor is the Tenant or the Guarantor a Parent of the Assignee, nor do any of the Tenant, the Guarantor or the Assignee have the same Parent. If a sale and assignment occurs in accordance with this clause 7.7 then the Timetable shall be amended by extending each date not yet fulfilled by the period equal to the period from the date specified in the Timetable for completion of the activity in the Timetable which has most recently been completed to the date of completion of the sale and assignment with the intention that the assignee shall have the benefit of the full duration permitted by the Timetable from completion of the last completed activity to complete the activity then incomplete. If the first activity in the Timetable has not been completed on the date of completion of the sale and assignment then the words "from the date specified in the timetable for completion of the activity in the Timetable which has most recently completed" shall be replaced, for the purposes only of that assignee, with the words "from the date of this deed". …
Clause 10.2 of the Construction Deed (in the section headed 'Miscellaneous' and under the sub-heading 'Approvals and consents') provides that: The Landlord may give conditionally or unconditionally or withhold its approval or consent in its absolute discretion unless this agreement expressly provides otherwise.
Clause 10.8 of the Construction Deed (in the same section and under the heading 'Good Faith') provides that: Without limiting the generality of any other provision of this deed the parties agree that in the performance of their respective duties and the exercise of the respective powers under this deed and in their respective dealings with each other, they shall act in the utmost good faith.
The Timetable set out in Annexure "A" to the Construction Deed specified thirteen activities, commencing with lodgement of the development application with SLHD (to be completed 1 April 1997) and concluding with the Rent Commencement Date (1 December 1999) (that also being the specified date of completion of "Construction of Hospital" and of "Admission of first patients").
The four relevant activities (the "extension" of time for which, as re-named or "re-badged" activities, promulgated by SLHD in September 2016 has led to the present dispute), are the fifth to eighth specified activities in the Timetable, as follows: Activity Substantial Commencement Completion Date Date … Lodge Building Application 1 May 1997 1 August 1997 with the Landlord Lodge Building Application - 1 September 1997 with Council Building Approval given - 1 November 1997 Building Approval declared - 14 November 1997 acceptable

[6]

The Leases

The Transaction Documents include three separate lease agreements: the Hospital Lease, the Car Park Lease and the Car Park Sub-Lease (together, the Leases).

The Hospital Lease

The Hospital Lease is a lease for a term of 103 years, commencing on 1 December 1996 and ending on 30 November 2099. SLHD (named in the lease in its former emanation as Central Sydney Area Health Service) is the landlord and Macquarie the tenant. Reference is made in the Hospital Lease to the Heads of Agreement and to various provisions of the Construction Deed, a number of which are expressly incorporated in the Hospital Lease.
Clause 1.1 sets out various definitions, including the definitions of "Timetable" (as the timetable set out as Annexure "A" to the Construction Deed) and "Works" (in substance in accordance with the definition of that term contained in the Construction Deed but with slightly different wording). "Works" is here defined as follows: Works means the works to be carried out in accordance with the Initial Construction Deed including: (a) the excavation of the land comprised in Folio Identifiers 11 and 12/809663 and removal of materials; (b) the construction of the Hospital; and (c) the fitting out of the Hospital; and (d) the construction of the Car Park including all ancillary works and activities associated therewith.
Clause 1.5 of the Hospital Lease provides that the lease is granted pursuant to the Heads of Agreement and that the provisions of the Heads of Agreement "merge in the grant of this lease".
Clauses 1.6 and 1.7, with evidently similar intent to cl 1.3 of the Construction Deed, provide that: 1.6 This lease contains obligations of Tenant which relate to both the land leased under this lease (on which the Hospital is to be erected) and to lot 11 in Deposited Plan 809663 (on which a car park is to be erected). The inclusion of obligations in this lease which relate to lot 11 is deliberate because it is intended that a breach of those obligations included in this lease which relate to lot 11 will give the Landlord certain rights under this lease, including in certain circumstances a right to terminate this lease. Therefore, the Tenant and Guarantor that those obligations as contained in this lease bind the Tenant and the Guarantor even though the Landlord, the Tenant and the Guarantor have entered into a separate lease of lot 11 in deposited plan 809663 and notwithstanding: (a) that the car park is not to be erected on the Land and is therefore not leased under this lease; (b) the assignment, subletting, mortgaging or other dealing with this lease separately to the Car Parl Lease or vice a versa; or (c) the termination of this lease or the Car Park Lease. 1.7 This lease contains obligations of Tenant which relate to both the land leased under this lease (on which the Hospital is to be erected) and to the Construction Deed (governing construction of the Hospital and Car Park). The inclusion of obligations in this lease which relate to the Construction Deed is deliberate, because it is intended that a breach of those obligations included in this lease which relate to the Construction Deed will give the Landlord certain rights under this lease, including in certain circumstances a right to terminate this lease. Therefore, the Tenant and Guarantor acknowledge and agree that those obligations as contained in this lease bind the Tenant and the Guarantor even though the Landlord, the Tenant and the Guarantor have entered into a separate Construction Deed.
Part 2 of the Hospital Lease (headed 'Rent') provides as follows: Consideration 2.1 On or before the Rent Commencement Date the Tenant must pay to the Landlord the sum of $5,500,000 which sum represents all rental payable under this lease (other than that referred to in clause 2.2 of this lease and clause 3.5 of the Construction Deed) paid in one lump sum in advance (being $53,920.00 per annum). If the Tenant: (a) constructs car parking for at least 1200 cars on the land comprised in Folio Identifier 11/809663; and (b) clears the land comprised in Folio Identifiers 11/809663 and 12/809663; and (c) removes the Telecom cable as set out in the Construction Deed then the cost to the Tenant of carrying out those works will be off set against the payment of $5,500,000 referred to in this clause and the Tenant will only be liable to pay to the Landlord the balance. The Landlord is not liable to pay any amount to the Tenant if the cost of these works exceeds $5,500,000. If this lease is terminated for any reason prior to the Terminating Date then the Landlord must refund to the Tenant the rent actually paid under this clause 2.2 which relates to the balance of the Term which is unexpired at the date of termination. Annual rent 2.2 In addition to the payment referred to in clause 2.1, the Tenant must pay to the Landlord annually: (a) commencing on the Rent Commencement Date, and (b) annually thereafter, $400,000 per annum as reviewed under clause 3. 2.3 The rent payable under clause 2.2 may vary in the circumstances set out in clause 3 and in clause 3 [sic] of the Construction Deed. 2.4 If an instalment is for a period of less than one month, then that instalment is that proportion of one twelfth of the Rent which the number of days in the period bears to the number of days in the month in which that period begins.
Clause 9.1 (under the heading 'Tenant's additional obligations') provides that: The Tenant must: (a) comply on time with all laws and the requirements of authorities in connection with the Premises, the Tenant's Business, the Tenant's Property and the use or occupation of the Premises (including obtaining all permits); and … (d) comply with the Construction Deed.
Clause 11.1 (under the heading 'Repair, Tenant's works and redevelopment' and under the sub-heading 'Erection of the Premises') obliges Macquarie to "erect the Hospital and ancillary services in accordance with the Construction Deed".
Clause 11.4 (under the sub-heading 'Redevelopment of and Alterations to the Premises') provides that: The Tenant may make any substantial alteration or addition in or to the Premises (including work carried out in connection with the Works or the Subsequent Works) with the Landlord's consent. In carrying out alterations or additions the Tenant agrees to comply with all requirements and orders of authorities and all laws. Alterations or additions requiring the Landlord's approval when construction has commenced must be completed within a reasonable time and in accordance with the plans and specifications approved by the Landlord, such approval not to be unreasonably withheld.
Clause 11.5 provides that: The tenant has the right to redevelop the Premises at any time in accordance with legislation then prevailing and in accordance with the terms of the Transaction Documents in relation to development. In carrying out any redevelopment the Tenant must comply with clause 4.5 of the Construction Deed (with any appropriate changes given the nature of the redevelopment).
Clause 14.1 (under the heading 'Expiry or termination' and sub-heading 'Tenant to vacate') provides that: The Tenant must vacate the Premises on the earlier of the Terminating Date and the date this lease is terminated and, subject to clause 14.2, it must leave on the Land a hospital or such other facilities as are permitted under this lease and associated facilities which are fixtures and buildings in a state of repair which permits them to be operated to a reasonable level of efficiency and quality having regard to the standards applying at the time when the Tenant vacates. The Tenant must undertake any works to the Premises necessary to cause compliance with this clause 14.1.
Clause 17 (headed 'Default') relevantly provides that: Essential terms 17.1 Each obligation of the Tenant to pay money and its obligations under clauses 6, 8, 11 and 12 are essential terms of this lease. Other obligations under this lease may also be essential terms. 17.2 The obligations under clause 2.1, 2.4 and 3.7 of the Construction Deed and clauses 5, 7, 10 and 11 of the Car Park Lease are essential terms of this lease. Landlord's right to terminate 17.3 The Landlord may terminate this lease by giving the Tenant notice, by re-entry or by converting this lease by notice to the Tenant into a Tenancy that may be terminated at the will of the Landlord but not of the Tenant if an Event of Default occurs. 17.4 An Event of Default occurs if the Tenant: (a) repudiates its obligations under this lease; (b) does not comply with an essential term of this lease; (c) repudiates its obligations under a Transaction Document or does not comply with an essential term of a Transaction Document; (d) does not comply with an obligation under this lease or a Transaction Document (which is not an essential term) and, in the Landlord's reasonable opinion: (i) the non-compliance can be remedied, but the Tenant does not remedy it within a reasonable time after the Landlord gives the Tenant notice to remedy it, (ii) the non-compliance cannot be remedied or reasonably compensated for; or (iii) the non-compliance cannot be remedied but the Landlord can be compensated and the Tenant does not pay the Landlord compensation for the breach within a reasonable time after the Landlord gives the Tenant notice to pay it; (in determining what is a reasonable time to remedy or pay any compensation the Landlord must have regard to whether the non-compliance arose due to events outside the control of the Tenant). … Opportunity to rectify 17.5 The Landlord must not exercise its powers under clause 17.3 unless it first gives the Tenant notice of the particular Event of Default on which the Landlord relies and the clause under this lease under which the default arises. 17.6 The Landlord waives the Event of Default specified in the notice under clause 17 so that this deed continues in full force and effect as if no such Event of Default has occurred, if the Tenant: (a) in respect of a breach remediable by payment of money, pays the Landlord all money necessary to remedy the Event of Default within: (i) 14 days of service of that notice in the case of Rent; (ii) 28 days of service of that notice in any other case; (b) in respect of a breach remediable other than by payment of money: (i) gives the Landlord a written undertaking, within 28 days of the service of that notice, to remedy the Event of Default; and (ii) remedies it within a reasonable time having regard to the nature and extent of the breach (but in any event within 3 months of giving the undertaking), (c) in respect of a breach which is not remediable … (d) completes the sale and assignment of the Tenant's interest in this lease, the Car Park Lease and the Construction Deed in accordance with clause 17.7 within 6 months of the notice of the Event of Default being given to the Tenant. 17.7 [Relevantly, this clause was in the same terms as the corresponding provision of the Construction Deed - see cl 7.7] … Compensation for Termination 17.9 If this lease is terminated under this clause 17, the Landlord must use all reasonable endeavours to relet the Premises to an unrelated party for the balance of the Term on the same or substantially the same terms as this lease (but including reserving a premium for the reletting and in so doing shall observe the same duties a mortgagee would have in disposing of mortgaged property in the event of a default) and if the Premises or any part are relet by the Landlord at any time prior to the Expiry Date, then the Landlord must pay to the Tenant within 30 days of receipt by the Landlord 90% of the net proceeds including a premium of the reletting which relates to the period from termination to the Terminating Date (apportioned, if necessary, by an expert appointed by the President of the Institute of Arbitrators) but less any rent which would have been payable during that period under this lease. …
Clause 20.13 (under the heading 'Miscellaneous' and under the sub-heading 'Good faith') provides that: Without limiting the generality of any other provision of this lease the parties agree that in the performance of their respective duties and the exercise of their respective powers under this lease and in their respective dealings with each other, they shall act in the utmost good faith.

The Car Park Lease

The Car Park Lease is a lease from SLHD, as landlord, to itself and Macquarie, as tenants in common in equal shares. It is in substantially the same terms as the Hospital Lease, being for a term of 103 years commencing and ending on the same dates as the Hospital Lease term. The substantive difference between the Hospital Lease and the Car Park Lease is that the Car Park Lease does not contain provisions equivalent to: the review of rent provided for in cl 3 of the Hospital Lease and the provision in cl 24 relating to circumstances where there is either a sale of RPAH, and its conversion to a non-hospital use; or the use of the leased premises for a purpose other than a private hospital complex and any ancillary facility allowable under any current planning instrument applying to the land.
Relevantly, the default provisions contained in the Car Park Lease are contained in cl 16, which mirrors the terms of cl 17 of the Hospital Lease. The comparable good faith provision in the Car Park Lease is cl 19.3.

The Car Park Sub-Lease

The third relevant lease is the Car Park Sub-Lease, under which SLHD, as landlord, agreed to sub-lease its interest as co-lessee under the Car Park Lease to Macquarie for 28 years, commencing on 1 December 1996 and terminating on 30 November 2024.
Clause 3.2 of the Car Park Sub-Lease (under the heading 'Head Lease') in effect incorporates into the Car Park Sub-Lease all the covenants and conditions contained in the Car Park Lease as relate to the Landlord's estate or interest in the premises and to their occupation and use. However, cl 3.8 of the Car Park Sub-Lease expressly provides that: The provisions of clause[s] 16.1, 16.2 and 16.9 of the Head Lease [i.e., the Car Park Lease] as imported into this lease by clause 3.2, do not apply to this lease. The remaining provisions of clause 16 of the Head Lease apply to this lease.
The terms of the Car Park Lease which are thus not applicable to the Car Park Sub-lease are those which: specify the essential terms of the Car Park Lease (cll 16.1 and 16.2) and the provision for compensation for termination (cl 16.9). Macquarie notes (and SLHD accepts) that cl 2.1 of the Construction Deed (the obligation to commence, carry out and complete the Works in accordance with the Timetable) is therefore not an essential term of the Car Park Sub-Lease. (However, SLHD says that it has issued the relevant notice of termination in respect of the Car Park Sub-Lease in reliance on cl 16.4 of the Car Park Lease which is incorporated in the Car Park Sub-Lease.)

[9]

Land and Environment Court proceedings and Development Approvals

Macquarie apparently lodged a "deemed refusal" appeal with the Land and Environment Court when approval was not received within the requisite time. However, as I understand it, prior to the Land and Environment Court proceedings being heard the Council had approved both 1997 Development Applications. What was ultimately then heard by the Land and Environment Court was an appeal against the conditions imposed by the Council on the respective consents: namely, the consent for the Car Park (DA 097-00153 - the Car Park Development Approval) (that being an adjoining five level car park with 1,225 spaces, not the separate, underground car park under the proposed private hospital as provided for in the plans the subject of the Hospital Development Approval and in relation to which there seems to have been some desire on the part of Macquarie to avoid nomenclature suggesting or emphasising its proposed use as a car park - see further below at [163], [167]; [172]) and consent for the private hospital, professional consulting rooms and associated facilities (DA 097-00154 - the Hospital Development Approval).
In respect of the development approval for the Hospital, the only condition that was in issue was the requirement that all vehicular access to the Hospital be from Carillon Avenue and from a new internal road to the east of the Site (the "New Hospital Road") (i.e., not via Church Street) (condition 6). (The 1997 Hospital Development Application had provided for loading and servicing to the hospital to be via Church Street; but the Council's assessing officers had recommended that approval of the application be on conditions that included disallowing any access into the carpark from Church Street and disallowing servicing and loading from the hospital via Church Street - see the Minute Paper dated 20 May 1997 in relation to the proposed development.)
The Land and Environment Court approved the grant of development approval for both applications (see Pace Property Management Services Pty Limited v South Sydney City Council (Land and Environment Court (NSW), Dr J Roseth, 19 June 1997, unrep)); in the case of the 1997 Hospital Development Approval without amendment to condition 6 of the approval (but with some amendment to the conditions of the Car Park Development Approval - including the insertion of the new condition 62, to which I refer below at [71]). The orders made on 19 June 1997 by the Land and Environment Court, approving the 1997 Hospital Development Application were in the following terms: 3. Development Application DA 097-00154 for a hospital at 35-43 Carillon Avenue, Camperdown is approved subject to the conditions in Annexure "B" of which the disputed condition is as shown in Order No 9. … 9. Condition 6 of DA 097-00154 is as follows: "That all vehicular access (ingress and egress) to the loading and servicing area of the new hospital shall be from the new link road with no access to be had from Church Street. The loading and service area, and the new ramp between the new link road and the loading and servicing area are to be designed in accordance with Australian Standard 2890.2, their plans submitted with building application, and be to the satisfaction of the Director of Public Works and Services."
The conditions of consent to the Hospital Development Approval (in Annexure "B"), as referred to in the Land and Environment Court orders made on 19 June 1997, provided in terms that: … [the] development consent be granted to the application submitted by PACE Property Management Services, with the authority of the Central Sydney Area Health Service, for permission to demolish two buildings and erect a 7-9 storey private hospital and medical centre, including ancillary facilities and a New Hospital Road (in association with an adjoining commercial car park) … , subject to the following conditions, namely: 1. That the development shall be generally in accordance with DA97.01B-24B, dated February 1997 [the drawings which were submitted with the supporting documentation for the 1997 Development Applications and included drawings for a 7-9 storey private hospital and medical centre, together with the "Stage 1" drawings for the five storey private hospital]. 2. That, prior to issuing a Certificate of Classification by Council, and therefore operation of the hospital, the adjoining commercial car park shall be fully operational (with 960 car spaces). … 6. That all vehicular access (ingress and egress) to the loading and servicing area of the new hospital shall be from the new link road with no access to be had from Church Street. The loading and service area, and the new ramp between the new link road and the loading and servicing area are to be designed in accordance with Australian Standard 2890.2, their plans submitted with building application, and be to the satisfaction of the Director of Public Works and Services. 7. That separate "entry only" access to the port-cochere area shall be deleted with access only from the New Hospital Road, and the entrance in to the port-cochere area, following deletion of that "entry only" access of Carillon Avenue, shall be designed so as to ensure queuing of vehicles does not create traffic congestion. 8. That attention shall be given to the design of the port-cochere area, following deletion of the "entry only" access of Carillon Avenue, including queuing back to Carillon Avenue and necessary turning circles for vehicles using that area. … 16. That the new link road shall be extended from the end of the car park to Lucas Street and two-way travel be re-instated in Lucas Street between Missenden Road and the new Link Road unless an agreed Master Plan cited in alternative Condition 3 of U97-00153 above, determines otherwise, …
Pausing here, there was dispute in the course of oral submissions as to who ultimately carried out the work for the construction of the new link road referred to in conditions 6 and 16 of the Hospital Development Approval. Macquarie claims that it carried out that construction work; SLHD says that Macquarie did no work on the road pursuant to the Hospital Development Approval and that SLHD carried out the work contemplated in condition 16 of that approval. (The relevance of this for present purposes goes to the question whether there was substantial commencement of works referable to the subsequent Hospital Building Approval, so as to prevent it from having lapsed in accordance with the relevant provisions of the legislation applicable at the relevant time - see below at [215]ff.)
As noted above, at the same time as granting the Hospital Development Approval, the Land and Environment Court also approved Development Application 097-00153 which related to the car park (the Car Park Development Approval). Condition 62 of that approval noted that "[t]he ramp between levels 4 and 5 of the car park shall not be constructed until the construction of the second stage of the Hospital, the Medical Centre and the Consulting Rooms has commenced" (the wording of which, in my opinion, supports SLHD's contention that the contemplated "staging" was a matter of construction sequencing, not a "staged" development of the kind for which a staged development application could have, but was not, brought).

[12]

Building Approvals

In the period from January to September 1998, the Council granted a number of separate building approvals in relation to the development.
On 14 January 1998, the Council granted Macquarie conditional Building Approval Q97-00689, described as "Demolition and Bulk Excavation". The approval was for bulk earthworks for both Development Approvals (see condition 63 of DA 097-00154) (the Demolition and Bulk Excavation Building Approval).
On 12 June 1998, the Council granted Macquarie conditional Building Approval Q97-00771 for the "open deck car park" (the Car Park Building Approval) (this being the five storey open deck car park that has since been built and is operational).
On 17 September 1998, the Council granted Macquarie conditional Building Approval Q97-00772 to "Construct Hospital & Associated Works" (the Hospital Building Approval). The letter from the Council granting the Hospital Building Approval stated that: Pursuant to the provisions of Chapter 7 of the Local Government Act, 1993, you are hereby notified that the plans numbered 96035/AWD 01A, 10A, 11B to 16B, 17A to 24A, 25B, 25A to 38A and 38B received on 25 September, 1998, submitted with your Building Application to execute the above work have been approved subject to the conditions contained in the attached Schedule and in accordance with the details listed below, as unconditional consent would be contrary to the provisions of the Act, the Regulations and Building Code of Australia (BCA). The letter further noted that, pursuant to s 104 of the Local Government Act 1993 (NSW) (Local Government Act) the approval "shall be void if the activity to which it refers is not substantially commenced within five years after the date from which it operates".
Macquarie notes that the schedule of conditions included conditions requiring compliance with, inter alia, the conditions of the Hospital Development Approval (see Schedule 1, item 3) and determination of the location, and temporary diversion, of services such as sewerage, water, gas and electricity (Schedule 1, items 10 and 23). Macquarie submits that it is apparent from the Hospital Building Application that the "associated works" the subject of this building approval related to the road, drainage and landscape works, referring also to the Site Block Plan AWD 01A.
The Hospital Building Approval referred to plans numbered 96035/AWD 01A, 10A, 11B-16B, 17A-24A, 25B, 25A-38A and 38B. Macquarie says that those plans contemplated a building of nine storeys, with five floors fitted out for the provision of hospital services together with floor plates on Levels 6 as well as 7 and 8 for "future fitout" together with a plant room on Level 9; and that the plans also contemplated the construction of the "new access road" together with ingresses and egresses to the Hospital itself. (SLHD cavils with the accuracy of Macquarie's description of these drawings, as I will explain in due course.)

[13]

1999 Notices of Default

By September 1998, therefore (and leaving aside the issue which surfaced during the course of oral argument at the hearing as to whether the applications made and approvals obtained in 1997/1998 in fact satisfied the requirements of the original Timetable, having regard to the definition of "building application" using the plural term), development applications in relation to both the Hospital and the Car Park had been lodged and had been approved; and building applications in relation to both the Hospital and the Car Park had been lodged and had been approved. (SLHD, however, says that the Hospital Building Approval did not satisfy the requirement for all necessary building approvals for the construction of the hospital and medical centre as required having regard to the terms of the Hospital Development Approval.)
There is no dispute as to the fact that, during 1998 and 1999, Macquarie carried out work for the construction of the open deck car park the subject of the Car Park Building Approval (and, as noted earlier, it has now been operational for some time). The complaint made by SLHD in 1999 was, rather, that Macquarie had not commenced construction of the Hospital. (The original Timetable required construction of the Hospital to have substantially commenced by 14 April 1998 and to have been completed by 1 December 1999 - see [40] above.)
On 13 September 1999, SLHD served notices of default on Macquarie under each of the Construction Deed, Hospital Lease, Car Park Lease and Car Park Sub-Lease respectively.
The Construction Deed Notice of Default, expressly invoking cl 7.5 of the Construction Deed, identified the following events of default: failure to comply with cl 2.1 of the Construction Deed by reason of the failure to complete or substantially commence specified works by 30 June 1999 at the latest (the notice there specifying non-completion of construction of the Car Park and not substantially commencing construction of the Hospital); failure to comply with cl 3.5 of the Construction Deed (by reason of failure to deposit a sum equal to rent at the stipulated rate for the period by which the construction of the Car Park was and is later than 30 June 1999); and failure to comply with cl 2.2 of the Car Park Lease (by failing to pay a stipulated amount of $1,440,000 by 14 February 1999). The notices of default under the respective Leases relied on the same defaults.

[16]

Appeal

Macquarie then appealed to the Court of Appeal. The appeal was heard in June 2010. The Court of Appeal (Hodgson JA, with whom Allsop P, as his Honour then was, and Macfarlan JA agreed) handed down judgment on 14 October 2010 (Macquarie International Health Clinic Pty v Sydney South West Area Health Service [2010] NSWCA 268) (the Court of Appeal Decision).
The Court of Appeal upheld the finding that the Car Park had not been erected by 14 February 1999 and noted the concession at trial by Macquarie that it was in breach of cl 2.1 of the Construction Deed by failing substantially to commence construction of the Hospital by 30 June 1999; but held that the termination notices that had been served in 2000 were invalid by reason of non-compliance with the requirements of s 129 of the Conveyancing Act 1919 (NSW) (Conveyancing Act) (as to which see further below). The Court of Appeal found that the re-entry and continued possession of the Hospital and Car Park Sites by SLHD was a trespass against Macquarie.
On 13 December 2010, the Court of Appeal made orders, inter alia, for possession by Macquarie of the Hospital and Car Park Sites and declarations to the effect that the Car Park Lease, Hospital Lease, Car Park Sub-Lease and Construction Deed continued to operate and bind both SLHD and Macquarie (Macquarie International Health Clinic Pty v Sydney South West Area Health Service [2010] NSWCA 348). However, the Court of Appeal stayed the order for possession pending the filing by SLHD of a foreshadowed application for special leave to appeal to the High Court.
The Court of Appeal made a number of further declarations, including that, as at 30 June 1999, Macquarie was in default of each of the Construction Deed and Leases by its failure to commence the Hospital and its failure to complete the Car Park. Orders were also made for an inquiry as to damages payable by SLHD for the trespass against Macquarie (see further as to the inquiry as to damages, which has only recently been concluded, below).SLHD then sought special leave to appeal to the High Court. Shortly prior to the special leave hearing, Macquarie wrote to the Minister for Health on 27 May 2011, stating that, in the event that special leave were refused, Macquarie remained willing and able to move forward with the project and to "map out and determine an appropriate new DA".
SLHD's application for special leave to appeal was refused by the High Court on 10 June 2011.

[18]

Re-possession of the Sites by Macquarie in 2015

On 23 July 2015, Macquarie sent a notice exercising its right to take possession of the respective Sites. There was a meeting to facilitate handover on 29 July 2015.
By letter dated 31 July 2015, Macquarie stated that it was "committed to constructing, opening and admitting patients" to the PAPH.
On 13 August 2015, SLHD wrote to Macquarie, agreeing that construction of the Hospital must commence as soon as possible and proposing a revised timetable for construction of the Hospital. SLHD noted in its letter that the proposed revised timetable "adjusts each of the original dates so that the amount of time now permitted for the completion of each of the steps is no less than that permitted under the original timetable".
On 20 August 2015, Macquarie raised (for the first time, apparently) the possibility that the stay imposed by the Court of Appeal pending the application for special leave to appeal to the High Court might still be on foot, foreshadowing an application to the Court of Appeal seeking removal of the stay (though, as it transpired, Macquarie made no such application; the application ultimately being made by SLHD - see at [109] below).
On 21 August 2015, Macquarie met with the City of Sydney Council to clarify whether the Hospital Development Approval (DA 097-00154) was still on foot.
On 8 September 2015, SLHD again wrote to Macquarie as to a revised timetable for construction of the Hospital, noting that Macquarie had not provided any comment in relation to the draft timetable enclosed with SLHD's 13 August 2015 letter. In its letter, SLHD asked Macquarie to advise, if the Hospital Development Approval was no longer on foot, what steps Macquarie needed to take to lodge a further development application and how long Macquarie considered it reasonably required to lodge such an application.
On 17 September 2015, the City of Sydney Council (responding to the request for clarification as to the status of the Hospital Development Approval) advised Macquarie that the works relied on by Macquarie appeared to be engineering works and to relate to the approval and that it was reasonable to assume that work had physically commenced; and said that it "appears" that the Hospital Development Approval had not lapsed (though stating that, because it was approved by the Land and Environment Court, a definitive answer could only be provided by the Land and Environment Court).
Macquarie informed SLHD of the City of Sydney Council's position in that regard by letter dated 22 September 2015. The letter noted, among other things, the changed regulatory environment, including the introduction of construction certificates and private certification of works and the introduction of State Significant Developments (SSD)'s providing an alternate route for approvals for projects like the private hospital; and stated that those matters would need to be taken into consideration when planning for the design and development of the private hospital.
On 25 September 2015, SLHD advised Macquarie that: … [w]e take this opportunity to place on the record that whilst the legislative framework may have changed, any development on the hospital site must accord with Macquarie's contractual obligations to SLHD. The legislative changes in particular do not create, or provide, an opportunity for Macquarie to proceed as though it has a "blank canvas" by proposing something different from what it has contracted to build [an observation reiterated in subsequent correspondence]. In this respect, SLHD will not provide its consent to the construction of any hospital which is not strictly in compliance with the contractual regime.
In that 25 September 2015 letter, SLHD proposed that Macquarie take such steps as are necessary to update the Hospital Development Approval to the extent required to bring it into line with the current legislative regime and that SLHD expected the parties to work together to agree on a streamlined development approval process.
Meetings of the Joint Working Party (JWP), as provided for under the Construction Deed, resumed from October 2015.
On 7 October 2015, Macquarie proposed an agenda for the first resumed JWP meeting, which included, as agenda items, "Hospital & DA Status" and "Planning & Design". Macquarie noted that it was currently progressing an application to the Land and Environment Court to determine the status of the Hospital Development Approval and stated that: Once Macquarie has a definitive answer regarding its application to the Land and Environment Court it will activate the steps now needed to update the DA.
There was a further JWP meeting on 13 October 2015, attended by representatives of Macquarie and SLHD, at which there was a discussion about SLHD's requests for a revised timetable. The meeting notes record Dr Wenkart (the Chief Executive of Macquarie) saying that the Construction Deed included "very punitive" clauses and suggesting that any revised timetable "would be one of good faith, not of obligation"; and that Macquarie "want[s] to get this built, but a formal timetable is impossible". The meeting notes record Dr Anderson (the Chief Executive of SLHD) as reiterating that a revised timetable was needed and that SLHD needed to know when it could expect to receive a timetable from Macquarie. The meeting notes also noted, in respect of Agenda Item 3 (the DA process), that Dr Wenkart referred to whether additional levels should be included above the 9 levels pursuant to the existing development approval.
SLHD then brought an application to the Court of Appeal to discharge the stay order made on 13 December 2010, to the extent it remained on foot. (SLHD notes that Macquarie opposed an immediate lifting of the stay and sought an adjournment of the application.) On 15 October 2015, Gleeson JA discharged the stay order previously made on 13 December 2010, with effect from 2 November 2015 (Macquarie International Health Clinic Pty v Sydney South West Area Health Service [2015] NSWCA 323).
On 16 October 2015, SLHD wrote to Macquarie in relation to the need for an updated timetable for construction of the Hospital, asking Macquarie to advise what Macquarie proposed by way of revised timetable and to provide proposed dates for completion of each of the steps in the timetable. SLHD's position as stated was that Macquarie ought at least to be in a position to indicate how long it may need to lodge an application for a development approval and roughly how long it considered it may need thereafter to undertake the steps necessary for the construction of the Hospital. The letter went on to state that: ... it is the responsibility of Macquarie to obtain a valid DA and to do so within a reasonable period of time. ... SLHD again cautions Macquarie against proceeding as though it has a "blank canvas" by proposing or pursuing something different from what it has contracted to build. In this respect, SLHD will not provide its consent to the construction of any hospital which is not strictly in compliance with the contractual regime that is already in place.
SLHD raised the issue of a revised timetable at the JWP meetings on 22 and 28 October 2015. The meeting notes for the 22 October 2015 JWP meeting record Macquarie's response as being that it would "come back to SLHD".
On 2 November 2015, Macquarie physically retook possession of the Hospital and Car Park Sites. Macquarie notes that, in the period between March 2000 and November 2015, SLHD had used the Hospital Site for car parking and that, in doing so, SLHD installed a hardstand, covered with roadbase gravel and pavement over approximately 60% of the Hospital Site.
On 9 November 2015, SLHD again wrote to Macquarie in relation to the revised timetable for construction of the Hospital, noting that it had not received a response to its earlier correspondence; and stating that: In addition to its failure to respond to the questions raised in SLHD's letter of 16 October 2015, Macquarie has also failed to: 1. provide any substantive response to the proposed timetable put forward by SLHD in its letter of13 August 2015; 2. provide any response to SLHD in respect of the following requests for information which were put to Macquarie in SLHD's letter of 8 September 2015: (a) what steps Macquarie must take so that it is able to lodge a further application for a DA; (b) how long Macquarie considered was reasonably required for it to complete the steps above; and (c) whether Macquarie had a proposed timeframe in mind for the completion of the project (being the construction of the private hospital) and the revised dates that should be inserted into the timetable. SLHD expects Macquarie to have turned its mind to these matters, and to have taken active steps to progress the construction of the private hospital. SLHD once again requests that Macquarie provide a formal response in relation to each of the questions set out above.
Macquarie resumed providing monthly reports to SLHD from mid-November 2015. In the first such report for October 2015 (dated 16 November 2015), Macquarie stated that it had focussed on several major tasks, including establishing the status of the Hospital Development Approval and engaging "key project resources to join the Macquarie team". Under the heading "Construction of Private Hospital", the report noted Macquarie's view that there were two work streams defining the path forward for the construction of the Hospital, namely establishing the status of the Hospital Development Approval and development of a preliminary business case. The report also recorded Macquarie's view that, once the status of the Hospital Development Approval had been established and the preliminary business case developed, Macquarie expected to be able to engage key project resources, including architects and builders. The report attached a draft project schedule (which SLHD points out did not forecast any work on the project beyond engaging a commercial planner).
In its next monthly report, for November 2015 (dated 14 December 2015), Macquarie proposed two "indicative timetables" depending on the determination of the status of the Hospital Development Approval, noting that "both these indicative timetables are preliminary drafts, based on best endeavours and will be subject to further due diligence". The preliminary draft timetable, assuming the Hospital Development Approval remained on foot, proposed: the commencement of an updated design process (April 2016); submission and approval of a supplemental development approval and amended development approval or modification application under s 96 (or s 96AA) of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) (modification application) (August 2016); and commencement of construction of the Hospital (April 2017). The report noted that Macquarie proposed to distribute a "Request for Proposal" (RFP) for the role of architect, with responses expected to be provided in March 2016. SLHD notes that the attached project schedule forecast steps only up to the stage of the engagement of an architect and preliminary due diligence. (Pausing here, there is reference in the documents and the submissions variously to a s 96 application and a s 96AA application. The former, under the EPA Act at the time, allowed for modification of a development consent that had been granted without a new consent needing to be issued; the latter for modification by consent authorities of consents granted by the Land and Environment Court. Nothing turns here on which kind of modification application was here required - I simply note the inconsistency of terminology and refer generically to a modification application.)
Macquarie's monthly report for December 2015 (dated 14 January 2016) contained the same "indicative preliminary timetable" for construction of the hospital, assuming the Hospital Development Approval remained on foot. SLHD notes that the report did not otherwise detail any progress in construction of the hospital. The report stated that Macquarie was conducting a review of leading precedent hospital designs and trends and that Dr Wenkart was currently undertaking a roadshow of selected "world leading" hospitals in the United States of America and Europe, with Australia to follow.

[19]

Events in 2016 leading up to the September Timetable

On 19 January 2016, SLHD wrote to Macquarie, complaining about the lack of detail in Macquarie's monthly reports. In relation to the references to Macquarie's "preliminary business case", the letter stated that: Finally, it is important that Macquarie is aware that it should not proceed in developing a business case as though it has a "blank canvas" so far as the construction of the private hospital is concerned and SLHD warns Macquarie against proceeding in that way. As you know, Macquarie already had a design that was consistent with what Macquarie is contracted to build and in respect of which the required approvals were granted. As part of any business case which it prepares, Macquarie should articulate, by reference to that original design, what is different, and the basis for any change. In other words, it is this design which ought to be the baseline for any progress going forward.
In a further letter on 19 January 2016, SLHD noted that Macquarie's preliminary indicative timetable provided for commencement of the updated design process in April 2016; and that SLHD's position was that Macquarie could commence the updated design process by (at least) assessing the extent to which the conditions in the 1997 Development Approval are capable of being complied with, having regard to the current position, including by undertaking a traffic assessment. SLHD sought an explanation from Macquarie as to why it considered it necessary to wait until April 2016 to commence the updated design process.
On 11 February 2016, SLHD expressed its concern at the statement in Macquarie's monthly report as at 14 January 2016 that Dr Wenkart was undertaking a review of "leading precedent hospital designs and trends", which was not expected to be completed until April 2016. SLHD's letter went on to state that: I confirm yet again that SLHD will not approve any design other than what Macquarie is contracted to build in the contractual agreements between the parties. That is to say, Macquarie will not be building anything other than what was provided for in those agreements. It is important that this is understood by Macquarie.
Pausing here, it is apparent from the above correspondence that by this time Macquarie had been put squarely on notice of SLHD's position that there was a contractually agreed design for the Hospital that Macquarie was obliged to construct; and that Macquarie should not assume that it had a "blank canvas" (or that SLHD would consent to any development beyond that which had been agreed). While it may readily be accepted that it was open to Macquarie to seek a variation or modification of the proposed development (and Macquarie on the present hearing candidly "embraced" the proposition that it was contemplating a very different development from that which had been agreed and was the subject of the Hospital Development Approval - see T 287), it could not be suggested that Macquarie was under any doubt as to SLHD's position in this regard. Accordingly, whatever else might be said about the steps taken by Macquarie over this period to develop proposals for a much different hospital complex than that contemplated by the original Hospital Development Application (including that it was open to Macquarie to have sought SLHD's consent to vary the proposed development - and that SLHD would have been obliged to consider and respond to such an application consistently with its contractual obligation of good faith), Macquarie must have been aware that to the extent that it was incurring costs in that regard this was at the risk that no such expanded development would ultimately be approved (and it should also have been under no misapprehension that, if this work was at the expense of compliance with its existing obligations under the Construction Deed, then that might lead to adverse consequences for it down the track).
Returning to the chronology of events, it is clear that (although unbeknownst to SLHD at that stage), by February 2016 Macquarie was contemplating a very different development of the Site. That much is evident from the content of the draft RFP for architectural services prepared by Macquarie in February 2016, the final version of which is dated 3 March 2016. The RFP at that stage involved a complex that included a "hospital hotel" on Levels 7 and 8; a pool, spa, gym and recreational facilities on Level 9; seniors' living apartments and an apartment living complex on Levels 10-25; and a basement car park for a minimum of 400 car spaces, segregated for each major facility (hospital, hospital hotel, seniors living, apartments and consulting suites/medical clinic).
The architectural scope of services accompanying the March RFP noted that Macquarie was then proposing that the project proceed in three development stages: basement car park excavation and construction (Stage 1); main hospital works up to and including Level 9 (Stage 2); and seniors' assisted living and seniors' apartment living (Levels 10 and above) to be approved through a "totally separate DA" (Stage 3).
SLHD points to Dr Wenkart's comment in an email dated 1 March 2016, having reviewed the architectural scope of services, that: I did not see any requirements to assist our submissions to the SLHD as to the elements, if queried especially for the Hospital Hotel and Seniors Living, as being "ancillary services" to the Hospital within the Lease Terms. This will be needed. The 10 to 25 levels for Seniors as we intend is what we wish. The height issue is out of our control and will need a clever and effective approach to CASA. This is not covered either. The outcome will determine the height and whether we use 3 wings or just 2 of the upper levels from 10 upwards to maximise the number of saleable units towards 300 of some description, being assisted or independent living. The architect will need to be across this too.
The fact that Macquarie was pursuing design options for a different (and much expanded) development does not, I accept, necessarily say anything as to a lack of intention to progress the original contractual design (if, say, approval were not to be obtained for that expanded concept), though it may well have had an impact on its non-compliance with the September Timetable that SLHD in due course set - and, if so, that is something for which SLHD cannot be blamed. SLHD relies upon Macquarie's pursuit of the expanded design options as indicating a lack of intention by Macquarie actually to build the Hospital as provided for under the Construction Deed in accordance with the Hospital Development Approval as relevant to Macquarie's damages claim (as discussed in due course later in these reasons).
Meanwhile, Macquarie had applied to the Land and Environment Court for a declaration as to the status of the Hospital Development Approval. That application was transferred, on SLHD's motion, to this Court before Kunc J (who was then hearing the damages inquiry in this Court following on from the Court of Appeal's 2010 decision). The application was heard on 23 February 2016. On 1 March 2016, Kunc J held that the Hospital Development Approval had not lapsed and remained on foot (Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 9) [2016] NSWSC 155) (Macquarie v SLHD (No 9)).
SLHD notes that the minutes of an internal Macquarie Project Control Group (PCG) meeting on 7 March 2016 record a discussion in relation to design issues; including (at item 2.8) an urgent requirement in the RFP for up to 400 basement car parking spaces and (at item 2.10) in relation to Seniors' Living, the instruction that "[a]ny reference to seniors living to any parties must be confidential and restricted in its application". (Pausing here, SLHD emphasises that Macquarie did not at the time provide its RFP (or other documents of this kind) to SLHD and refers to statements of the kind recorded in these minutes in effect as evidencing the concealment by Macquarie of its proposed development. It says, and again Macquarie does not here appear to gainsay, that it is plain from the RFP that Macquarie was in fact proposing a very different development from that contemplated by the Hospital Development Approval - see T 81.)
Silver Thomas Hanley (STH), a firm of architects, responded to the RFP on 29 March 2016. STH's proposal dealt with the "full complex" identified in the RFP, including residential living apartments on Levels 10 to 25, two levels of basement car parking for 400 cars, and a departmental analysis of all proposed 25 levels; noting that: COMPLIANCE WITH AHFG AND BCA The Development Application approval date is noted as being 19 June 1997. From the information made available in the RFP documentation, it is not possible to ascertain full [sic] the level of compliance with the current AHFG [Australasian Health Facilities Guidelines] and the BCA [Building Code of Australia]. It is therefore assumed that the successful design team will need to undertake a full review of this scheme against the AHFG with specific respect for: • Departmental services and scale of the service to be provided; and • Space by space benchmarking against the recommended room area by department; We are particularly experienced in challenging the guidelines where necessary to ensure a practical yet compliant schedule of accommodation is agreed. Our team is experienced in managing the AIP process for Private Hospitals, and as such are familiar with the necessary dialogue to reach mutually agreeable space standards.
I interpose here to note that SLHD has pointed to the evidence in cross-examination of the principal of STH, Mr Bruce Crook, to the effect that STH never conducted this full review - see T 191.13, where Mr Crook said he was not aware of any document prepared by his firm in this respect. (Mr Crook's evidence in general seemed to exhibit a concern to avoid concessions that might be perceived to be adverse to Macquarie's case, but it may have been due to close attention being paid by Mr Crook to the precise terms of the questions he was being asked and it is not necessary to reach any concluded view on this.)
On 4 April 2016, SLHD wrote to Macquarie complaining about the content of Macquarie's monthly reports for January and February 2016, and stating: Given that [Macquarie] has obtained a declaration from the Supreme Court of NSW that its DA U97-00154 has not lapsed, SLHD expects that [Macquarie] intends to develop and operate a private hospital that is very similar to that design. Is this the case? … How will [Macquarie] manage the design process such that the impact of any fine-tuning of the design on your approved DA, to suit the updated models of care and operational model for the hospital, does not unnecessarily delay a reasonable timetable for the project? … The report indicates that such factors 'will necessitate amendment of DA U97-00154'. Please confirm SLHD's expectation that any such amendments will be confined to a Section 96 process and that design change will be mitigated and delays avoided.
Notes of the JWP meeting on 5 April 2016 record Dr Wenkart's son (Mr David Wenkart) advising, as to the status of the proposed modification application, that "the design was out of date and non-compliant with current standards" but that "there was no architect to determine what aspects of the design need to be changed"; and that Dr Anderson (of SLHD) said that the designs included in the Hospital Development Approval were agreed by SLHD and Macquarie. Dr Anderson is recorded as having asked whether Macquarie intended significantly to change those designs or to maintain the same footprint, in response to which it is noted that Mr Wenkart "confirmed that Macquarie intends to substantially maintain [sic] the same design". The notes record that Dr Anderson raised the need for a revised timetable and asked when Macquarie would be in a position to provide a timetable; and that Mr Wenkart said that "Macquarie was committed to building a hospital as soon as practicable, but did not want to create a rod for its own back with an unrealistic timetable".
Macquarie's RFP for town planning services, dated 5 April 2016, identified the proposed development in the same terms as the architectural RFP (i.e., as including a 2 level basement car park, a hotel and 15 levels of apartments). (Again, SLHD notes that this document was not provided to SLHD.) Macquarie's planning approach was described as follows: In order to ensure MHC can be seen to be progressing with the works in line with the expectations of SLHD we wish to progress with the planning stages to allow early works to commence as soon as practicable. Therefore we expect three separate planning applications will be made as follows: 1. The first planning application will be the design and integration of a two-level basement carpark without changing any other aspects of the current design. 2. The second will include the required re-design of the existing plans with consideration also to the basement car park already in planning. 3. The final stage will include an application for planning approval of, up to, 15 additional levels on top of the currently approved hospital. These levels will house seniors assisted living and seniors independent living apartments.
On 5 April 2016, Arup (traffic engineering consultants) responded to Macquarie's RFP for traffic engineering services. The response recorded Arup's understanding that the first planning application would be the design and integration of a two level basement car park with a separate development approval to be submitted for a seniors living development of up to 15 levels; and that key issues that would need to be addressed in the traffic and transport assessment would include car parking demand and supply. The response noted that Macquarie had proposed a range of uses that would require access to car parking, including: Levels 10 and above will include seniors living apartments. In total we expect 300 apartments and living units can be accommodated in the space above Level 9. These apartment levels will be accessed via a shared zone within the Level 1 South West wing porte-cochere.
Macquarie wrote to SLHD on 12 April 2016, noting that, since this Court had ruled the Hospital Development Approval had not lapsed, it would need to be modified "to allow the private hospital to comply with current health guidelines and to align with changes in casemix since the plan was first developed" and that "[a]t this stage, we are hopeful such amendment can be achieved through a Section 96 [modification] application, which would substantially preserve the building envelope".
Macquarie's monthly report for March 2016 (dated 14 April 2016) noted that it had still not appointed an architect for the project and expected to complete the appointment in May 2016 (CB 10/4034).
On 14 April 2016, Mr Robinson (Macquarie's Project Manager) responded to queries which had been raised by another architectural firm responding to the RFP. As to height constraints on the Site, Mr Robinson said: We are currently applying to SACL (Syd Airport) for judgement on the required height to achieve the desired 25 floors. The development of the concept and design will proceed based on our desires until we are told/or receive advice otherwise.
Also on 14 April 2016, Mr Robinson forwarded to Mr Wenkart a draft program for provision to SLHD, noting that "[a]ttached is a program that satisfies our obligation under the deed. I am sure they will ask for more, and as aspects of the project are tabled, more may be provided, but not before".
On the same day, SLHD wrote to Macquarie setting out certain actions which it proposed be advanced by Macquarie consistent with its obligation to construct the Hospital. Those steps included: Section 96 application 4. [Macquarie] promptly [to] complete its assessment of the approved DA design, including from a compliance perspective ([Macquarie] advised that the latter depends on the imminent engagement of the architect who is integral to this process), to ascertain any refinements and redesign that might be required to bring the existing design up to date. 5. In view of the Supreme Court's decision on 1 March 2016 that the development consent has not lapsed, [Macquarie] is to prepare its foreshadowed section 96 application to the City of Sydney (S96) without further delay. … Timetabling issues 7. Given that clarity has been achieved in respect of the existing DA, incumbent design and S96 process, [Macquarie] is now in a position to "firm-up" and "tighten-up" the draft program for the project such that a realistic and reasonable timetable (to replace the Timetable in Annexure A of the Construction Deed), can be proposed by [Macquarie] at the next JWP meeting. 8. To facilitate the above, SLHD expects that [Macquarie] will include a detailed draft program for all project phases, in its next monthly project report ...
Macquarie responded to SLHD's letter of 4 April 2016 on 15 April 2016, noting (in respect of project status and timetable) that "Macquarie intends to act expeditiously to construct the Hospital. Macquarie expects to be able to refine its timetable as the recommencement of construction progresses".
On 26 April 2016, Mr Wenkart sent an email to the Macquarie "team" ("team" here encompassing the consultants employed by Macquarie for the project as well as certain representatives of Macquarie) setting out a number of planning options: "[c]ase 1" involved the current "K-shaped" hospital "plus car park plus senior living"; "[c]ase 2" involved a "[n]ew hospital design plus car park plus Senior Living". In respect of the former, Mr Wenkart said: Once we [sic] a Section 96 approved and building commences, then it becomes much harder for SLHD to argue against the Senior Living apartments[.] [I]t also becomes more challenging for SCC [Sydney City Council] to say "No" if we have a build on foot and lodge a new DA[.]
In respect of "[c]ase 2", Mr Wenkart commented that it was "[u]nlikely to get Seniors Living through without a massive fight, and only after SLHD approves the Hospital and the Car Park, which will be a massive fight". In his concluding comments, Mr Wenkart noted that: Once we have an approved Section 96 for the hospital and car park, it becomes much harder again for SLHD to kick us out of the site. This will provide us with a stronger footing from which to contest the legitimacy of Seniors Living, which will surely be challenged by SLHD and possibly Council.
Dr Wenkart responded to the above email that "I totally agree with DW [David Wenkart] thoughts".
A further JWP meeting was held on 4 May 2016. The Minutes record Mr Wenkart saying to the SLHD representatives, in relation to the proposed modification, that "it cannot change substantially in form or function" and that "there may need to be changes in relation to the egress and car flow, but the proposal will not substantially change".
On 13 May 2016, SLHD wrote to Macquarie expressing its frustration at the lack of meaningful progress on the project.
Macquarie's monthly report for April 2016 (dated 14 May 2016) reported that it had still not engaged an architect and there were no changes in the dates for the preliminary draft timetable.
On 26 May 2016, Mr Robinson, the Project Manager, forwarded a proposed revised program "to suit the input from STH", which included activities and dates for the full proposed development comprising a 2 level basement car park, hospital, hotel and 15 floors of residential apartments with separate planning approvals for each stage. (SLHD notes that it is apparent from the project milestones section at the beginning of the program that Macquarie was proposing the submission of planning applications for each of the three phases (basement car park, main hospital and Levels 10 to 25) prior to appointment of the main contractor and the main contractor commencing work on the Site. SLHD complains that this program bore no relationship to the program Macquarie provided to SLHD in its monthly report for May 2016.)
Macquarie's monthly report for May 2016 (dated 15 June 2016) reported that it had still not engaged an architect (though it was noted that one had been selected). Under the heading "Project Status & Timetable", the proposed date for submission and approval of an amended development application had been changed from August 2016 to December 2016, and commencement of construction of the Hospital had been changed from April 2017 to August 2017. Attached to the report was what is described as a "highly abbreviated program" (being the version of the program that Mr Robinson had provided to Mr Wenkart on 14 April 2016 as suitable for provision to SLHD).
Macquarie engaged its architect for the project (STH) by Consultancy Agreement dated 23 June 2016 (the Consultancy Agreement), pursuant to which STH was retained provided for a design brief including a hospital-hotel on Levels 7 and 8, a club floor with amenities and a pool on Level 9, seniors living apartments on Levels 10-25 and a 2 level basement car park consisting of a minimum of 400 car spaces. The agreed contract program at Annexure "E" to the Consultancy Agreement provided for submission of a development application for Levels 10-25 prior to appointment of the main contractor. (Again, this document was not provided at the time to SLHD.)
In its monthly report for June 2016 (dated 14 July 2016), under the heading "Project Status & Timetable", the proposed date for submission and approval of an amended development application was changed to March 2017, on the stated basis that this was to "accommodate additional time required for the Concept Development and Approval".

[20]

SLHD issues the September Timetable

It was against this background that, on 9 August 2016, SLHD wrote to Macquarie indicating its intention to promulgate a revised timetable pursuant to cl 2.5 of the Construction Deed and attaching a proposed extended timetable which SLHD considered to be appropriate. SLHD invited comment from Macquarie on the proposed timetable. In particular, SLHD sought confirmation from Macquarie as to whether it considered that any of the dates in the enclosed draft extended timetable was not appropriate and, if so, the alternative dates proposed by Macquarie and the reason why Macquarie considered those dates to be more appropriate. SLHD indicated that it would consider any response from Macquarie, including whether to amend any of the dates in the enclosed draft extended timetable, but stated that "for the avoidance of doubt, notwithstanding any response from Macquarie, SLHD will not amend any dates in the enclosed draft extended timetable to the extent to which, after considering Macquarie's position, it considered those dates ought not be amended".
Macquarie responded to SLHD's draft extended timetable by letter dated 22 August 2016 in which Macquarie asserted that: Macquarie did not accept SLHD's attempt to use cl 2.5 of the Construction Deed to extend the dates in the Timetable; the Timetable in the Construction Deed had, by the effluxion of time and circumstances, either been satisfied, frustrated or abandoned; accordingly, the Timetable in the Construction Deed and the dates contained within it were redundant; Macquarie did not accept that cl 2.5 was relevant or that SLHD could use cl 2.5 to revive the Timetable; and, in Macquarie's view, the indicative (non-binding) timetable to which Macquarie was working and the Construction Deed were sufficient to govern the contractual relationship between the parties. (SLHD notes that each of those assertions was part of Macquarie's pleaded claims in this proceeding, until abandoned at the hearing.)
SLHD's response to that, by letter dated 1 September 2016, was to write to Macquarie, expressly invoking cl 2.5 of the Construction Deed to promulgate a timetable of events (the September Timetable) as contractually binding upon Macquarie. The letter stated that: However, as a Building Approval is now known as a Construction Certificate, SLHD has adopted the new terminology of "Construction Certificate" in articulating the steps which relate to obtaining and being given a building approval (that said, SLHD regards "Building Approval" and "Construction Certificate" as interchangeable in terms of their meaning).
Relevantly, in place of the four steps that I have extracted above (see at [41] above) from the original Timetable (relating to the lodgement of building applications and the obtaining of building approval), the September Timetable provided as follows (these being the disputed activities): Activity Substantial Commencement Completion Date Date … Lodge Construction 29 November 2016 17 February 2017 Certificate Application with the Landlord Lodge Construction 4 April 2017 Certificate Application with Private Certifier Construction Certificate given 12 May 2017 Construction Certificate declared 12 May 2017 acceptable
Accordingly, the September Timetable allowed a period of roughly two months from the date of its promulgation for the lodgement of the construction certificate application with SLHD (although, as is apparent from the above chronology, SLHD had been calling for a proposed revised timetable for some time and Macquarie was well on notice of SLHD's concern for there to be progress on the construction timeline).
The dates for the remaining items in the original Schedule to the Timetable were revised as follows: Activity Substantial Commencement Completion Date Date Bulk Excavation of Land 26 May 2017 7 July 2017 Construction of Hospital 11 September 2017 29 October 2019 Admission of first patients 25 February 2020 Rent Commencement Date 25 February 2020

[21]

Pursuit of the "full complex" proposal

Following the September Timetable, it appears that Macquarie continued to pursue preparation of the expanded "full complex" development proposal (i.e., that including not only a hotel but some fifteen levels of apartments and four hundred underground car spaces). SLHD notes in this regard that: there was a design meeting on 19 September 2016 at which the design of all elements of the proposed complex were discussed, including residential levels from Level 10 and up (including apartment sizes and facilities) and car parking (it being noted that the senior living units would require about 200 spaces with easy street access and egress and that Macquarie had requested two levels of efficient single 'maxed out' parking - see item 3.9); Dr Wenkart provided his comments on the designs, with a focus on the residential apartments and car parking, on 21 September 2016; on 21 September 2016, Mr Robinson (the project manager) forwarded to Dr Wenkart Arup's analysis of required car parking for all elements of the project, including the hotel and senior living units; there was a formal contract amendment to the engagement of Mecone (Macquarie's town planning consultant) on 23 September 2016, recording a changed planning strategy (from the previously proposed three stage process) involving, first, a modification application for the addition of the basement level car park and, second, a State Significant Development (SSD) application for the entire complex (including the basement level car park, main hospital, Level 9 club deck, and senior living units).
On 24 September 2016, Mr Brady (a construction programmer) forwarded a revised draft program, which again provided for Macquarie to obtain all planning approvals (including SSD approval for the complete complex) prior to the commencement of construction work on the Site; and that, on 5 October 2016, Mr Robinson emailed Mr Brady, stating that: Once we agree on a final programme we need to show SLHD a programme that identifies completion of the hospital that they want us to build in line with the lease conditions. This will not include the senior living portion, so please provide two programmes. One without all activities from task 330 on, and one with everything.
Mr Brady duly prepared and provided two different construction programs on 10 October 2016: the complete version including the construction of Levels 10- 25; the abbreviated program finishing at line 339.
On 11 October 2016, Mr Coburn (of Mecone) emailed comments on Macquarie's planning strategy document, advising that the proposed modification to the Hospital was unlikely to be supported as a modification given the addition of Levels 8 and 9 and that he recommended taking this out of the second modification (i.e., the second modification under the previous three stage process) and including it as part of the SSD; and stating: I know there is logic behind the approach for the 2 modifications, but I think there is little benefit in the second modification and instead maybe it could be rolled into the SSD - I understand you need to show approval is being sought etc, but this should be achieved with the Section 96 for the basement, particularly given this is going to take some time in Council and likely to get push back from Council.
Mecone then prepared a draft "Planning Approval Pathway" in October 2016 recommending a two phase approach, namely: Phase 1, being a modification under s 96 of the EPA Act for a 2 level basement car park and alterations to the approved hospital development; and Phase 2, being an SSD application for the entire development including hotel and apartments. On 17 October 2016, Mr Robinson provided comments on the draft and, in his covering email, instructed Mecone: Please address the use of the basement is primarily for the reasons noted. We need to focus on limiting the discussion on carpark and promote the space as useful for all the other reasons. We can discuss this in more detail later.
On 19 October 2016, Dr Wenkart sent an email to Mr Robinson and STH (and other persons from Macquarie) stating that "I have reviewed [the draft plans] and have many concerns!!!" and "[h]ow many car parking spaces on these designs??? 400 is essential on the 2 basement floors, is that allowed for??".
On 21 October 2016, Mr Robinson emailed Mr Brady in relation to the two versions of the program and, in relation to the version of the program to be provided to SLHD, instructed him "[p]lease remove all reference to the word Car park. From my review there is no need to replace it with another word, it works without it".
On 8 November 2016, Dr Wenkart wrote to SLHD in response to the September Timetable, in which he explained the time needed for amendments to the design of the Hospital as follows: SLHD's illegal trespass occurred on or around 17 March 2000. Therefore, there has been a delay in excess of 16 years for the Completion of Construction of the Private Hospital. As Macquarie has noted on numerous occasions, this delay and the associated passage of time has meant that the previously approved design for the Private Hospital no longer complies with the Australasian Health Facility Guidelines (AHFG) and therefore a process of redesign and subsequent approval process are required.
On 10 November 2016, Mr Robinson emailed Mr Wenkart (and included some STH representatives) "some points and discussion topics" from past design meetings that "require ongoing consideration", including under the heading "Nomenclature": Basement - we know what will be in the basement, it goes without saying, we don't need to refer to it as anything other than a basement, please.
On 22 November 2016, Mr Buckley (a Macquarie project manager working under Mr Robinson's supervision) emailed a prospective mechanical services consultant the proposed "Design Consultants Milestone Program", which indicated that Macquarie intended: to submit a modification application in March 2017 (with expected approval in November 2017); to submit an SSD application in April 2017 (with expected approval in December 2017); and for construction to begin in December 2017.
On 30 November 2016, Macquarie served a delay notice on STH, assessing STH as having completed 0% of the car park planning approval and only 1.3% of the main building planning approval (they being the components of the proposed modification application).
STH's 5 December 2016 response to the delay notice served by Macquarie accepted that STH had only completed 15% of the car park planning approval and 1.3% of the main building planning approval; and proposed a program to progress work not completed, which included: Friday 16 December • Issue drawing list for Section 96 submission. … Tuesday 20 December • Review Level B3 to 9 for consultant co-ordination and commencement of Section 96 process. • Levels 10 to 25 exempted from Section 96 submission but will be advanced as departmental plans.
A further design meeting was held on 15 December 2016. SLHD says that it is plain from the minutes that the design team was focused on the complete complex, including assisted and seniors living units, noting that there is no mention of the modification application or drawings to support it. It is noted that Item 2, dealing with "Nomenclature", observes that there were certain terms over and above the standard rhetoric that were important for Macquarie that need to be observed in discussions and on all documents and that Item 2.2 states: Basements - We would like to draw attention away from the car park for political reasons. So all "Basement Levels" will be referred to as "Basement" or "Basement Levels" or "The Basement". The "Basement" does include some space for cars to be parked for periods of time, but primarily it is a "Basement" that houses plant, storage area, some spaces for cars to be parked, circulation space, maybe even future space for an IMRI bunker or two. We will have two levels of "Basement".

[22]

Macquarie's proposed modification application

SLHD argues that the evidence clearly shows that Macquarie and its consultants did not start working on the modification application to Council until January or February 2017 at the earliest (having been focussed on the "larger" development prior to that time). It says that Mr Crook's claim to the contrary in his first affidavit should be rejected, having regard to the documentary evidence referred to above. (In cross-examination, Mr Crook appeared to take an inconsistent position as to when work commenced on the application process - see T 183-184, perhaps explicable, as I have suggested earlier, by a focus on the precise terms in which questions were put to him; but what can hardly be disputed is that the communications at the time revealed that the "larger" project (to which there was no reference in Mr Crook's affidavit, as he accepted at T 164.18) was understood to be the priority in early 2017.)
On 9 January 2017, Mr Robinson emailed the Macquarie "team" (which included Dr Wenkart, Mr Wenkart, and Mecone and STH representatives) "Welcome to 2017", commenting on the status of the project including: The main focus for the design team needs to be the planning documents for the first submission. As previously noted this is a section 96 application to The Council of the City of Sydney to augment the floors, add the 2 basement levels, change some of the access roads and paths around the ground level and connections to some of the upper levels, relocate the oxygen vessel enclosure and a few other minor amendments. The main building will be topping out with level 7 as the upper most habitable floor (as per the original DA). STH are taking the lead on the design as per usual …
On 18 January 2017, Mr Crook emailed a revised stacking diagram to Mr Coburn, noting: Specifically we need to understand the scope (being the height and extent) of the building we will indicate in the Section 96 submission so we can develop that as a separate set of drawings[.]
A list of requirements for the modification application was provided to STH on 20 January 2017 and Mr Crook provided indicative sketches for the modification application on 12 February 2017, noting to Mr Coburn that: Adam we will dedicate a small team to do the the [sic] section 96 proposal as we know it will become academic once the major project is submitted. Also, in terms of Facade we will identify the larger project as our priority and work back to the section 96 proposal[.]
On 10 February 2017, Mr Robinson sent an email to the Macquarie team, which included under the heading "DA Modification": STH to complete drawings for DA modification showing stacking and elevations overlapped on existing drawings to show + 's and - 's for the DA Modification only (up to level 7 of main building and the consulting suite building). STH to confirm with Andrew Hulse (Arup) on parking requirements for the DA Modification works only, to determine the extent of parking likely to be allowed in the basement. … We discussed the possibility of submitting to [sic] DA modifications. We resolved to submit only one plus the NSW Planning submission. The one DA modification will include one only basement level showing loading dock, short term parking, ambulance drop off, storage, plant, future space for hospital services. STH need to use appropriate parking nomenclature on parking spaces on plans to minimise the reliance on long term mass parking.
Mr Robinson also referred to the status of the proposed SSD application, including that: Mecone need to provide MR [Mr Robinson] with a programme showing the steps to submission of the SSD application, MR will complete a detailed programme to identify the required milestones. … STH to ensure the drawings for the entire development shows the SLU [Seniors Living Unit] portion of the development in the same colour, on block plans, to make it less conspicuous.
On 13 February 2017, Mr Robinson sent an email to Mr Wenkart, responding to his request for the Hospital design description by level, in which Mr Robinson noted: Basement L2 - We are not designing this portion for the first planning submission, however it will be mass parking for the SSD planning submission and said: Level 7 - Hospital hotel/ IPU (80 - 100 beds) and consulting suites Everything above this is subject to the SSD application, apart from the consulting suites up to Level 9 inclusive. Level 8 - Hospital hotel/ IPU (80 - 100 beds) Level 9 - Club deck Level 10 - Club deck and assisted living Level 11- Assisted living Level 12 - Level 15 - Independent living units (a mix of 1, 2 and 3 bedroom units).
On 22 February 2017, Mr Robinson emailed the project team in relation to the modification application, stating that: Please remember that all reports and drawings need only reference the main building up to and including level 7 as habitable floors, only 1 basement level we are not including additional floors for the purposes of this first submission. For this submission we will not include the link across to Salisbury Ave from L3, any habitable floor above level 7 or basement level 2.
On the same day, Mr Robinson emailed Mr Coburn, Mr Crook and others in relation to the Building Code of Australia (BCA) classification of Level 7, stating that: Attached is the current approved L7 drawing for the 'Hospital'. Note it is designed as a hospital level as are all the existing levels and therefore the "use" is effectively class 9A. Therefore, to simplify the DA mod submission and to obviate the reference for the required fire engineering to deal with the different classifications, I propose we design and address this level as class 9A in the DA mod submission. I presume this would mean the requirement for a change of use application at a later stage, which I don't see as much of an issue.
On 8 and 9 March 2017 there was email correspondence between members of the Macquarie team in relation to condition 6 of the Hospital Development Approval (which prohibited access to Church Street). Mr Bachimov of STH concluded that the condition needed to be changed to permit vehicle egress to Church Street. Dr Wenkart responded by saying: I appreciate this planned access and egress from Church street for the Hospital hotel use in Stage 1 and as well as the seniors Living in Stage 2. This makes sense. .... Not varying the old 1997 conditions would in the current trends and design changes create havoc at the entrance and exit to the PAPH hospital most of the day and particularly when local peak traffic times occur. In fact it could cause the hospital to be a no go zone! Thus effecting its economics. So any dispersion onto Church street for anyone wanting to enter the PAPH complex will be essential as well as practical in stopping a very messy possible queuing problem getting into PAPH as well as getting out of PAPH at the combined main entry and exit into New Hospital road and the adjacent traffic lights on the main road.
On 9 March 2017, Mr Robinson sent an email to the Macquarie team stating: For the DA Modification there is to be no changes to those conditions noted below as far as what can be expressed on the drawings. In accordance with the design, trucks may be able to access the loading dock from Church St, but the condition to access from New Hospital Road must be maintained. DO NOT show access to the porte cochere off Church St for the DA modification. We have the pass through ideology working. We are pushing shit up hill to get a viable option in front of council as it is. We need to maintain as much "substantially the same development" as possible to ensure a clean path through council.
On 10 March 2017, Mr Robinson emailed Mr Crook and others advising that Macquarie had reviewed the latest plans from STH showing additions and subtractions to the building fabric, that the drawings were not good enough and that Mr Coburn would discuss with STH what was required to support the modification application. By email on 13 March 2017, Mr Coburn explained that the extent of change in STH's drawings posed a real risk that they would not be considered to be "substantially the same" development (a precondition to Council's ability to approve a modification application); in particular that: … Bulk and scale of the modification: There is a large portion of additional floor space when compared to the approved plans and this is a significant risk as Council may not consider the modification to be substantially the same as the original consent - we would also find it difficult to support.

[23]

February Default Notices

Meanwhile, on 20 February 2017, SLHD had served the February Default Notices. Those notices of default issued pursuant to the Leases and the Construction Deed specified the alleged breach by Macquarie as its failure to lodge a construction certificate application with SLHD, the landlord. Those notices (other than the notice with respect to the Construction Deed) were in terms issued pursuant to s 129 of the Conveyancing Act.
On 10 March 2017, Dr Wenkart wrote to SLHD in response to the February Default Notices: In light of the major efforts underway to build PAPH, it was disappointing to receive Notices of Default as issued on the 20th February 2017 for both the Hospital Lease and the Car Park Lease. … There is ample historical correspondence that clearly states that in order to comply with the necessary building codes and to achieve functional design to meet today's hospital requirements that a Section 96 application is required to modify the existing DA. Thus, our efforts have been focused on the Section 96 timetable as compared to the construction certificate...
Pausing there, nothing was said in this letter to suggest that much of the focus of the efforts of the Macquarie team to this point appears to have been on the proposed expanded development rather than pursuit of the contractual design for which the Construction Deed provided.
On 15 March 2017, Macquarie's solicitors wrote to the SLHD's solicitors attaching a draft summons, stating: Following the court's declaration that development consent D1997/154 (the Consent) has not lapsed, our client has spent the last year (in consultation with its experts, builders, architects and planners) in planning and preparing to meet the requirements of the Consent and construction of the private hospital the subject of the Consent. It has kept your client informed at all stages of that process. (SLHD maintains that, insofar as this letter reflects the instructions provided by Macquarie to its solicitor, those instructions were simply false - see T 94. Certainly, it is difficult to see how it could seriously be maintained, in light of the material referred to above in relation to the "larger project", that Macquarie had kept SLHD informed at all stages of the planning process; since it appears that Macquarie was at pains not to alert SLHD to its apparent intention or proposal to pursue the "larger project", though of course that begs the question as to whether it had any obligation to do so - as to which the obligations Macquarie has under cl 10.8 of the Construction Deed might well be relevant.) Provision of draft modification application documents to SLHD
Macquarie provided SLHD with a draft (and incomplete) modification application of the Hospital Development Approval on 20 March 2017; the draft application included a statement of environmental effects prepared by Mecone, which, when describing the "Proposed Development", asserted that "[t]he vast majority of the amendments relate to hospital code and operational requirements that necessitated a change to the building plans for the proposed hospital". At [4.1.1], the statement of environmental effects included that: The intended use of the development as a hospital and medical centre will remain as originally approved, therefore characterization of use has been maintained; The building envelope of the proposal will be similar to the approved with only slight push and pull of the approved envelope in parts ... The modification will retain the approved height of 7-9 storeys ... The proposed basement level is only partial and will not create any further bulk and scale than previously approved. The proposed 32 car parking spaces are not anticipated to create any further impact to the existing road network.
On 28 March 2017, Macquarie provided SLHD with additional documents to accompany the draft (and still incomplete) modification application. By letter dated 10 April 2017, SLHD requested further information to enable it to consider the draft application but noted its particular concern as to how Council would view the proposal for service vehicles to exit the Hospital car park via Church Street given that this access was opposed in the original development application (and prohibited under the Hospital Development Approval) and as to the revised footprint of the Hospital.

[25]

May Modification application

On 12 April 2017, following review of SLHD's comments on the draft modification application, Mr Coburn emailed Mr Crook, Mr Robinson and Mr Nash stating that: [t]he main issue is not so much the numerical setback .... rather the issue of the changes at ground and level 1 (haven't checked above yet) compared to the original approved plans and whether this still constitutes substantially the same development. I sense we are pushing the boundaries (pardon the punt [sic]) here and need to scale back, as there is also likely to be a merit consideration as Council will want the setback area to be predominantly landscaped and free of obstructions.
Mr Nash (an expert town planner) gave similar advice to Macquarie in April 2017 about this risk (though SLHD notes that this was not included in his expert report filed in this proceeding dealing with the same issue).
SLHD provided further comments on the proposed application in its letter of 28 April 2017, which noted that Macquarie's proposed design for the Hospital was still at a concept level and that some further design was contemplated.
On 3 May 2017, Macquarie sought SLHD's consent to lodge with the Council a modification application with respect to the Hospital Development Approval (the May Modification Application). (SLHD says that Macquarie has at all relevant times maintained that the first step required in the construction of the Hospital is a modification to the Hospital Development Approval obtained by Macquarie in 1997 from the Land and Environment Court, on the basis that the Hospital Development Approval plans no longer complied with current regulatory requirements and required amendment, and that is supported by, for example, Wenkart's letter of 10 March 2017 to which I have referred above.)
On 15 May 2017, SLHD informed Macquarie that it declined to provide its consent to the May Modification Application. SLHD says that it is common ground that some changes to the Hospital Development Approval plans would be required (likely necessitating a modification of the Hospital Development Approval), so that the Hospital as built would comply with the Australasian Health Facility Guidelines (AHFG) introduced in 2007; and accepts that additional detailed design plans would also be needed for the construction certificate application to demonstrate compliance with changes to the National Construction Code (formerly Building Code of Australia) and the Australian Standard concerning access for people with disabilities. However, it says that the May Modification Application did much more than update the Hospital Development Approval plans to ensure compliance with current regulatory requirements (pointing to the inclusion of a new basement level with vehicle egress for service vehicles via Church Street, contrary to an express condition imposed by Council (and then the Land and Environment Court) prohibiting any vehicle egress to Church Street when the original development application was approved in 1997; and to the increase in the building footprint and reduced the setback to Carillon Avenue - matters that it is said would very likely have caused Council to refuse the application either because it did not have the power to approve it on the basis it was "not substantially the same development" or on merits grounds).
SLHD informed Macquarie that it would not consent to the May Modification Application for the above reasons but indicated that it would consider an alternative application which did not have the particular problems it had identified. SLHD notes that Macquarie did not submit any alternative modification application to SLHD and, in particular, has not submitted any modification application which is limited to updating the Hospital Development Approval plans to conform to current regulatory requirements. (There is no longer any complaint made by Macquarie in relation to the refusal by SLHD to consent to the May Modification Application; Macquarie accepting that SLHD was justified in refusing its consent to the May Modification Application on the basis of the egress/ingress issue - though not conceding that the modification application could not have been approved by Council.)
SLHD says that, notwithstanding submission of the May Modification Application, the focus of Macquarie and its consultants remained the larger hospital, hotel, residential apartments and basement car park development proposed to be the subject of an SSD application, pointing to the following matters: that on 22 March 2017, Mr Coburn proposed meeting with the Department of Planning in the next few weeks to discuss the SSD application; that on 4 May 2017, Macquarie's project team met to work through the proposed SSD application; that Dr Wenkart observed on the same day that "[t]his is the REAL planning now"; that on 6 May 2017, Mr Coburn observed, in response to a query as to whether the modification application could be made to the Land and Environment Court rather than Council, that "[i]ts [sic] probably irrelevant in the grand scheme of things anyway, as we can lodge the SSD to capture everything in this application, including all the modification works included in the current modification application, plus other things we wanted to include (such as new basement, hospital levels and other works) that we were worried would be perceived as not substantially the same and off [sic] course the aged care"; that at the Design, Approval and Construction Meeting on 8 May 2017, the status of the SSD application submission was discussed and, in relation to the main contractor appointment, it was noted that "tender documents need to be collated but this is a function of [a] sufficiently progressed SSD application"; and that, on 11 May 2017, Mecone circulated an updated list of documents required for the SSD application.

[27]

Further steps in relation to the larger (full complex) development

SLHD says that, instead of submitting a revised modification application (as SLHD had invited it to do) Macquarie continued to work on its proposed SSD application until at least July 2017. It is noted that, at a design meeting on 18 May 2017, Dr Wenkart made a handwritten note on the then current STH Level B1 car park plan "Need Ingress + Egress to SLU Car Parking" from Church Street; and that, on 6 June 2017, STH circulated revised architectural plans, which included access to the basement car park from Church Street as well as the hotel, club floor, assisted living units and seniors' living units up to Level 25.
It is noted that, on 9 June 2017, STH circulated updated plans for the ground and basement levels showing a total of 387 car spaces and that, on 20 June 2017, Mr Robinson sent an email summarising the content of a "town planning meeting" the previous day, at which Mr Coburn and Mr Nash advised that the SSD process would be likely to take between 18-24 months, noting that this would change Macquarie's approach to the construction methodology and that they discussed the likelihood of "additional excavation to cater for the basement levels", which would allow the pad footings and columns to be built as required and "the additional basement levels can be filled in once the SSD is approved". It was said that "[t]here is an issue with this process. If a member of the public (including SLHD) sees that we are excavating too much, they can take injunctive proceedings in the L&E court. KN [Mr Nash, Macquarie's town planner] gave us 2 examples where developers over excavated and were forced to fill it back in at a later date".
On 26 June 2017, Mr Robinson sent an email titled "PAPH - SSD Application strategy", in which he noted: Last week I discussed the preferred way forward to ensure we have an application in play that will allow us to build a hospital big enough to contain all the facilities we need, plus some seniors living, without pushing the boundaries too much. A hospital big enough to contain all the facilities we need means a building of 9 habitable floors plus basement levels to house as many new parking spaces as required, preferably 2 levels … Level 10 has always been and will remain to be the club deck. The senior living, according to some, is the contentious part of our current ideology. STH has been directed to formulate the highest possible level that represents the path of least resistance through the state planning department.
On 11 July 2017, STH circulated shadow diagrams for the complete complex.

[28]

Issue of termination notices in August and October 2017

On 10 August 2017, SLHD served notices of termination in respect of each of the Transaction Documents (together, the August Termination Notices). The August Termination Notices relied upon failure to remedy the alleged breaches notified in the February Default Notices and the April Default Notices, namely: an initial failure to lodge a construction certificate application with the Landlord followed by a failure to remedy within 28 days; and an initial failure to lodge a construction certificate application with a Private Certifier followed by a failure to remedy within 28 days.
Macquarie says that, prior to 10 August 2017, it had undertaken the following works in relation to the construction of the Hospital: it had secured/made safe the Hospital Site for early works (referring to its Monthly Report of June 2017); it had cleared the Hospital Site of vegetation (referring to its Monthly of Report of June 2017); it had removed fauna on the Hospital Site (referring to its Monthly Report of July 2017); it had commenced to remove hard stand brought onto the Hospital Site by SLHD (and laid by SLHD to be used as car parking during its occupation of the Hospital Site) from 60% of the Hospital Site (referring to its Monthly Report of July 2017); and it had commenced the safe removal of asbestos found on the Hospital Site during the removal of the hard stand (referring to its Monthly Report of July 2017). Reference is made in this context to various letters, dated 14 August 2017, 25 August 2017, 31 August 2017 and 16 October 2017, from SLHD to Macquarie.
I interpose here to note that, under the September Timetable, the substantial commencement date for "Construction of Hospital" was 11 September 2017. Therefore, leaving aside for the moment whether SLHD was contractually entitled to assist on compliance with the disputed activities, it seems unarguable that (unless the steps referred to above in fact amounted to substantial commencement of construction of the Hospital - as opposed to works preparatory to the commencement of construction of the Hospital, i.e., works, as they have been described, to put the Site back in the condition in which it was at the time Macquarie was evicted from the Site) by the time of the August Termination notices it is likely that Macquarie would shortly be in default of at least one of the later stages in the September Timetable (substantial commencement of Construction of Hospital), the extension of which date Macquarie does not suggest was beyond SLHD's power under cl 2.5 of the Construction Deed. Indeed, even if the works referred to above did amount to substantial commencement of construction of the Hospital so as to satisfy that extended activity date in the September Timetable, on Macquarie's own case it would have been necessary for it to take a number of further steps preliminary to the actual commencement construction of the Hospital - which on the September Timetable was to be completed by October 2019 (another date that Macquarie does not appear to dispute was capable of extension by SLHD pursuant to cl 2.5 of the Construction Deed).
It was accepted (see at T 28.30) by Macquarie that it would undoubtedly have been open to SLHD to extend the date for Construction of the Hospital (which the September Timetable did), though it was also said that if many things then had to be done this would be relevant to the bona fides of setting particular dates for that milestone. (SLHD does not accept that it has a good faith obligation in that regard, emphasising that cl 2.5 provides for an absolute and unfettered discretion - as to which see further below.)
SLHD did not issue default/termination notices based on the failure of Macquarie substantially to commence construction of the Hospital by 11 September 2017, so the question as to whether it would have been open to SLHD to terminate the Transaction Documents for failure to adhere to that step in the September Timetable does not here arise (just as the issue as to whether it would have been open to SLHD immediately after the Court of Appeal Decision to obtain possession based on Macquarie's breaches in relation to construction of the Hospital, as postulated by Hodgson JA at [338] of the Court of Appeal Decision, did not then arise). It might, however, be relevant to any assessment of damages for a wrongful promulgation of the September Timetable, if default in steps legitimately extended under that revised Timetable would likely have occurred irrespective of the failures relied upon in the default notices that were issued.
On 17 October 2017, SLHD served further notices of termination on Macquarie terminating the Construction Deed and Leases for failure to remedy the defaults in the February and April Default Notices (together, the October Termination Notices). The notices of termination were in identical terms to the August Termination Notices save that the date of termination of each of the Construction Deed, Hospital Lease, Car Park Lease and Car Park Sub-Lease was 17 October 2017 (together, the October Termination Notices). (SLHD says that it did so for "abundant caution" in response to a contention put by Macquarie in these proceedings that cl 7.6 of the Construction Deed prevented SLHD from terminating the deed within six months of service of a default notice.)
SLHD submits that Macquarie never had any intention of building the Hospital which it was obliged to build under the Construction Deed; noting that, from the first half of 2016 when Macquarie commenced engaging consultants to work on the project, Macquarie and its consultants were working on a "completely different" development which included a "hospital hotel", a "club floor" and 15 levels (from Levels 10-25) of "seniors living" residential accommodation. SLHD says that such a development is not permitted by the Construction Deed or the Hospital Development Approval. It is said that Macquarie proposed to seek approval for the whole of this development as a "State Significant Development" and to surrender the existing approval upon obtaining approval for the full development; and that Macquarie concealed from SLHD its intention to proceed with this development (the May Modification Application, SLHD says, being intended to create the false impression that Macquarie was proposing to construct the Hospital required by the Construction Deed, when in truth it had no intention of so doing).
Macquarie cavils with the above; its position being that it cannot reasonably be inferred that it did not intend to pursue its rights under the Construction Deed (see further below).

[30]

Issues

In its closing submissions, Macquarie identified six issues as arising for determination, those being (here adopting the defined terms used in these reasons, where they differ from Macquarie's formulation of the issues) as follows: (i) Are the February Default Notices and the April Default Notices invalid and of no effect by reason of the proper construction of the Construction Deed? (ii) In any event, did Macquarie have a construction certificate which obviated the need for it to lodge a construction certificate application with SLHD (on 17 February 2017) and then a Private Certifier (on 4 April 2017)? (iii) By reason of the matters referred to in (i) or (ii) above, are the February Default Notices and the April Default Notices (and, as such, the August Termination Notices and/or the October Termination Notices) invalid and of no effect? (iv) If no, are the February Default Notices and the April Default Notices (and, as such, the August Termination Notices and/or the October Termination Notices) invalid insofar as they purport to terminate the Leases pursuant to the provisions of section 129 of the Conveyancing Act? (v) By reason of the matters referred to in (i) or (ii) above, in purporting to terminate the Construction Deed and the Leases, did SLHD breach one or more of the Transactions Documents by failing to giving effect to the terms of the bargain contained in the Construction Deed? (vi) If the answer to (v) is "yes", should the Court order that an inquiry be undertaken as to the loss and damage that has been suffered by MIHC?
SLHD did not (as I understand it) cavil, at least as a general matter, with the identification of the issues as so framed (although SLHD in its closing submissions framed the issues more closely by reference to the pleaded claims - see at [15]).
There was a dispute at the outset (to which I will refer in due course) as to the import of the (agreed) limitation of the scope of the present hearing to issues of liability (i.e., with the quantification of damages being left to be dealt with, if necessary, in a subsequent hearing); namely, as to whether Macquarie was required to lead any evidence going to the issue of causation on the present hearing or whether all such evidence was to be deferred to any subsequent damages hearing. I deal with that issue later in these reasons (having indicated at the hearing that I considered it incumbent on Macquarie, in order to establish liability for breach of contract, to adduce evidence to prove (or from which it would reasonably be inferred) that it had suffered more than nominal damage by reason of the alleged breach(es).
As to liability, the issues in relation to the validity of the respective notices can be distilled to the following: the proper construction of cl 2.5 of the Construction Deed; the adequacy for the purposes of s 129 of the Conveyancing Act of the default and termination notices served in respect of the Leases; the adequacy for the purposes of the Construction Deed of the default and termination notices served in respect of that deed; and whether SLHD, in promulgating the September Timetable and issuing the respective default and termination notices, breached its obligations under one or more of the Transaction Documents (and, if so, whether an inquiry as to damages should be held).
As to the proper construction of cl 2.5, this raises issues (already adverted to) as to whether the clause permits SLHD to include "new activities" or to extend a date in the Timetable annexed to the Construction Deed if the activity in question has been already been completed (the latter being Macquarie's "once and for all" construction of the clause - see T 22; and [36] of the fourth further amended statement of claim). In other words, whether the default (and termination) notices are invalid because the September Timetable included "new required 'activities'" not contained in the Timetable (as pleaded in the fourth further amended statement of claim at [36.3], [51]) and/or extended dates for 'activities' specified in the Timetable which Macquarie had already completed (see the fourth further amended statement of claim at [36.4], [52]-[53]) (those being the activities I have referred to above, more neutrally, as the "disputed activities").
As adverted to above, Macquarie argues that even if, contrary to its submissions, the power to extend a date in the Timetable can be exercised in relation to steps or activities that have already been completed, in the present case there was no breach because the approvals obtained by it satisfy the requirements of the September Timetable. SLHD, conversely, argues that, even if the power under cl 2.5 does not enable an extension of time for an activity that has been completed, the approvals obtained did not satisfy the requirements of the original Timetable and hence it remained open to it to extend the dates as it did in the September Timetable (and it maintains that no question as to the reasonableness of the time allowed in the September Timetable arises because it has an absolute and unfettered discretion in that regard - although, in any event, it says the time allowed was reasonable in all the circumstances).
As to Macquarie's claim to be entitled to damages on the basis it has been prevented by the termination notices from constructing the Hospital in accordance with the Construction Deed (see the fourth further amended statement of claim at [63C], [63E]), SLHD says that this raises the subsidiary issue as to whether Macquarie was and is ready, willing and able to construct the Hospital. I note in this regard that Macquarie does not now press the allegation (formerly made at [63D] of the third amended statement of claim) as to it being at all material times ready, willing and able to perform its obligations under the Transaction Documents; it being said by Macquarie that this was an allegation made in respect of its now abandoned relief against forfeiture claim (see at [65] of the third amended statement of claim).

[31]

Issues as to status of the Hospital Building Approval

Before turning to the parties' submissions as to the principal issues for determination (the proper construction of cl 2.5 of the Construction Deed, the validity of the default and termination notices, and the consequences thereof), I propose first to deal with the issues that were raised as to the status of the Hospital Building Approval. This is because Macquarie maintains that this (and/or the other building approvals obtained in 1998) satisfied the requirements of both the original Timetable and the September Timetable (such that even if SLHD were now permitted to add "new activities" - i.e., the disputed activities, to the Timetable, there has already been compliance therewith); whereas SLHD maintains that the building approvals that were obtained in 1998 did not even satisfy the original Timetable requirements.
By way of context, the development applications for both the Hospital and the Car Park were determined by reference to Pt 4 of the EPA Act as it was in force prior to the 1997 amendments to that legislation (which came into effect on 1 July 1998).
On 1 July 1998, the EPA Act came into force, replacing the building approvals regime in Ch 7 Pt 1 of the Local Government Act with a new regime for the grant of construction certificates, including by private certifiers. However, because Macquarie's Hospital Building Application had been lodged on 29 August 1997 and had not been determined by July 1998, the effect of the applicable transitional provisions (see below) was that the Hospital Building Approval obtained on 17 September 1998 remained subject to the provisions of Ch 7 of the Local Government Act (as it was in force as at the date of the execution of the Transaction Documents in December 1996) as if the amendments to the building approvals regime effected by the Environmental Planning and Assessment Amendment Act 1997 (NSW) and the Statute Law (Miscellaneous Provisions) Act 1998 (NSW)) (together, the EPA Amendment Acts) had not been enacted.
Clause 37 of the Environmental Planning and Assessment (Savings and Transitional) Regulation 1998 (NSW) (Transitional Regulation) provides that the unamended Local Government Act continues to apply to and in respect of such an application as if the EPA Amendment Acts had not been enacted. Clause 38 of the Transitional Regulation preserves the continued operation post-determination of certain provisions of the old Local Government Act regime to approvals granted under that Act (including an approval arising under the Transitional Regulation, such as the Hospital Building Approval). It provides that: Sections 99, 100, 101, 102, 103, 104 and 105 of the unamended LG Act 1993 continue to apply to and in respect of (a) any determination of an application for an approval for a prescribed activity made under that Act (including a determination arising under this Division), and (b) any approval for a prescribed activity granted under that Act (including an approval arising under this Division), as if the EP&A Amendment Acts had not been enacted.
Thus, the effect of cl 38 of the Transitional Regulation is that ss 103 and 104 of the Local Government Act continue to apply to the Hospital Building Approval as if the EPA Amendment Acts had not been enacted.
The relevance of this for present purposes is that s 103 of the Local Government Act provided that an approval lapses five years after the date from which it operates; and s 104 provided that an approval for the erection of a building does not lapse if building, engineering or construction work relating to the building is substantially physically commenced on the land to which the approval relates before the date on which the approval would otherwise lapse under s 103.
The question whether the Hospital Building Approval has lapsed is thus to be determined by applying the (old) "substantial physical commencement" test in s 104 of the Local Government Act, which is directed to the work performed under the relevant building approval (not some other approval in relation to the same development). This requires a determination as to whether building, engineering or construction work "relating to the building" was substantially physically commenced prior to five years from the date on which the Hospital Building Approval commenced operation. SLHD emphasises that for the purposes of this test work performed on the Site under another approval (such as the separate demolition and bulk excavation approval that Macquarie obtained) is insufficient as if "physical commencement" simpliciter (which would have been sufficient had the test under s 95(4) of the EPA Act, which Kunc J was considering in the 2016 determination as to the Hospital Development Approval, applied).
In this regard, Macquarie accepts that the test to be applied (as to whether there has been substantial physical commencement of the works the subject of a building approval) is whether there has been the commitment of resources of such proportions relative to the approved project as to carry the assurance that the work has really commenced, noting that it is an objective test and the work must relate to the subject consent (here referring to the judgment of Cripps J in Smith v Wyong Shire Council (No 3) (1984) 53 LGRA 170, his Honour there applying the test in Day v Pinglen Pty Ltd (1981) 148 CLR 289; [1981] HCA 23 (Day v Pinglen).

[32]

Macquarie's submissions as to the status of the Hospital Building Approval

To set this issue in context, Macquarie notes that s 91 of the EPA Act (under which consent to a development application for development which involved the erection of a building was sufficient to authorise the use of the building when erected for the purpose specified in the development approval) is permissive in nature (the requirement for a building approval before commencement of construction being a matter under the Local Government Act). Macquarie refers in this regard to Currey v Sutherland Shire Council [2003] NSWCA 300; (2003) 129 LGERA 223 at [34], where Spigelman CJ describes the "scheme" (including Pt 4 of the EPA Act) for lodging and determining development applications as "permissive and procedural"; and Radray Constructions v Hornsby Shire Council [2006] NSWLEC 155; (2006) 145 LGERA 292 at [9], where Jagot J described cl 55 of the Environmental Planning and Assessment Regulation 2000 (NSW) (which allows for the amendment of development approval conditions) as "beneficial and facultative" in nature.
Macquarie argues that the Hospital Development Approval, when read together with the Car Park Development Approval, envisaged that the Hospital (and permitted medical centre and ancillary facilities) might be developed and constructed in stages, rather than all at once; and imposed a condition of consent which was subject to such staged development taking place. It is said that the Hospital Development Approval expressly envisaged that the Hospital would be constructed in at least two stages and did not otherwise specify how such staging might occur or impose any conditions with respect to such staging (leaving that as a matter for Macquarie).
Macquarie refers in this regard to condition 33 of Annexure "B" to the Hospital Development Approval, which contemplated that the entire building may "not be completed in one stage" in providing: 33. That should the entire building not be completed in one stage, the building form and finishes shall be to the satisfaction of the Director of Planning and Building.
In this regard, Macquarie points out that in the 19 June 1997 Land and Environment Court decision, reference was made to the agreement of the parties (i.e., Macquarie and the Council) that the provision of parking should be linked to the "staging of the development" (which led to the new condition 62 of the Car Park Building Approval, referred to above). It is noted that, in the reasons of the Land and Environment Court, the suggestion put for Macquarie that "a condition requiring that the ramp to the upper level is constructed only when the development is complete" was accepted (the Court having earlier noted Macquarie's submission that it was not practicable to build the parking station in stages).
Macquarie submits that the Hospital Development Approval granted by the Land and Environment Court thus gave effect to the design concept specified in the Initial Proposal and the statement of environmental effects. Macquarie also emphasises the permissive nature of the Hospital Development Approval, i.e., that it did not require Macquarie to undertake or complete any aspect of the development by any particular time (that being a matter of contractual obligation, separate and distinct from any obligation under the Hospital Development Approval).
Macquarie further emphasises that the Hospital Building Approval stated that, pursuant to Chapter 7 of the Local Government Act, the specified plans (which identified the construction work involved with the building of Stage 1 of the Hospital, being Levels 1-5 and just over 200 beds) submitted with the 1997 Hospital Building Application had been approved (subject to the conditions contained in the attached Schedule and in accordance with listed details) but did not require or oblige Macquarie actually to undertake any work. Macquarie points out that the Local Government Act expressly envisaged construction of a development proceeding in stages (with separate applications for building approval made with respect to each stage of construction) and did not impose any obligation on the applicant to undertake any development or activity if, or once, it had been approved. (SLHD emphasises, however, that the application for development consent in relation to the Hospital was not an application for a staged development per se; and argues that there was nothing optional under the Transaction Documents as to construction of the rest of the building; rather, as noted above, that the references to the staging of the development were in the context of construction sequencing.)
Accordingly, Macquarie says that neither the Hospital Development Approval nor the Hospital Building Approval imposed any contractual or statutory obligation on it to undertake the construction of any works; and it argues that the concept of staging was fundamental to the construction of the Hospital (pointing to the Initial Proposal, which contemplated a hospital with initially 200 beds but the flexibility to expand to 400 beds in the longer term; the adoption of the Initial Proposal in the Construction Deed (cl 4.5(k); the definition of "Development Application" in the Construction Deed, which contemplates subsequent replacement or modification applications and the provisions of cll 4.13-4.16 of the Construction Deed which provide for modification applications, replacement of the Development Application and other applications).
Macquarie emphasises that the principal contractual obligations imposed upon Macquarie to build the Hospital (referring to cll 2.1 and 4.1 of the Construction Deed) use the defined term "Works" (see above at [20]), noting that where a term is defined by the parties the contract must be construed by reading the words of the definition into the operative text of the contract (there referring to Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 (Kelly v The Queen) per McHugh J at [103]).
Macquarie says that the requirement under cl 4.1 of the Construction Deed for it to obtain approvals required for the "the carrying out of the Works" (strictly speaking, I note that the obligation there imposed is to "lodge all necessary applications", although the clause clearly is directed to the obtaining of approvals) thus encompassed approvals for "the works to be carried out in accordance with the Initial Proposal as amended or varied"; as well as the works to be carried out in accordance with the Plans and Specifications, Schedule of Finishes and relevant development and building approvals and the requirements of any other regulatory authorities. Macquarie argues that the concept of "to be carried out" means the works that "must" be carried out; rather than the works that "may" be carried out. (Arguably, the words "to be carried out" have both a temporal reference, i.e., the Works that are to be carried out in the future; as well as being ambulatory in that they encompass works in accordance with the Initial Proposal as amended or varied and works in accordance with plans and approvals not to hand at the time the Construction Deed was executed.)
Macquarie thus argues that the "Works" that it is contractually obliged to undertake pursuant to cl 4.5 of the Construction Deed (that clause, strictly speaking setting out the agreed criteria for plan preparation) are works "providing for at least 200 beds" and are to "be consistent in nature and standard with the Initial Proposal" (being a hospital which initially had 200 beds but had the flexibility to expand to 400 beds in the longer term). It says that the reference to Plans and Specifications in the definition of "Works" is consistent with the mandatory nature of the Works (which are to be distinguished from some further variation or distinct from some works that may be carried out at some indeterminate time in the future). Insofar as the definition of "Works" also expressly includes works to be carried out under the relevant development approvals and building approvals, Macquarie says that this gives rise to a circularity evidenced in cll 2.1, 3 and 4.1 of the Construction Deed and that this ought not to be given any weight in the proper construction of "Works" but that, even if those words are to be given weight, the Hospital Development Approval contemplates the construction of the Hospital in stages and does not impose any obligation on Macquarie.
Macquarie points out that the Construction Deed does not specify the number of "in-patient" beds; rather, cl 4.5(j) relevantly provides, in the specified "criteria for plan preparation", for the relevant documents and plans to satisfy the criterion that they "provide for at least 200 beds" (consistent, it says, with the Initial Proposal which contemplated a hospital with 200 beds); and says that the "mere fact" that the Hospital Development Approval provides for the possibility of 394 beds does not impose any contractual obligation upon Macquarie to obtain (in accordance with the Timetable) a building approval for the construction of a hospital which has 394 beds. Macquarie thus argues that it had obtained the necessary Hospital Development Approval and Hospital Building Approval required for the purposes of the Timetable in June 1997 and September 1998 respectively.
In particular, Macquarie says that the requirement for 200 beds was satisfied (pointing to the plans the subject of the Hospital Building Approval, which it says disclose "at least 212 beds and as many as 226 beds"). Insofar as SLHD has pointed to the evidence of Mr Harrison to the effect that the Hospital Building Approval which had been obtained by Macquarie "approved only 192 inpatient beds", Macquarie says that Mr Harrison omitted to include the 10 ICU beds and the 10 CUU beds on Level 2 (despite Mr Harrison's recognition that the ICU and CCU form part of Level 2 of the Hospital the subject of the Hospital Building Approval and his recognition (as part of the analysis of what the Hospital Development Approval allowed) of 10 beds in ICU and 10 Beds in CCU). Macquarie says that Mr Harrison also omits beds in the oncology ward and delivery suites. (SLHD submits in response to this that, even if Macquarie is correct, and the Hospital Building Approval "did just get over the threshold of 200 beds", that it did not matter as the Works were for a hospital with 394 beds - see T 53.24.)
Insofar as SLHD submits that the Hospital Building Approval "approved only the first 5 floors of construction", rather than "a 7-9 storey hospital", while Macquarie accepts that the Stage 1 drawing submitted with the Hospital Development Application only extends to five floors, it says that the Hospital Building Approval was for a building which included floor plates on Level 6 as well as Levels 7 and 8 for "future fitout" together with a plant room on Level 9. Macquarie says that this is consistent with the Initial Proposal, referring, by way of example, to statements such as the statement that a medical centre providing private suites for medical specialists will "also be provided as part of the overall plan" and that "[t]he hospital will initially have 200 beds with the flexibility to expand in the longer term". In any event, Macquarie says that there is no contractual obligation imposed upon Macquarie in the Construction Deed as to the number of floors that were required to be built.
As to SLHD's contention that the Hospital Building Approval was insufficient because it did not approve the fitout for a hospital with 394 beds (at [91] of SLHD's submissions and T 56.28ff), Macquarie says that SLHD's argument is premised on the (it says misconceived) arguments that: the terms of the Hospital Development Approval imposed an obligation upon Macquarie to construct a hospital with 394 beds (referring to [91] of SLHD's submissions and T 53.5ff); and that the definition of "Works" required all approvals that might be needed over the term of the Lease to be obtained by Macquarie no later than 1 August 1997 (T 51.32). (As to the first of those matters, I accept that the Hospital Development Approval, as a planning instrument, imposed no such obligation - but that goes nowhere if, as I have concluded it does, the Construction Deed did; as to the second of those matters, that is the very issue here to be determined.)
Macquarie says that, in any event, the Hospital Development Approval does not require the Hospital to be fitted out with any more than a minimum of 200 beds in the first instance, referring to: the statement of environmental effects which was submitted with the 1997 Development Applications (to which I have referred above), which contemplated: in the description of the "Development", a hospital with seven levels and a nine level medical centre; in the project description, a hospital with the potential for 394 ward beds; and a building to be constructed in stages with Stage 1 being for Levels 1-5, with an additional plant room level. Macquarie notes that this is a total of 204 general ward beds plus ICU, CCU and oncology beds. Further, Macquarie points to the drawings submitted with the 1997 Development Applications (the drawings numbered DA97.01B to DA97.24B) which anticipated that there would be a staged construction process; and the approval granted by the Land and Environment Court in 1997 which gave approval to the design concept specified in the Initial Proposal and the statement of environmental effects. It is noted that Annexure "B" to the Land and Environment Court's orders in 1997 provides that the "development shall be generally in accordance with DA97.01B-24B" and that condition 33 in Annexure "B" expressly contemplated that the entire building may "not be completed in one stage". Macquarie says that the notion that it was required to construct a hospital with 394 beds is also inconsistent with the manner in which the parties were conducting themselves at the relevant points in time.
Macquarie attaches significance to the fact that when SLHD purported to terminate the Transaction Documents in 2000 it did not do so on the grounds that the Hospital Building Approval which had been obtained by Macquarie only provided for the construction of a hospital with just over 200 beds rather than 394 beds. Macquarie notes that the proceeding before Nicholas J in 2008 in Macquarie v Sydney South West Area Health Service concerned breaches of the Transaction Documents but that it was not there contended by SLHD that the failure by Macquarie to obtain a building approval for a hospital with 394 beds was a requirement of the Transaction Documents that had been breached by Macquarie (see, for example, [131], [263], [266], [352] and [443]ff). Macquarie says that the contention that the Hospital Building Approval needed to be for 394 beds is a "wholly new construct" on the part of SLHD. Macquarie accepts that the letter which promulgated the September Timetable made reference to the fact that SLHD asserted that Macquarie now needed to obtain a building approval for a 394 bed private hospital but emphasises that the failure to provide for 394 beds was not provided as a basis for declining consent when the May Modification Application was submitted by Macquarie to SLHD.
Pausing here, there is no estoppel argument pleaded by Macquarie in its fourth further amended statement of claim (nor the earlier iterations of the pleading as far as I can see) and the fact that SLHD may have chosen not to raise (or perhaps not been cognisant of at the time) an argument as to the sufficiency of the initial Hospital Building Approval (or its compliance with the relevant activity specified in the original Timetable) does not assist in determining whether, on the present hearing, there has been compliance with the equivalent activity in the September Timetable.
As to the submission by SLHD that the Hospital Building Approval that had been obtained by Macquarie has lapsed (see T 56.40ff), because substantial physical commencement under s 104 of the Local Government Act was not undertaken within the five year period following the grant of the Hospital Building Approval), Macquarie points to the consideration of the work relating to the subject consent given by Kunc J in Macquarie v SLHD (No 9) (at [85]; [86]), where his Honour said that: … The work was also undertaken "on the land to which the [Consent] applies". That is unarguably the case in relation to most of the work which comprises the Relevant Works. However, it also extends, as a matter of plain language, to the land on which the work in relation to New Hospital Road was done. Insofar as the Consent expressly included the building of New Hospital Road, it follows that the land on which that was to be done was land to which the Consent applied. Insofar as recourse to authority is required, I respectfully adopt the conclusion of Lloyd J in Boral Resources (NSW) Pty Limited v Wingecarribee Shire 3818 Council [2003] NSWLEC 39; (2003) 124 LGERA 90 at [26] that the ""land to which the consent applies" is all land upon which works required by and authorised by the consent are to be carried out". In that case the development consent concerned a quarry but also required an access road to be upgraded. His Honour had no difficulty in concluding that the road was part of the land to which the consent applied. The decision of Biscoe J in Reysson Pty Ltd v Roads and Maritime Services [2012] NSWLEC 17; (2012) 188 LGERA 252 is to the same effect.
Macquarie also points to the suggestion that the difference between the test under s 104 of the (unamended) Local Government Act (substantial physical commencement) and the test under s 95 of the EPA Act (physical commencement) may be somewhat illusory (see Reynolds JA in United Dominions Corporation Limited v Woollahra Municipal Council [1973] 1 NSWLR 616 at 623). Macquarie says that it is clear from Annexure "B" to the 1997 Land and Environment Court decision that the Hospital Development Approval included the construction of the New Hospital Road (and refers also to conditions 6, 16 and 22, which also provided for the ingress and egress to the proposed hospital). It is submitted that physical work pursuant to the Hospital Building Approval had commenced prior to Macquarie's wrongful eviction on 17 March 2003 and was not simply limited to the demolition and excavation works (as contended by SLHD) (T 58.13ff).
Macquarie says that the fact that physical work pursuant to the Hospital Building Approval had commenced was relevantly agreed when the matter was before Kunc J (referring again to his Honour's decision in Macquarie v SLHD (No 9) at [10]-[50] and, in particular, [36]-[49]). It is said that those works were substantial in nature and that they met the test set out in Day v Pinglen. Thus, it is submitted that substantial physical commencement of works under the Hospital Building Approval occurred within two years of 17 September 1998 (well within the time by which the Hospital Building Approval would be deemed to have lapsed under s 104 of the (unamended) Local Government Act) and hence that the Hospital Building Approval obtained by Macquarie in September 1998 has not lapsed (see T 56.40ff).
As to the contention that Macquarie needs a construction certificate to undertake the work that is required to be undertaken following the (I would interpose to note "as yet prospective") modification of the Hospital Development Approval (Macquarie itself contending that the modification of the development approval is required as the necessary first step to complete the Works - see prayer 2.4 of the fourth further amended statement of claim), Macquarie says that this argument is founded on the fact that SLHD's unlawful occupation of the Hospital Site has resulted in the need for the plans attached to the 1997 Development Approval to be updated to reflect the current regulatory environment governing hospitals (noting that the need for change by reference to the current regulatory regime is an agreed position between the parties - by reference to SLHD's opening submissions at [89]).
Macquarie says that SLHD cannot argue that Macquarie is in breach by reason of a default which has only arisen by virtue of SLHD's own breaches and the fact that its conduct unlawfully kept Macquarie from being able to carry out and complete the Works in accordance with the Timetable.
Thus, Macquarie submits that if, contrary to its submissions, the proper construction of cl 2.5 of the Construction Deed does permit the inclusion of the "new activities", then it has already complied with those "new activities" and, as such, the Termination Notices are invalid and of no effect. Macquarie says that it did not lodge a construction certificate application with SLHD or a private certifier in 2017 because Macquarie already had a construction certificate referable to the Hospital Development Approval, which had not otherwise lapsed. In these circumstances, Macquarie says it already had a construction certificate which was on foot and it was not necessary for it to lodge a construction certificate application with either the Landlord or a Private Certifier (and hence it had satisfied the "new activities").

[33]

SLHD's submissions

SLHD does not dispute that Macquarie applied for, and obtained, three Building Approvals during 1997 and 1998 (being Building Approvals for demolition and bulk excavation (BA Q97-00689), the car park (BA Q97-00771) and the Hospital (BA Q97-00772)). What it says is in dispute, however, is whether these Building Approvals were sufficient to comply with Macquarie's obligation under cl 2.1 and the Timetable in Annexure "A" to the Construction Deed to lodge applications, and obtain a Building Approval, for the "Works" by the dates stipulated.
Having regard to the definition of the "Works" (which I have extracted earlier), SLHD says that, on its proper construction, the Construction Deed requires Macquarie to obtain a building approval or building approvals for the whole of the Works in accordance with the relevant development approvals, here the Hospital Development Approval. It says that obtaining a building approval for part only of the Works (for example, for the demolition works) by the date stipulated in the Timetable would not satisfy the obligation in cl 2.1. By the same reasoning, it says that the obtaining of a building approval in 1998 for part of the Hospital approved by the development approval was not compliant with the obligation (under cl 2.1 and the Timetable) to obtain a building approval for the "Works" by the date stipulated.
In this respect, SLHD says that it is immaterial that the Hospital Development Approval is permissive as a matter of planning law (in the sense that it did not impose any statutory obligation upon Macquarie to proceed with the development as approved) because the relevant obligation on Macquarie to construct a hospital in accordance with the Hospital Development Approval is not statutory; rather, it is contractual.
SLHD says that the obligation under cll 2.1 and 3.1 on the part of Macquarie to carry out and complete the "Works" takes its content from the terms of the development as approved by the Hospital Development Approval. SLHD says that that contractual obligation would be rendered meaningless if, as Macquarie submits, it extends only to works which must be carried out by statutory compulsion (since if that were so Macquarie would be under no contractual obligation to perform any work at all). Nor, SLHD says, can it sensibly be said that the concept of "Works" finds its content from cl 4.5 of the Construction Deed (since that clause is directed only to the parameters for the development application to be submitted by Macquarie).
SLHD submits that the intended operation of cll 2.1, 3.1 and the definition of "Works" is that: once Macquarie had obtained a development approval, it was required to carry out and complete the Works identified in that approval in accordance with the Timetable and as expeditiously as possible. It says that, unless and until Macquarie has sought and obtained an amendment to the development approval so obtained, the contractual obligation imposed on it is to build the Hospital the subject of the Hospital Development Approval.
SLHD argues that a close analysis of the Hospital Development Approval and accompanying plans, and a comparison of the "Works" so identified with the Hospital Building Approval and the accompanying plans , demonstrate that the Hospital Building Approval issued on 17 September 1998 did not authorise construction of the whole of the Hospital as approved by the Hospital Development Approval.
In that regard, SLHD points to the fact that the Hospital Development Approval granted by the Land and Environment Court identifies the proposal as the construction of a 394 bed private hospital, a 24 hour medical centre and ancillary facilities, reflecting the Hospital Development Application (which similarly described the proposed development as a seven storey private hospital with 394 beds and a nine storey medical centre). Emphasis is placed on the fact that condition 1 to the Hospital Development Approval requires that the development shall be generally in accordance with plans DA97.01B-24B dated February 1997; those being the plans accompanying the Hospital Development Application, which relevantly include: a full Level 6 plan for the hospital floor and medical centre floor; a full Level 7 plan for the Hospital floor and medical centre floor; Level 8 plan for the medical centre; Level 9 plan for the medical centre; and elevations which clearly show a seven level Hospital and nine level medical centre.
In contrast, it is noted that the Hospital Building Approval approves the work identified in the plans numbered 96035/AWD 01A, 10A, 11B-16B, 17A-24A, 25B, 25A-38A and 38B and that: those plans do not include the medical centre at all; the Level 6 plan includes only the central lift and services tower (the "core") and shows metal roof sheeting over the rest of the building (SLHD here disputing Macquarie's assertion that this plan showed a floor plate for "future fitout", noting that there is no floor plate for any of Wings A, B, C or D, only the central core); the Level 7 and Level 8 plans similarly show only the central lift and services tower; and the elevations show only a five storey hospital with a seven storey central lift and services tower and no medical centre).
SLHD points to the comparative analysis of the Hospital Development Approval and the Hospital Building Approval carried out by Mr Harrison (its expert town planner), which identifies the elements of the Hospital approved by the Hospital Development Approval that are not covered by the Hospital Building Approval as being: that the Hospital shown in the Hospital Development Approval plans includes 394 in-patient beds whereas the hospital shown in the Hospital Building Approval plans includes 192 in-patient beds: and that the Hospital Building Approval plans do not include Level 6 and Level 7 for Wings A-D and the nine levels of medical centre shown in the Hospital Development Approval plans.
SLHD maintains that a further building approval would have been required to complete construction of the Hospital as approved by the Hospital Development Approval.
SLHD argues against the contention by Macquarie that the Hospital Development Approval permitted the Hospital to be constructed in stages (and, implicitly, permitted the construction of only "Stage 1" of the Hospital without completing the balance of the Hospital such that completion of "Stage 1" only would amount to completion of the "Works") for a number of reasons.
First, SLHD says that, contrary to Macquarie's submissions, the Hospital Development Approval did not identify the development as a hospital with "the potential for" 394 beds; rather, the hospital the subject of the development application was described in terms that "[t]he hospital will comprise seven levels and a nine level medical centre" and that "[t]he hospital comprises a range of medical and ancillary uses. This includes: 394 ward beds". It is noted that the application states that: "Level[s] 4 to 7 are ward floors. There are 102 ward beds on each level from level 4 to 6, level 7 has 88 beds. Total number of ward beds is 394". SLHD says that nowhere in the text of the development application is it suggested that the medical centre or some of the ward floors are optional, or that there is only the "potential" that they may be built.
Second, SLHD notes that the plans attached to the Hospital Development Application included, in addition to the plans for the complete development (DA97.00 to DA97.17), separate plans described as "Stage 1" plans (DA97.18 to DA97.27). It submits that, read in the context of the application itself, the "Stage 1" plans were an indication of Macquarie's proposed construction approach (namely, that the works identified in the "Stage 1" plans would be constructed first with the construction of the balance of the works shown in the main plans to be completed thereafter) but that the Hospital Development Application did not propose, or seek, approval for a staged development in the sense that Macquarie might only build Stage 1 and not proceed with the construction of the balance of the Hospital.
Third, it is noted that Macquarie could have, but did not, seek staged development approval under s 91AB of the EPA Act (which permits Council to grant development consent for part only of a proposed development). SLHD argues that the fact that approval for a "staged" development was not sought in the Hospital Development Application is confirmed by the minute paper of Council's Planning and Development Committee. SLHD says that the "Stage 1" plans referred to construction staging and that this paragraph of Council's minute paper explains the genesis of condition 33 to the Hospital Development Approval (namely, that it is a reference to construction staging and imposed a temporary condition whilst the balance of the Hospital in accordance with the Hospital Development Approval was constructed).
It is said that, similarly, the judgment of the Land and Environment Court in 1997 does not grant development approval of a "staged" development (in the sense that Macquarie could elect to build part of the development rather than the whole); rather, the approval was on condition that the development be in accordance with plans DA97.01B-24B (those plans including, from DA97.01B-17B, the complete seven level hospital and nine level medical centre). SLHD argues that completion of part only of those works would be in plain breach of that condition; and that the reference in the judgment to staging of parking spaces is dealing only with the temporary situation of the proposed construction staging (as is said to be clear from its references to "until the hospital is complete" and "when the hospital is complete").
SLHD points out that, if Macquarie were to construct only "Stage 1" of the Hospital as shown in the Hospital Development Approval plans and not continue to construct the balance of the Hospital, there would be a partially constructed building on the Site with a central lift and services tower protruding two levels above the rest of the building; and it contends (a contention that in my opinion has force) that it cannot have been the intention of either the parties or Council that Macquarie could elect not to complete the balance of the Hospital mid-construction.
In particular, it is submitted that, because Macquarie had not sought a staged development approval under s 91AB of the EPA Act, the effect of the Hospital Development Approval was to approve the whole of the development identified in the Hospital Development Application plans; and that it follows that, in the event Macquarie were to construct only part of that approved development, Council could make an order under s 121B(1) of the EPA Act and item 16 of the Table in that section requiring the completion of the development the subject of the Hospital Development Approval. Thus SLHD contends that the Hospital Development Approval did not provide Macquarie with an option to build either Stage 1 or the whole Hospital.
It is further submitted that even if the Hospital Development Approval did permit Macquarie to construct only "Stage 1" of the Hospital as shown in plan DA 97.18 to DA 97.27 (such that obtaining a Building Approval for "Stage 1" was in compliance with the relevant steps in the Timetable), Macquarie did not in fact obtain a Building Approval for the whole of "Stage 1". SLHD points to the evidence of its town planning expert (Mr Harrison) that the Hospital Building Approval approved only part of what was nominated as "Stage 1" in the Hospital Development Approval plans; in particular, that it did not approve construction of the specialists' consulting suites, clinician's cafeteria, training facilities or fit out of the physiotherapy area, fitness centre, and diagnostics area as shown in the "Stage 1" plans (some at least of which facilities SLHD says would be essential for a functional hospital).
Insofar as Macquarie contends that the total number of beds approved by the Hospital Building Approval exceeds 200 (once ICU and CCU beds are added to the total number of in-patient beds), SLHD says that whether or not that is so is immaterial; rather, that the contractual obligation under cl 2.1 was to obtain building approval for the "Works" (defined by reference to the terms of the Hospital Development Approval). It is noted that the Hospital Development Approval identified 394 beds and that it defines the scope of the "Works". SLHD contends that it is the Hospital Development Approval which thus defines Macquarie's obligation to obtain building approval for such Works, not the terms of any anterior proposal (such as the Initial Proposal which was replaced by the development approval that was in fact obtained) and hence that Macquarie's reliance on the Initial Proposal is misplaced. As to Macquarie's reliance on cl 4.5 of the Construction Deed, SLHD maintains that this too is misplaced in that it defines the parameters of the development application to be sought by Macquarie which, as at the date of the Construction Deed, had yet to be formulated. SLHD argues that the development application was required to provide for "at least" 200 beds but that, if the development application once lodged and approved provided for a greater number of beds, then Macquarie was bound by cll 2.1 and 3.1 to construct that hospital with the larger number of beds as approved by that development application.
SLHD contends that Macquarie has not proved that it commenced any work relating to the erection of the Hospital under the Hospital Building Approval, as opposed to carrying out demolition and bulk excavation work under the Demolition and Excavation Building Approval.
As to the construction of a new access road (New Hospital Road), SLHD says that the Hospital Building Approval does not authorise the construction of New Hospital Road (reference being made to plan AWD 10A for the proposition that the construction of New Hospital Road from Carillon Avenue to the Car Park did not form part of the Hospital Building Approval, it being there marked as "existing access road"). SLHD says that the status report for 16 November 1998 indicates that construction of the road was being performed as part of demolition and excavation works. As to the reliance by Macquarie on conditions 6, 16 and 22 of the Hospital Development Approval, it is noted that condition 16 speaks of an extension of New Hospital Road from the car park to Lucas Street (which, SLHD says, explains why New Hospital Road is described as "existing access road" on plan AWD 10A but as "new access road" on plan AWD 01A, which identifies the extension of New Hospital Road from the end of the Car Park to Lucas Street as "new unit paved road"). It is said that the section of New Hospital Road from Carillon Avenue to the Car Park is shown in the plans for the Hospital Building Approval for the Car Park and that the construction of New Hospital Road and the Car Park, without the Hospital, is evident from some of the aerial photography included in the expert report of Mr Harriman.
As to the diversion of services such as sewerage, water, gas and electricity, SLHD says that those works were related to the existing buildings on the Site which were to be demolished and that this work was expressly identified by condition 17 to the Demolition and Excavation Building Approval. SLHD says that those works are not shown on the plans accompanying the Hospital Building Approval. Insofar as Macquarie makes reference to Kunc J's judgment (Macquarie v SLHD (No 9) at [36]-[49]), SLHD says that this does not establish that the diversion of sewerage, water, gas and electricity was work performed pursuant to the Hospital Building Approval (and that even if that work was performed pursuant to the Hospital Building Approval, the relevant question for the purposes of s 104 is whether the approval holder had substantially physically commenced work "relating to the building" (not the test there considered by Kunc J under s 95(4) of the EPA Act).
SLHD points to his Honour's observation that the substantial commencement test under s 104 incorporated a requirement similar to that under the former s 315 of the Local Government Act as considered in North Sydney Municipal Council v Middle Harbour Investments Pty Ltd [1964] NSWR 934 at 937, which imports two elements: first, some positive unequivocal step indicating that the building for which consent or approval has been obtained has actually been commenced; and, second, that "some substantial part of the works" must have been physically commenced. Reference is also made to the statement in Day v Pinglen at 299 that "[t]he facts must be such as to lead naturally to the conclusion that the commencement is not merely evident, but is substantial, that is, of considerable amount".
It is submitted that Macquarie has not proved that it substantially commenced construction of the Hospital within five years of the grant of the Hospital Building Approval (and it is noted that it was admitted in the trial before Nicholas J that Macquarie did not substantially commence construction of the Hospital because it could not raise finance and had formed the view the Hospital was not viable.)
SLHD argues that in order to establish that the Hospital Building Approval had not lapsed and remains on foot it was necessary for Macquarie to prove that it had physically commenced a substantial part of the Works for the construction of the Hospital prior to its eviction from the Site in 2000 (as opposed to physical commencement of demolition and bulk excavation works, or other works, on the Site). Thus, SLHD contends for a finding that the Hospital Building Approval lapsed in accordance with s 103 of the Local Government Act and that a fresh application for a construction certificate is required to be made in order to build the Hospital in accordance with the Construction Deed. It is said that it was therefore entirely appropriate that this activity be included in the September Timetable.

[34]

Determination

As to the status of the respective approvals, there is no dispute (nor can there be, since that was the subject of Kunc J's determination in March 2017 in Macquarie v SLHD (No 9)) that the Hospital Development Approval remains on foot. However, the status of the Hospital Building Approval was not the subject of determination by Kunc J.
The relevance of the question as to whether the Hospital Building Approval remains on foot goes to the submission by Macquarie (as I understand it, in substance to answer the complaint that it has failed to lodge a new construction certificate application at this stage) that even if cl 2.5 of the Construction Deed permitted SLHD to promulgate a revised timetable that included the "construction certificate" disputed activities, there should nevertheless be a finding that Macquarie did have a construction certificate which obviated the need for it to lodge a construction certificate application with SLHD (on 17 February 2017) and then a private certifier (on 4 April 2017).
The relevant test (having regard to the Transitional Regulation) is as to whether there has been substantial physical commencement of the Works the subject of the Hospital Building Approval (i.e., works relating to the construction of the building itself, not works relating to other building approvals in relation to the same overall development - see the authorities to which reference has been made above). The suggestion that the difference in the relevant tests might be said to be illusory does not really assist. What is necessary is to determine whether there has been some positive unequivocal step indicating that the building for which consent or approval has been obtained (i.e., the Hospital) has actually been commenced and that "some substantial part of the works" has been physically commenced (requiring the conclusion that the commencement "is not merely evident, but is substantial, that is, of considerable amount" (see Day v Pinglen).
The fact that the Hospital Development and Building Approvals are permissive or facultative (for planning purposes) says nothing as to what Macquarie is contractually obliged to do under the Construction Deed; nor as to whether there has been substantial physical commencement for the purposes of the Hospital Building Approval.
The content of the Hospital Development Approval is of course highly relevant in ascertaining what Macquarie is contractually obliged to build, having regard to the definition of the "Works" to be carried out under and in accordance with the Construction Deed. That approval was for a 7-9 storey hospital and medical centre with 394 beds (albeit one that it was contemplated would be constructed in stages).
As noted above, SLHD maintains that there has not been substantial physical commencement of the Works the subject of the Hospital Building Approval. Macquarie contends to the contrary, relying in this regard, on work undertaken in relation to the construction of the New Hospital Road and the diversion of services in relation to the Site.
As to the construction of the access road, there was dispute as to the party responsible for construction of the road the subject of the Hospital Development Approval (it not being disputed, as I understand it, that Macquarie was responsible for construction of the New Hospital Road (shown as the "existing access road" on the plans the subject of the Hospital Building Approval); rather, the dispute being as to who was responsible for the extension to that road (the link road)).
Reference to aerial photographs of the Site is problematic in making any finding in that regard (see the caution, albeit raised in a different context, as to reliance on photographs to sustain factual findings of matters in dispute, as discussed in Goode v Angland [2017] NSWCA 311 (Goode v Angland) per Beazley P, as her Excellency then was, at [89]ff, with whom Meagher and Leeming JJA agreed, and Blacktown City Council v Hocking [2008] NSWCA 144; (2008) Aust Torts Reports 81-956, which her Honour referred to in Goode v Angland). However, the differing description on successive iterations of plans between the new access road and the existing access road readily gives rise to the inference that what was required as part of the Hospital Building Approval was work for the construction of an extension to the then existing access road. The chronology of events makes it more likely than not that this was work carried out not by Macquarie prior to its eviction from the Site but by SLHD thereafter (as SLHD contends). I did not understand it to be suggested that the extension of the New Hospital Road was carried out by Macquarie (as opposed to the work on the construction of the initial portion of New Hospital Road). Hence, the reliance placed by Macquarie on the construction of the access road does not assist it. Nor does the fact that the parties accepted before Kunc J that there was physical commencement of the work required for the purposes of the Hospital Development Approval (for the reasons submitted by Macquarie).
As to the diversion of services, to the extent that that work was carried out in relation to the demolition of the existing building on the Site, that was work clearly carried out pursuant to the separate Demolition and Earthworks Approval, not the Hospital Building Approval.
The work carried out after Macquarie re-took possession of the Site in 2015 (apart from any question as to whether that was referrable to the construction of the building itself as opposed to rectification of the Site in preparation for the commencement of construction work on the Site) was, on any view of the matter, after the five year period had elapsed and is not relied upon by Macquarie for the proposition that the Hospital Building Approval has not lapsed.
Therefore, were it necessary to reach a concluded view on this issue, I would conclude that the Hospital Building Approval did lapse and that it no longer remains on foot. That said, for the reasons I will come to shortly, when considering the proper construction of cl 2.5 of the Construction Deed, I have concluded that whether or not the Hospital Building Approval remains on foot is not determinative of the issue as to whether it was permissible for SLHD to include the disputed (or so-called "new") activities in the September Timetable relating to the now equivalent of a building application. It is accepted that (due to regulatory changes relating to private hospitals) it will be necessary for there to be a fresh building approval in respect of the Hospital in any event. Hence, it cannot be that, even if the Hospital Building Approval remains on foot, it obviates the need for a new construction certificate application to be lodged (as Macquarie has contended).
As to SLHD's contention that the Hospital Building Approval did not ever comply with the requirements of the Construction Deed (because it did not encompass the whole of the "Works" the subject of the Hospital Development Approval), a complaint that was not raised by it back in 2000, this is now raised in effect in response to the contention by Macquarie that there can be no extension of dates in the Timetable once the activity there specified has been satisfied (a contention that is addressed below in the context of the construction of cl 2.5 of the Construction Deed).
The Hospital Development Approval related, relevantly, to the construction of a seven storey hospital (with 394 beds) and a nine storey medical centre. There was no application for a "staged development consent" pursuant to s 91AB of the EPA Act. Therefore, the reference to "Stage 1" on various of the plans must in my opinion be understood as relating to the sequence of construction not a staged development as such (for the reasons submitted by SLHD).
The 200- versus 394-bed issue (by reference to the Initial Proposal) is in my view a red herring because the Initial Proposal was clearly superseded by the Construction Deed. The reference to "at least 200 beds" in cl 4.5(j) of the Construction Deed was, in my opinion, as SLHD contends, clearly part of the required parameter or "criteria" for plan preparation but did not have the effect of permitting Macquarie (at its option) only to construct part of the building contemplated by the Hospital Development Approval.
As SLHD contends, the suggestion that (under the Construction Deed) it was (or is) optional for Macquarie to choose to build only part of the seven storey hospital and nine storey medical centre there provided for is not a commercially sensible (nor, in my opinion, is it a defensible) proposition. The requirement to build "generally" in accordance with the approval similarly does not assist Macquarie. That is most naturally read as making clear that precise correlation is not required - rather that the construction is "generally" (or in substance) to be in accordance with the development approval.
I accept the submission for SLHD that, unless and until Macquarie has obtained an amendment to the Hospital Development Approval, its contractual obligation is to build the Hospital the subject of the Hospital Development Approval and, for that, it requires a further building approval (not just because of the changed regulatory regime but also because the Hospital Building Approval did not extend that far). Therefore, whether the existing Hospital Building Approval remains on foot is not to the point; nor is it to the point that SLHD did not previously take issue with the now perceived lack of compliance by the existing Hospital Building Approval with the original Timetable if it is the case that a further building approval is now required.

[37]

Macquarie's submissions

Macquarie maintains that it is clear from the express provisions of cl 2.5 of the Construction Deed that the clause does not contain a general power to amend the Timetable, and that the power granted to SLHD is confined to the extension to any date in the Timetable if there is any delay to the Works caused by an event beyond the control of Macquarie. (That much may readily be accepted, having regard to the express terms of cl 2.5, and I do not understand SLHD to contend otherwise.)
Macquarie submits that on its proper construction cl 2.5 of the Construction Deed does not confer power upon SLHD to include "new activities" into the Timetable and only permits the extension of dates specified in the Timetable until such time as the relevant activity has been satisfied. It is said that, once an activity is satisfied "it is forever satisfied" and the power to amend the Timetable with respect to that activity is exhausted.
Macquarie argues that a "satisfied" activity cannot be reanimated by a purported extension to the date specified for its completion (because the logical predicate to the exercise of the power in cl 2.5 is that the activity is unsatisfied). In this regard, Macquarie argues that if an "historically satisfied" activity in the Timetable could be enlivened, then no matter how advanced Macquarie was in completing the activities in the Timetable it could be in breach of an essential term of the Construction Deed (that is, cl 2.1) by, say, a change in legislation which required a different process to be undertaken in satisfaction of that activity (and thus would exposed it to the risk of termination of the contractual arrangements if no extension in the relevant date were to be granted). Hence it is submitted that such an interpretation produces a result that is commercial nonsense and is not one which a reasonable business person would understand cl 2.5 to mean.
Macquarie notes that the Timetable is expressed in terms of "substantial commencement" and "completion". It is submitted that, as a matter of logic, the power to "extend dates" in cl 2.5 of the Construction Deed must apply only to an activity that has yet to be "completed" and that, once an activity has been completed (and the relevant date met), cl 2.5 has no work to do (and thereafter, any purported reinsertion of a completed activity is of a different character and cannot be an 'extension' of a date). It is said that the use of the word "extended" in cl 2.2(a) of the Construction Deed is supportive of that construction.
As to SLHD's contention that the "new activities" are no more than a rebadging of existing activities (to take into account the change in the nomenclature from "Building Approval" to "Construction Certificates" - see T 50.29ff) which had not, as at the time of the promulgation of the September Timetable, been completed by Macquarie, (the change in nomenclature submission), Macquarie disavows any contention on its part that a "mere rebadging" of an existing activity (to refer to a functional equivalent of that activity to reflect a change which is brought about, for example, by a replacement statutory regime during the term of the Construction Deed) would be sufficient to conclude that an activity was "new" in the sense of not falling within an activity included in the Timetable in the Construction Deed. However, it says that what it describes as the "change in nomenclature submission" only assists SLHD if the Hospital Building Approval that Macquarie had obtained in 1998 was insufficient for Macquarie to comply with its contractual obligations set out in the Timetable or if the power conferred by cl 2.5 of the Construction Deed permits a satisfied activity to be reanimated by a purported extension to the date specified for its completion.
As to what is to be understood by the term "Works", Macquarie says that the construction of the word "Works" contended for by SLHD has no proper regard to the use of that defined term in cll 2.1 or 4.1 of the Construction Deed. Macquarie says that it cannot be the case that the requirements of cll 2.1 and 4.1 are such that the obligation which was placed upon Macquarie under the Construction Deed was that it was required to obtain a building approval under the provisions of the Timetable (i.e., by 1 November 1997) for any work that might possibly be carried out or desired at some indeterminate point in time during the 103 year term of the Hospital Lease. It points out that if that were to be the case and the regulatory requirement were to change during that period, then Macquarie would automatically be in breach of the Construction Deed notwithstanding it had obtained all necessary approvals at, for example, the time that the construction of the Hospital was commenced.
It is submitted that such a construction is inconsistent with the original Timetable, which required the development approval, building approval and the subsequent construction of the Hospital to occur in a 32 month period following the commencement of the project; and that the original Timetable is to be construed in the context of the parties' understanding of the staged nature of the Hospital as was contemplated by the Initial Proposal. Macquarie says that everything that flowed subsequent to the Initial Proposal was to be consistent with the concept and nature of the proposal contained within it.
It is submitted that the original Timetable does not itself contemplate the obtaining of approvals for all possible stages of the Hospital (that might be constructed at points of time in the future) by the specified date; rather, it is said that the Timetable contemplates the obtaining of a single building approval necessary to build the first stage of the Hospital. (SLHD takes issue with this and emphasises the use of the plural in the definition of the term "Building Application", which I have extracted earlier.) Macquarie emphasises that the extent and nature of this obligation imposed in the Timetable is to be understood in the context of the 103 year Hospital Lease and says that if SLHD's construction were to be accepted, it would result in Macquarie having been in fundamental breach of its obligations under the Construction Deed (giving rise to an ability for SLHD to terminate) for every step which was undertaken by Macquarie from the lodgement of the Hospital Building Application.
As to the further oral arguments raised by SLHD at the hearing (see T 52.14-39), Macquarie makes the following submissions in response.
First, Macquarie says that SLHD's argument that if there is a need to obtain fresh building approvals, those approvals must be obtained in accordance with the Timetable is premised on an ability to reinsert activities into the Timetable following completion of those activities and dependent upon the Hospital Building Approval having lapsed. Second, as to the argument that the Construction Deed, properly construed, is not one where building approvals once obtained render irrelevant any difficulty with actually constructing the Works in accordance with those building approvals, Macquarie says that the fact that a construction certificate would now be required to satisfy the current regulatory requirements has nothing to do with earlier, completed activities in the Timetable. It acknowledges that the need for a construction certificate may have an effect upon steps in the Timetable that are yet to be completed (such as, arguably, the commencement of the construction of the Hospital) but says that these are not matters now before the Court (and points to the unlawful trespass which it says gave rise to the necessity for such a construction certificate).

[38]

SLHD's submissions

Since Macquarie disavows the suggestion that its complaint is based on the change of nomenclature per se, it is not necessary here to address at length SLHD's submissions as to the functional equivalence of a construction certificate under the current building regulation regime with a building approval under the old regime. Macquarie accepts that the Hospital could not now be constructed under the Hospital Building Approval because of the time which has elapsed and the need to obtain a construction certificate which satisfies current regulatory requirements.
SLHD emphasises the fact that the term "Building Approval" (which appears in the Timetable in Annexure "A" to the Construction Deed) is not defined in the Construction Deed by reference to particular legislation or to any instrument bearing a particular name; and that the definition in cl 1.1 of "Building Application" is in the plural and encompasses "the building applications to be lodged" by Macquarie "as required under clause 4.1", which in turn requires that Macquarie commence to prepare promptly, and when prepared, lodge "all necessary applications (including the Plans and Specifications and Schedule of Finishes) to the Council and all other necessary authorities for the carrying out of the Works".
Thus, SLHD contends that the term "Building Approval", when used in the Timetable is not a reference only to an instrument bearing the name "building approval" issued under the Local Government Act but, rather, is a reference to such instrument or instruments in fact necessary for the carrying out of the "Works". SLHD says that the fact that the defined term "Building Approval" is capable of referring to instruments other than the old building approvals under the Local Government Act is reinforced by cl 1.2(a), which provides that a reference to this deed or another instrument (which, it says, would plainly include a Building Approval) includes any variation or replacement of them; and by cl 1.2(b), which provides that a reference to a statute, ordinance, code or other law includes consolidations, amendments, re-enactments or replacements of any of them. SLHD notes that cl 4.2, headed "Statutory Approvals", refers to applications to be made under cl 4.1, which in turn refers to all necessary authorities for the carrying out of the Works. SLHD thus submits that, read as a whole, these provisions of the Construction Deed are concerned with necessary applications under the statutory regime for carrying out building works which, by virtue of cl 1.2(b), includes any replacement statutory regime.
That change in nomenclature submission does not appear to be disputed by Macquarie. Rather, it disputes what follows next, namely the submission by SLHD in effect that the Timetable encompasses all building applications and approvals that are or might become required over the life of the project (even if an earlier building approval that had been obtained would have satisfied that activity in the Timetable).
As to the proposition that SLHD could not include in the September Timetable steps relating to obtaining a construction certificate because these steps had already been completed, SLHD says that this raises two subsidiary issues: the first, being whether Macquarie had in fact completed the activities in the original Timetable for lodging a building approval application with SLHD, lodging a building approval application with Council and obtaining a building approval, and the second, being as to whether (even if it were to be accepted that Macquarie had fully complied with its contractual obligation to obtain building approval of the Works in 1998) it was open to SLHD to include in the September Timetable activities relating to applying for and obtaining a construction certificate (because those activities must now in fact be performed in order to construct the Hospital).
In other words, SLHD says that the question is whether obtaining the Hospital Building Approval amounted to compliance "once and for all" with those steps in the Timetable relating to building approval, even if (for whatever reason) it becomes necessary for Macquarie to apply for and obtain a fresh building approval in order to construct the Hospital.
SLHD says that Macquarie could not, in 2016, construct the Hospital in accordance with the Hospital Building Approval for two reasons. First, because the Hospital Building Approval lapsed five years after its issue (in accordance with the relevant provisions of the Transitional Regulation - which has been discussed above); and, second, because it is common ground that Macquarie requires a modification to the Hospital Development Approval to update the plans to comply with the AHFG and a new construction certificate based on those amended plans.
SLHD says that the same is true of the activity of bulk excavation, to the extent that that activity is relied upon by Macquarie as a disputed activity. It is said that, notwithstanding that bulk excavation was commenced prior to Macquarie's eviction from the Site in 2000, it is uncontroversial that further bulk excavation is required due to the passage of time, and use of the Hospital Site as a car park in the intervening period, in order to construct the Hospital. SLHD points out that Kunc J has made that finding in the damages inquiry and that Macquarie will be awarded $301,990 (excluding GST) as compensation for its need to perform this work. It is said that it is part of Macquarie's positive pleaded case that it in fact performed further excavation works from June 2017. Accordingly, it is said that it was appropriate that SLHD include in the September Timetable dates for the commencement and completion of bulk excavation because these activities were necessary for construction of the Hospital. (Pausing here, although still part of the pleading, no issue was taken in oral submissions by Macquarie as to the May default notices issued in relation to the bulk excavation activity - it being accepted by SLHD that this had since been satisfied and this not being relied upon for the termination notices.)
SLHD argues that, on its proper construction, cl 2.5 of the Construction Deed entitles SLHD to extend the dates for activities in the Timetable which are at the time in fact required to carry out the Works, even where those activities may have been performed in the past. SLHD makes reference to cl 2.1 which expressly states that the intention of the parties was that Macquarie's obligation to "commence, carry out and complete the Works" was one to be performed against a binding timetable, which required Macquarie to meet critical dates in the course of the project and not simply complete the development by the end date in the timetable.
It is said that the parties expressly recognised in cl 16.2 of the Hospital Lease and cl 15.2 of the Car Park Lease that, in the event it became necessary for Macquarie to repeat steps in the Timetable (even after completion of the Works) because of extensive damage or destruction of the premises, Macquarie would be required to complete those steps again in accordance with a binding timetable. It is said that such a recognition is inconsistent with Macquarie's "once and for all" argument; and that the contractual intention was that any work pursuant to the Construction Deed would be performed in accordance with a binding timetable.
SLHD thus submits that the obligation under cl 2.1 to meet the dates in the Timetable is not a "once and for all" obligation; rather, it is an obligation to perform such steps in the Timetable as are necessary to "commence, carry out and complete the Works" by the dates set out in the Timetable. It is said that the risk that supervening events might render a building approval already obtained no longer satisfactory or sufficient to carry out the Works (such that a fresh approval is needed), is a risk that Macquarie bore under the Construction Deed. SLHD contends that it could in such circumstances extend the date for compliance under cl 2.5 (as it did in this case) but that Macquarie remained bound to apply for and obtain all necessary approvals needed to carry out the Works in accordance with the Timetable as extended or not.
In response to the suggestion by Macquarie that such a construction is "absurd" (in that it could not sensibly be suggested that SLHD could hold Macquarie in default by declining to extend the relevant dates when its own conduct unlawfully kept Macquarie from being able to carry out the Works resulting in the need to update the Hospital Development Approval plans and to obtain a new construction certificate), SLHD says that post-contractual conduct is incapable of informing the proper construction of the Construction Deed but that, in any event, such an assertion is not an accurate reflection of the facts. It is submitted that SLHD's possession of the Site had not prevented Macquarie from complying with the Timetable in the Construction Deed, rather Macquarie on its own admission had not sought to comply with that obligation. It is said that there was nothing preventing SLHD from issuing fresh default and s 129 notices following the Court of Appeal Decision in relation to the admitted breach of cl 2.1 reflected in the declarations made by the Court of Appeal (and that that eventuality would not have been "absurd"). Much less, SLHD argues, could it be said that the course adopted by SLHD (to afford Macquarie a further chance of complying with cl 2.1 by promulgating the September Timetable) was "absurd".

[39]

Determination

The principles in relation to construction of commercial contracts have been stated in numerous High Court decisions over the years and are well known. A short survey of the authorities in this regard will here suffice.
In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 (at [40]), the High Court (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) said: The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. [Footnotes omitted.]
Some ten years later, in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 (Woodside) (which was recently cited with approval by the High Court (Kiefel CJ, Gageler, Nettle and Gordon JJ) in Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13 (at [44])), the High Court (French CJ, Hayne, Crennan and Kiefel JJ (as her Honour then was)) stated (at [35]) in the context of a commercial contract that: … The meaning of the terms of a commercial contract is to be determined by what a reasonable; businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". [footnotes omitted]
See also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (French CJ, Nettle and Gordon JJ) (at [46]-[52]); and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12, where the majority of the High Court (Kiefel (as her Honour then was), Bell and Gordon JJ) (at [17]) stated that the relevant clause of the lease there in question was "to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease" and, citing Woodside, "that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense".
As I have noted above, Macquarie accepts that changes in the regulatory regime may require modification of the relevant development approvals (or building approvals) before it can complete later stages in the Timetable but says that this does not permit SLHD to include "new activities" in the Timetable.
I consider that there is force to Macquarie's submission that the concept of an "extension" of a time period or date by which a specified activity is to occur logically presupposes that the particular event has not occurred or is not yet complete (since otherwise no "extension" would be necessary), though as I explain below I do not consider that in the particular circumstances of this case this results in the conclusion for which Macquarie here contends.
Clause 2.5 is to be construed in the context that it appears after cll 2.2-2.4, which deal with "extensions of the times in the Timetable", in the context of events that have prevented or delayed compliance with the Timetable. Logically, a completed activity cannot be one in respect of which compliance with the Timetable has been prevented or delayed. The wording of cl 2.5 is slightly different in that it refers to an "extension to any date in the Timetable" but it is not suggested that this is a material difference. What is there dealt with is a "delay to the Works" rather than prevention or delay in compliance with the Timetable.
One difference between the two kinds of extension is that the first arises for events and circumstances that might be described as "force majeure" events (and entitles Macquarie to a fair and reasonable extension of time, subject to the proviso there being satisfied); whereas, the latter arises where the delay is caused by an "event beyond the control" of Macquarie but does not give rise to an entitlement to an extension as such (rather, the clause is permissive - SLHD "may" grant an extension and this is in its absolute and unfettered discretion).
However, another difference can arguably be drawn from the difference between delay in compliance with the Timetable and delay to the works. Relevantly, both extensions are predicated on some form of delay. Logically, however, it is possible for there to be a delay caused to the Works by an event beyond the control of Macquarie (such as, here, the wrongful taking of possession of the Site by SLHD in 2000) even if there has been no delay in compliance with the relevant event in the Timetable. Therefore, the fact that cl 2.5 operates in circumstances of delay does not compel the conclusion that it cannot permit the extension of a date in the Timetable where the particular activity in question has already been completed (assuming that the extension would serve some legitimate commercial purpose in relation to completion of the Works).
The force of Macquarie's submission as to the "once and for all" construction of cl 2.5 is the proposition that no extension to any particular date would be necessary if the event to be completed by that date has already been completed. Thus, once an event (or, in lay terms, a milestone) has occurred (and there is no objective commercial need for it to be re-done), it would be logical to conclude that the power to extend the date referrable to that task has been spent and that there is no power to amend the Timetable to reinsert that activity afresh or to reactivate that task.
However, the more difficult questions that arise in the present case are whether an activity can be treated as having been completed (finally or for all purposes) if, by reason of subsequent events, it has to be re-done; and how the regime under cl 2.5 is to deal (if at all) with the possibility of more than one such activity being encompassed by the item included in the Timetable.
The answer to the first of those dilemmas, from a practical perspective, may well be that if later stages in the Timetable for the completion of the Works are dependent on a further step occurring in respect of an activity that has already been completed than the amendment or extension to those later stages could be designed to incorporate such an earlier step - say for example, the later steps in the Timetable would be extended to reflect the acceptances that a further application was necessary (a proposition that Macquarie appeared to accept, although emphasising that this is not what is relevantly before the Court for consideration). Another answer to that might well be that, in the circumstances that have transpired, what was once thought to have been completed has not in fact been completed.
Ultimately, it is not necessary to resolve that conundrum because, in the present case, it is relevant textually to note that the term "building application" is defined in the Construction Deed in the plural, i.e., as encompassing more than one "building application". As Macquarie itself has noted, where a term is defined, that definition will ordinarily be incorporated throughout the document where the defined term is used (see Kelly v The Queen). In the present case, the definition of "Works", read with cll 2.1 and 3 of the Construction Deed, means (as SLHD in effect contends) that Macquarie is obliged to lodge all necessary building approval(s) for the construction of the Hospital "in accordance with" the Hospital Development Approval. Hence, the specification of that activity in the Timetable would logically comprise all such activities by the specified end date. In other words, the obligation to comply with the Timetable was an obligation relevantly to lodge all building applications required for the construction of the Hospital by the nominated date and, by parity of reasoning, the obligation was to obtain all building approvals necessary for the construction of the Hospital in accordance with the Hospital Development Approval by the date specified in the Timetable.
I accept that at first blush it would seem surprising to suggest that there might be an obligation to undertake all over again an activity earlier complied with, but it does not to my mind produce a commercially absurd result when it is appreciated that, without a further building approval, construction of the Hospital as required under the Construction Deed now cannot occur (due to unforeseen regulatory changes for private hospitals). In other words, the issue is not as to whether a further step must be taken - it is common ground that it must; the issue is simply whether Macquarie should be held to a set time by which that step should occur (breach of which would amount to breach of an essential term of the Construction Deed and expose it to risk of termination of the Transaction Documents). That it should so be held to a timetable of this kind is not commercially absurd in a context where the contract itself provided for that very regime.
Nor do I consider that it exposes Macquarie to the risk of being said retrospectively to be in breach of an essential term for having failed at an earlier time (when it would not necessarily have been required) to obtain the building approval that is now required (due to a change in circumstances). I do not consider that it could be said that cl 2.5 imports a retrospective obligation (nor do I consider that SLHD, consistent with its good faith obligations, retrospectively to argue that there had been a breach at an earlier stage caused by delay to the Works arising by changed circumstances at a later stage). Rather, it is facultative - it permits an extension to be granted if there is a delay to the Works caused by an event beyond Macquarie's control. If in those circumstances a fresh or different building approval is required (as is the case here) then I consider that cl 2.5 permits an extension to be granted to the date by which all requisite building approvals were required to be obtained.
In other words, whether or not the original Hospital Building Approval was all that was formerly necessary to construct the Hospital in accordance with Macquarie's obligations under the Construction Deed, if there has been a delay to the Works beyond Macquarie's control such that a further building approval is required, then I consider that cl 2.5 permits SLHD to extend the date for that activity in the Timetable. So to read the relevant clause is consistent in my view with the requirement that defined terms be read as bearing the same meaning throughout the document (in accordance with the authority to which Macquarie has itself referred); and serves the commercial purpose evident from cl 2 as a whole, namely that (as SLHD contends) it was the commercial objective of the parties to require that there be a mandated timetable for the construction of the Hospital (an objective that provides commercial certainty for both parties).
What I consider a reasonable businessperson would understand by the use of the term "building approval" where specified in the Timetable (in the context of the deed as a whole and the commercial purpose of setting such a timetable) is that the date there fixed is the date by which all necessary building applications are required to be obtained in order to permit the carrying out of the Works in accordance with the Construction Deed (which plainly contemplates that more than one building application might be necessary to carry out the Works). The fact that the Construction Deed also contemplates that there might be amendment or modification (or replacement) of existing building approvals is not to my mind inconsistent with this.
Thus, I have concluded that the entry for "building approval" in the Timetable must contemplate all necessary building approvals; and that if, as here, it transpires that a fresh or further building approval is required (for reasons beyond Macquarie's control) then it is open to SLHD in its absolute and unfettered discretion to extend the time for that to occur (as it has done here). As noted, I do not accept that such a reading gives rise to commercial absurdity - it does not mean that Macquarie can reasonably be accused of being ex post facto in breach of the original Timetable by not having obtained this approval back in 2017. It simply reflects the fact that it is now necessary for a further building approval (or building approvals) to be obtained and that Macquarie can be required to meet a new contractual timetable in that regard.
I therefore consider that it was within SLHD's power under cl 2.5 to extend the dates in the Timetable by reference to the disputed ("new") activities (and that it was open to SLHD to do so even though, as at an earlier time, those activities might have been, and seemingly here were, regarded as complete).
It is therefore not necessary to consider SLHD's argument that the requirement to obtain building approval was never satisfied for the reason that the Hospital Building Approval that was obtained was not one that extended to the whole of the construction of the Hospital as provided for under the Hospital Development Approval. For completeness, however, I should note that I am of the view (by reference to the comparative analysis of the plans carried out by SLHD's expert and to which I was taken in submissions) that the Hospital Building Approval (even leaving aside the 200 bed issue) did not comply with the Hospital Development Approval as it did not go beyond Stage 1 of the Construction. That said, insofar as SLHD consented to the lodgement of the Hospital Building Approval, difficult issues might here have arisen as to whether SLHD could now have relied upon such a failure (even leaving aside the fact that no estoppel argument was pleaded as such); but as those issues have not arisen it is not necessary to explore this further.

[41]

Macquarie's submissions

As to the reasonableness of the time allowed in the September Timetable for the disputed activities (and, by the same token, the reasonableness of the time allowed to remedy the alleged defaults, which I consider later), Macquarie says as follows.
Macquarie says that in order to provide a construction certificate to SLHD, it was required to: update the Hospital Development Approval plans to comply with current regulatory standards, including the AHFG; submit a modification application to SLHD and obtain SLHD's approval; lodge the modification application with Council for approval; prepare a construction certificate application; and submit the construction certificate application with SLHD.
As to the first of those steps, Macquarie points to the evidence of its architect, Mr Crook, to the effect that updating the Hospital Development Approval would take four to six weeks (see T 212.40) and that it would also include the compilation of a "suite of other reports" (referring by way of example to the fact that the Statement of Environment Effects submitted to SLHD on 3 May 2017 as part of the May Modification Application was accompanied by 25 other reports and plans).
As to the second of those steps, Macquarie points again to the May Modification Application, noting that it was submitted to SLHD on 3 May 2017 and that SLHD responded to it on 15 May 2017 (an earlier modification application having been provided to SLHD on 20 March 2017 and SLHD having requested further information on 10 April 2017). In these circumstances, Macquarie says that two weeks would be a reasonable time to obtain SLHD's consent.
As to the third of the steps required, Macquarie points to the joint report of Mr Nash and Mr Harrison (the town planning experts) submitting that the time between lodging a modification application and its approval is up to 16 months (see the Joint Report at [2.13]). Macquarie notes the evidence of Mr Nash in his July 2017 Report (at [5.7.1]) that, if the approval were to be given by Council without the involvement of the Land and Environment Court the approval process would be six to eight months. Macquarie accepts that it is reasonable to proceed on the basis that Macquarie would have adopted whichever course allowed it to obtain the modification application in as short an amount of time as possible (which, given the above, would obviously not be the sixteen month time frame).
As to the fourth of the steps, Macquarie refers to the documents to be submitted in support of a construction certificate application (see that are set out in the report of Mr Harriman (the expert who gave evidence as to building compliance and certification) (at [18.2.3]). While extensive, Macquarie accepts that this material could be prepared concurrently with the modification application and that this would not require significant further time to finalise.
Macquarie thus submits that, on the basis that the various experts were giving evidence as to the outer bounds as to how long it might take, Macquarie would require approximately six months to complete the first of the disputed activities (lodgement of a construction certificate application with SLHD); and that, even assuming a "running start" (as postulated by SLHD at T 76.41-77.13) that would only remove the first of the steps set out above (for which four to six weeks has been allowed in Macquarie's calculations) because at the time of the issue of the February Notices no modification application had been submitted to SLHD.
As to the work required for the provision of a construction certificate application to the private certifier, the second of the disputed activities, Macquarie says that it would have to take the following further steps (after SLHD had approved the construction certificate application and assuming it would take SLHD approximately two weeks to approve that application, that being the time it took SLHD to consider the May Modification Application): to make an application to the Building Professionals Board with the consent of the Council to change the principal certifying authority from the City of Sydney Council to a private certifier (referring to the Joint Report of Mr Harriman and Mr Appleyard at [6]), which it says it can reasonably be inferred would take at least a week; and, once the private certifier was confirmed as the consent authority, to lodge the construction certificate application with the private certifier.
Macquarie says that after the construction certificate application is submitted to the private certifier, the evidence in the Joint Report of Mr Harriman and Mr Appleyard (at [7]) is that approval would take between four to five weeks. Reference is also made to the evidence of Mr Brady, a construction programmer, that it would take four weeks from the resolution of the modification application to prepare and lodge a construction certificate application (see Mr Brady's August 2017 Report at [68]).
Thus, Macquarie's position is that the time reasonably required for the disputed activities was substantially more than that allowed under the September Timetable.

[42]

SLHD's submissions

SLHD argues that the time allowed in the September Timetable for completion of the steps relating to a construction certificate application was reasonable.
Before considering the reasonableness of the time allowed, SLHD raises the anterior question as to whether it was obliged to act in the utmost good faith and/or reasonably in promulgating the September Timetable (arguing that there was no such constraint on its absolute and unfettered discretion under cl 2.5).
SLHD submits that the "absolute and unfettered discretion" to which cl 2.5 refers is inconsistent with any constraint that the discretion so described be exercised reasonably or in good faith (referring to Platinum United II Pty Ltd v Secured Mortgage Management Ltd (in liq) [2011] QCA 162 at [5]; Troupakis v Adams [1999] FCA 609 (Troupakis v Adams) at [7]-[10]); or with the implication of an implied term of good faith or reasonableness qualifying the exercise of the discretion (referring to Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 at [194]-[197]; Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165; (2012) 268 FLR 433 at [154]; Solution 1 Pty Ltd v Optus Networks Pty Ltd [2010] NSWSC 1060 at [61]-[63]; and Tomlin v Ford Credit Australia Ltd [2005] NSWSC 540 at [119]).
SLHD submits that this position is not relevantly affected by cl 10.8 of the Construction Deed, noting that the parties' obligation under that clause to act in the utmost good faith in respect of the exercise of their powers under the deed and in their dealings with each other is, in terms, expressed to be without limitation to the generality of any other provision in the deed (one of which is cl 2.5); and arguing that any conflict between the good faith obligation in cl 10.8 and the absolute and unfettered discretion in cl 2.5 is to be resolved by the specific provision (cl 2.5) prevailing over the general (cl 10.8).
SLHD argues that giving cl 2.5 its ordinary and literal meaning is supported by the rationale for expressing a contractual discretion in such terms (pointing to the observation by Heerey J in Troupakis v Adams at [8]); namely to avoid the "great trouble, cost and inconvenience" attended by challenges, dispute or agitation (such, one might think, as the present) as to whether the exercise of the discretion has been in good faith.
SLHD contends that the conclusion that it has a truly unfettered discretion in exercising the power to extend dates in the Timetable reflects a contractual allocation of risk (of delay due to events beyond Macquarie's control other than acts of God or the like) and a contractual primacy given to SLHD's legitimate interest in seeing the Site developed in a definite time period. Insofar as Dr Wenkart has described the Timetable in the Construction Deed as "punitive" (see [108] above), SLHD points to the fact that there is no general contractual facility for extension of time claims, nor of arbitration over delay claims; there being only limited provision for an extension of time limited to force majeure events in cll 2.2-2.3 and that otherwise the obligation to compete construction in accordance with the Timetable is strict. Emphasis is placed on the language used in cl 2.5 of a "grant" of an extension in this regard (see T 28.30).
Even if cl 10.8 does constrain the exercise of the "absolute and unfettered" discretion in cl 2.5, SLHD submits that the only constraint would be that SLHD exercise its contractual power in good faith and says that this does not subject the exercise of the power to a test of objective reasonableness, nor does it require a party to act in the interests of the other contracting party or to subordinate its own legitimate interests to those of the other party (referring to the Court of Appeal Decision at [147]). It is submitted that the essence of the good faith requirement is honesty (referring to Sundararajah v Teachers Federation Health Ltd [2011] FCA 1031; (2011) 283 ALR 720 at [68]).
SLHD disputes any contention that its construction of cl 2.5 of the Construction Deed would allow it to profit from its own wrongdoing. It accepts (as it obviously must) the finding of trespass against Macquarie while it was in possession of the Site. However, SLHD emphasises that Macquarie remained in admitted breach of cl 2.1 of the Construction Deed following the appeal and points to the possibility (recognised in the Court of Appeal Decision) that it could, following the Court of Appeal Decision, immediately have issued fresh default notices (which complied with s 129 of the Conveyancing Act) for the admitted breach; instead of which it afforded Macquarie over six years to progress the construction of the Hospital before issuing fresh default notices.
SLHD also points to the fact that it sought to engage Macquarie over a prolonged period with the objective of implementing a replacement timetable for construction of the Hospital, inviting Macquarie to indicate its views on an appropriate timetable and providing multiple draft timetables for Macquarie's review and comment; and that Macquarie refused to engage in that process (instead asserting that it was entitled to build a hospital without being subject to any binding timetable for completion of the Works). It is noted that the September Timetable was the same as the draft provided to Macquarie on 9 August 2016, in response to which Macquarie had made no comment as to its appropriateness or reasonableness.
Thus, assuming (contrary to SLHD's primary position) that it was obliged to act in utmost good faith and/or reasonably in promulgating the September Timetable, SLHD contends for a finding that it did so.
As to the extended dates in the September Timetable, SLHD contends that they were objectively reasonable (having regard to when Macquarie could (and, it says, should) have commenced the work needed to achieve the milestones in the September Timetable) and that Macquarie had ample time to perform the work necessary to achieve the disputed activities within the dates specified in the September Timetable.
SLHD contends that the reasonableness of the dates in the September Timetable should be assessed against the background that Macquarie could have progressed what it needed to do to lodge a construction certificate application from the time that the High Court refused SLHD's application for special leave in June 2011; from which time, the finding by the Court of Appeal that the Construction Deed remained operative and binding on the parties could not be disturbed. SLHD points to cl 3.1 of the Construction Deed, which obliges Macquarie to carry out and complete the Works "as expeditiously as possible". SLHD submits that Macquarie could have exercised its right to possession, obtained a modification of the Hospital Development Approval to update the Hospital Development Approval plans to conform to the AHFG and any other changed regulatory requirements, and prepared a construction certificate application in the time between June 2011 and 17 February 2017 (the latter being the date specified in the September Timetable for lodgement of a construction certificate application with SLHD); and that there was nothing to prevent Macquarie from doing what Dr Wenkart said in May 2011 that Macquarie would do (i.e., to "map out" and determine a new development application).
Certainly, by the time Macquarie had resumed possession of the Site and the status of the Hospital Development Approval had been clarified (by the determination made by Kunc J in 2016), it is said that Macquarie could and should have proceeded expeditiously with an application to modify the Hospital Development Approval to comply with current regulatory requirements and preparation of a construction certificate application, consistently with its obligation under cl 3.1 of the Construction Deed (tasks that could comfortably have been performed in the period between 1 March 2016 and 17 February 2017). SLHD says that the reason those tasks were not performed is that Macquarie was in fact working with its consultants "at no great haste" on a very different development. It is said that Macquarie only instructed its consultant design team, including its architects (STH), to turn attention to a modification application in January 2017; and that STH did not undertake any substantive work on the modification application until February 2017 (after it had spent over six months working on the SSD proposal). (In that regard, there was inconsistent evidence from Mr Crook but the documentary record amply supports SLHD's contention as to this issue.)
SLHD submits that even if (which it disputes, having regard to cl 3.1 of the Construction Deed) if the reasonableness of the extended dates in the September Timetable is to be assessed on the assumption that Macquarie was not required to have done any work prior to promulgation of the September Timetable, the time allowed under that timetable was still reasonable to allow for a modification application which reflected changes to comply with current regulatory requirements (and which did not change the original footprint, building envelope or traffic flows), before lodging the requisite construction certificate application (such application then be lodged and approved by Council). SLHD says that such an application could be determined under delegation and would not require notification, in which case (on Mr Harrison's unchallenged expert evidence) it would likely be determined by Council within four weeks. SLHD points out that Mr Nash, Macquarie's town planning expert, did not contradict that evidence; rather, he expressed the opinion that it would take in the order of six to eight months for Council to determine the May Modification Application. SLHD says that the time for Council to determine the May Modification Application is immaterial as Macquarie now accepts that SLHD was justified in refusing consent to that application because it had contentious elements which were unlikely to be approved by Council.
Thus SLHD submits that the expert evidence establishes that a modification application which was limited to modifying the Hospital Development Approval plans to conform to current regulatory requirements could have been prepared (and approved by Council) and a construction certificate application could have been prepared on that basis in the time allowed between 1 September 2016 and 17 February 2017.
In this regard, reference is made by SLHD to the agreement of the architectural experts that one or more construction certificate applications could be prepared in the five and a half months allowed in the September Timetable (noting that this was one of the questions which Mr Quigley, SLHD's architectural expert, specifically addressed at [100]-[129] of his report, on which he was not challenged; and that Mr Crook agreed in the joint report that this timeframe was achievable, although he noted there were cost risks involved in such an approach which would need to be managed).
SLHD relies upon Mr Quigley's evidence that: changes to the approved Hospital design to comply with changes in regulatory requirements could be achieved by a modification application which did not involve any expansion of the existing building footprint; design development could commence concurrently with schematic design prior to lodgement of the modification application; while design development was proceeding for each of the building areas separate teams could prepare construction documents for that area; and, as design documents were completed, the application for a construction certificate for that section of the work could be lodged. It is submitted that in that fashion the schematic design, design development and construction documentation for the whole Hospital could have been completed such that construction certificate application(s) for the development could have been lodged within a five and a half month timeframe.
SLHD maintains that Macquarie's programmer, Mr Brady, does not establish that the five and a half months allowed for lodgement of a construction certificate application was unreasonable. SLHD says that, although Mr Brady's evidence is that the time allowed in his program for the lodgement of all construction certificate documents with Council was six months, that evidence cannot be accepted as relevant opinion evidence that five and a half months was an unreasonable time in circumstances where: Mr Brady has no first-hand knowledge of how long the task of preparing necessary drawings takes for a given project (being a programmer who is reliant on advice from the architects and engineers for the appropriate time frame); Mr Brady's program was premised on the assumption that the contract procurement methodology for the project would involve a "document and construct" contract and that the estimates he allowed in his program for preparation and lodgement of a construction certificate application allowed for the design involvement of the main contractor following appointment, which would not be needed if design were finalised prior to appointment of a contractor; Mr Brady's program assumed a strictly sequential process whereby work on the construction certificate application would not commence until an approval to the modification application was obtained, whereas the architects and Mr Brady himself agreed that it was possible to do construction drawings and other work towards getting construction certificates while the modification approval process is underway; and Mr Brady's time estimates for preparation of a construction certificate application, like Mr Nash's estimates, were premised on the changes reflected in the May Modification Application rather than the (minimal) changes needed to bring the Hospital Development Approval plans into conformity with current regulatory requirements.
Similarly, it is submitted that the expert evidence establishes the reasonableness of the five weeks allowed in the September Timetable for determination of the construction certificate application once lodged (i.e., 4 April 2017 to 12 May 2017). SLHD notes that the building compliance experts (Mr Harriman and Mr Appleyard) agreed that it would take four to five weeks for a certifier to assess a complete submission for the Hospital, assuming all architectural, structural and service drawings were complete and available. (It is noted that Macquarie does not challenge the reasonableness of the time allowed in the September Timetable for the steps following receipt of a construction certificate.)
SLHD's position is that the reasonableness of the time allowed in the September Timetable is not to be assessed in a vacuum and that the starting point is the time frames allowed in the original Timetable in the Construction Deed (those being the timeframes which the parties have agreed should give content to Macquarie's obligation to carry out the Works expeditiously). In that regard SLHD notes that the original Timetable allowed only four months between lodging a development application with Council (1 April 1997) and lodging a building application with SLHD (1 August 1997). It is submitted that, against that yardstick, the time allowed in the September Timetable to lodge a construction certificate application with SLHD was generous (SLHD emphasising in this regard the "much reduced time required by Council to consider a minor modification application to conform the Hospital Development Approval plans to current regulatory requirements relative to the time needed to consider the original 1997 Development Applications".

[43]

Determination

In setting the September Timetable, the question of reasonableness does not arise except to the extent that SLHD's absolute unfettered discretion is subject to the utmost good faith obligation (see cll 2.5 and 10.8) or an obligation of reasonableness; and hence it is relevant first to consider that issue.
In the Court of Appeal Decision, Allsop P, as his Honour then was, observed (at [7]): These clauses [the utmost good faith clauses in the Transaction Documents] should not be read narrowly. By the encompassing reference to "in their respective dealings" in contracts preliminary to or concerned with dealings over an anticipated century of a commercial relationship, the parties can be seen to have been laying down a high standard of contractual fair dealing that they expected of each other.
Accepting that the parties in the present case set out in the Construction Deed a high standard of contractual fair dealing expected of each other, the content of a duty of good faith (as considered by Hodgson JA in the Court of Appeal Decision) has been given varying content in the authorities but in any event does not require a party to act in the interests of the other contracting party at the expense of, or to subordinate, its own interests (see the Court of Appeal Decision at [147]). There is also force to SLHD's submission that content must be given to the agreement reached between the parties that SLHD was to have an "absolute and unfettered" discretion in the exercise of the power under cl 2.5 of the Construction Deed.
That said, it is not self-evident that the requirement for SLHD to act in its contractual dealings with Macquarie in the utmost good faith is necessarily inconsistent with there being an absolute and unfettered discretion as to the extension of the Timetable. The two might in some circumstances have a complementary operation. So, for example, the utmost good faith obligation might very well operate to preclude the exercise by SLHD of the discretion to extend the Timetable for, say, improper or collateral purposes (such as, for example, in a fashion designed to procure a breach by specifying an activity or a time frame with which it would be impossible on any view of the matter to comply); but no such allegation is here raised. I accept SLHD's submission that cl 10.8 cannot require it to subordinate its own legitimate interests to those of Macquarie, although, as Hodgson JA noted (see the Court of Appeal Decision at [147] in this regard) such a clause would require a party to have due regard to the legitimate interests of both parties.
In any event, it is not necessary here to decide this issue because, even if the utmost good faith requirement does qualify the exercise of the otherwise absolute and unfettered discretion under cl 2.5 of the Construction Deed (and even if that does impose a requirement that the exercise of that discretion be objectively reasonable - which seems to me even more problematic), I am not persuaded that it has been established that the promulgation of the September Timetable derogated from that standard. In other words, it is therefore not necessary here to determine whether the utmost good faith obligation in cl 10.8 requires a reading down (and, if it does, to what extent) of the absolute and unfettered discretion provided for in cl 2.5 of the Construction Deed because I consider that the evidence does not warrant a finding other than that SLHD did act in good faith, and reasonably, in promulgating the September Timetable.
Relevant on that issue is the fact that SLHD had been pressing for input from Macquarie for quite some time as to the time it contended would reasonably be required for the tasks at hand and had received no meaningful or co-operative response to that request. (Indeed if criticism is to be made of any party as to compliance with the requirement of utmost good faith in its contractual dealings with the other, it would more appropriately be levelled at Macquarie insofar as it appears to have embarked upon a deliberate strategy of concealing from SLHD its intentions or proposals in relation to the expansion of the development project and to have, colloquially speaking, left SLHD "in the dark" as to the real progress, or lack thereof, of steps in relation to the progress towards construction of the Hospital. It is not, however, necessary nor would it be appropriate here to make any findings in that regard.)
I am of the opinion that, for the reasons put forward for SLHD (and, in particular, the submissions and evidence referred to at [351]ff above), the proposed revised timetable for the substantial commencement and completion of the first of the disputed activities was reasonable in all the circumstances when it was set in September 2017; as was the time allowed for the second of those disputed activities.
As noted, Macquarie had been on notice of SLHD's concerns as to timetabling issues for some time; and had largely ignored SLHD's requests for comment in respect of a proposed revised timetable. SLHD's expert evidence (to which I have referred above) supports the conclusion that the proposed time frames in the September Timetable were not unreasonable (and this is supported by the fact that it does not appear that Macquarie's own consultants considered that much time needed to be spent on preparation of the relevant modification application - insofar as only a small team was allocated to that task, the principal focus being instead on the more significant larger project - see for example at [171] above). It is also apparent that, at least in some of its calculations as to timing, Macquarie has misread the construction planners' timelines. So for example, the construction timetable in Mr Watson (SLHD's construction timetable)'s report, which refers to "total slack" of 79 days, is not (as Macquarie seems to have considered) an estimate as to the time required between lodgement of a construction certificate application and certification - rather, that is the amount of permissible delay that would not impact on other steps in the time frame (see the explanation of this item in oral submissions at T 73).
This cannot, in my opinion, be said to be a case of SLHD taking advantage of its own breach. SLHD accepts that it was found to have unlawfully trespassed in re-taking and remaining in possession of the Site from 2000. It has been the subject of adverse orders in that regard and is now the subject of orders for the payment of a considerable sum by way of damages for that trespass, following the extended damages inquiry that was conducted by Kunc J. SLHD allowed Macquarie a considerable period of time after the Court of Appeal Decision, and ample opportunity for Macquarie to engage in the process of putting in place a timetable for and implementation of steps in relation to the construction of the Hospital, before invoking the cl 2.5 regime in what was patently a desire to obtain certainty in relation to the progress of construction of the Hospital in accordance with the Construction Deed (something that Macquarie professes still to want to build, albeit, it would seem, that its preference would be to obtain consent to a larger, expanded, development at some future date).

[45]

Macquarie's submissions

Macquarie argues that there was, and is, considerable uncertainty on the face of the February Notices and April Notices as to whether the construction certificate application referred to, and mandated, in the notices was for a seven to nine storey hospital with capacity for 394 beds or "merely" for a hospital with capacity for at least 200 beds (as Macquarie says is required by cl 4.5 of the Construction Deed). Further, Macquarie complains that the notices do not specify whether: the construction certificate application had to be for the construction of a hospital with an identical lay out and the various room sizes as specified in the Hospital Development Application plans; or Macquarie would be able to remedy the breach if it lodged a construction certificate application with plans which provided for a seven to nine storey hospital (with 394 beds or which had a capacity of 200 beds or which had a capacity of 200 beds together with two free floors which would have the capacity of housing 394 beds at some time in the future) or which updated the plans in the Hospital Development Approval to reflect the current regulatory environment governing hospitals or increased the room sizes to account for the increased specification, for example, with respect to operating theatres, recovery bays, ICU bays, bedroom suites, en suites and birthing rooms and any changes to the floor plates as a result of the increased room sizes. It is submitted that this demonstrates ambiguity and that the notices required Macquarie to speculate "as to precisely what the construction certificate application would be referrable to, and therefore precisely what was required of it in order to remedy the alleged breaches (and, as such, avoid forfeiture of the Leases)".
Second, Macquarie says that the fact that the purported termination notices were issued six months after the first of the purported notices of default "provides no justification that the time specified in the notices was reasonable". Macquarie acknowledges that a notice does not need to stipulate a time in which the alleged breach must be remedied but says that the notices themselves stipulate what SLHD considered to be a reasonable time (namely, 28 days) and says that therefore the necessary inquiry is whether the 28 day period stipulated by SLHD was reasonable in all of the circumstances.
Reference is made to Harris v Thallon [1926] 26 SR (NSW) 456 (Harris v Thallon) (at 461-462) where Street CJ (with whom Gordon J and Harvey CJ in Eq agreed) found that a s 129 notice was invalid because it did not give the lessee notice that she had a reasonable time within which to effect the repairs (but instead gave the lessee 14 days in order to carry out repairs). It is submitted that Casquash Pty Ltd v NSW Squash Limited (No 2) [2012] NSWSC 522 (Casquash (No 2)) (at [55]) (on which SLHD relies - see below at [389]) does not provide any support for the proposition that it was sufficient to give 28 days' notice in the circumstances of the present case.
Macquarie contends that 28 days to remedy the alleged breach was "clearly inadequate". It is said that, to remedy the alleged default asserted in the February Notices (namely, the provision of a construction certificate application to the landlord), Macquarie would have had to take the steps referred to at [332]ff above (and says that it would have taken the time there identified) ; and that, in order to remedy the purported default asserted in the April Notices (being the provision of a construction certificate application to the private certifier), Macquarie would have had to take the further steps identified at [338] above within the time period there identified.
On that basis, Macquarie argues that it would require approximately six months to remedy the asserted default in the February Notices and two further months to remedy the asserted default in the April Notices. Thus, Macquarie submits that the 28 days stipulated in the February and April Notices was not a reasonable time to remedy the alleged defaults and, as such, the notices are invalid pursuant to the provisions of s 129 of the Conveyancing Act (at least insofar as the notices in respect of the Leases are concerned); and it argues that the time frame provided for in the Construction Deed (cl 7) as to rectification of defaults cannot properly inform the reasonable time required for the purposes of s 129 of the Conveyancing Act.

[46]

SLHD's submissions

As to the allegation by Macquarie that the February and April Notices were invalid because they did not comply with s 129 of the Conveyancing Act, namely that they failed to describe the asserted defaults with sufficient particularity and provided an unreasonable time period to remedy the asserted defaults (fourth further amended statement of claim at [64]), SLHD submits: first, that s 129 only applies to the February and April Default Notices served under the Leases (and does not apply to, and cannot invalidate, the notices served under the Construction Deed; although it is accepted that such notices need to comply with cll 7.5-7.6 of the Construction Deed in relation to affording an opportunity to rectify); and, second, that there is no merit in either alleged deficiency.
As to the alleged lack of particularity, SLHD submits that the February and April Notices clearly identified the particular defaults alleged: each identifying Macquarie's obligation under cl 2.1 of the Construction Deed to complete the Works in accordance with the Timetable; that SLHD had extended the Timetable on 1 September 2016; that Macquarie had failed to lodge a construction certificate application with SLHD or a private certifier by the relevant date in the extended Timetable (i.e. the September Timetable); that cl 2.1 was an essential term of the Construction Deed by virtue of cl 7.1; and that Macquarie's failure to comply with an essential term of the Construction Deed was an "Event of Default" under the relevant clauses of the Leases.
Further, it is said that the February and April Notices clearly identified what Macquarie needed to do to remedy the asserted defaults, namely to lodge a construction certificate application with SLHD (in the case of the February Notices) or a private certifier (in the case of the April Notices). SLHD notes that the parties had been in prolonged correspondence about the Timetable and SLHD's promulgation of the September Timetable (as referred to above).
Insofar as Macquarie contends that the notices lacked particularity because they did not advise Macquarie whether it should lodge a construction certificate application referrable to the Hospital Development Approval (which, on Macquarie's own case, SLHD says would involve construction of a hospital which would not be able to be licensed once built) or the Hospital Development Approval as modified by a modification application (which SLHD notes Macquarie had been informing SLHD for almost a year that it was preparing), SLHD says that this is a false issue and that these were not alternatives.
SLHD maintains (and I accept) that Macquarie was obliged under the Construction Deed to build the Hospital as approved by the Hospital Development Approval unless it sought a modification of that approval; that whether it did so was a matter for it but that the Construction Deed did not provide it with alternatives as to the Hospital to be built; rather, the obligation was to build the Hospital as currently approved.
SLHD's position in that regard is that if Macquarie obtained from Council a modification of the Hospital Development Approval then the contractual obligation would be to build the Hospital in accordance with that modified development approval. It says that Macquarie was not put in the position where it was left to speculate as to what it was required to do: rather, it was required to lodge a construction certificate application in accordance with the Construction Deed and the content of that application depended on whether it first sought and obtained a modification of the Hospital Development Approval (which was a matter for Macquarie to determine for itself).
SLHD argues that the authorities make clear that all the landlord must do in the notice is to specify the breach with sufficient particularity to allow the tenant to remedy it (and that how the tenant goes about remedying the breach is a matter for the tenant). It is noted that the notice does not need to indicate the means by which the tenant should go about remedying the default. Reference is made to the Court of Appeal Decision at [307]-[324] per Hodgson JA in this regard, including his Honour's observations from [308]-[309] (see below); and to his Honour's extract (at [316]) of what was said in Fox v Jolly [1916] 1 AC 1 (Fox v Jolly) (at 11), where the impugned notice annexed a schedule of dilapidations and it was held that the notice sufficiently specified the landlord's complaints and gave the tenant adequate notice of what he was required to do, Lord Buckmaster LC there saying that: All that the landlord is bound to do is to state particulars of the breaches of covenants of which he complains and call upon the lessee to remedy them. The means by which the breach is to be remedied is a matter for the lessee and not for the lessor. In many cases specification of the breach will of itself suggest the only possible remedy. For example, complaint that a covenant to paint or to paper has been broken can only be met by painting and papering. But it does not follow that this is always so. A particular covenant to keep the roof watertight, if broken, would be sufficiently defined by a reference to the covenant, a statement that the roof had not been kept watertight, and that the tenant was required to remedy the omission; the means by which this could be accomplished would be for the tenant to determine.
SLHD argues that Macquarie was not left to speculate as to whether, if it remedied its default by lodging a construction certificate application with SLHD and subsequently Council, SLHD might nonetheless proceed to forfeit the Leases. It says that it "would not, and could not" proceed to forfeiture if such an application were to have been lodged within a reasonable time because the identified breach would have been remedied; and that the content of the construction certificate application was a matter for Macquarie (in particular, that whether Macquarie wished to apply first to modify the Hospital Development Approval and then seek a construction certificate on the basis of the modified development consent was a matter for Macquarie to decide - SLHD says that it was not for it to dictate to Macquarie that it do so, or not do so).
As to the reasonableness of the time allowed to remedy the default before termination notices were served, SLHD maintains that Macquarie's contention that the time allowed to remedy the breaches was unreasonable should be rejected for at least four reasons.
First, that the reasonableness of the time afforded to Macquarie to remedy its breach by lodging a construction certificate application with SLHD, and subsequently a private certifier, is to be assessed having regard to the very significant time prior to service of the February Notices and April Notices during which Macquarie could and should have been preparing a construction certificate application. SLHD says that time does not begin to run only from service of the s 129 notice. In particular, it is said that, where the terms of a lease require a tenant to do something (such as building work) within a stipulated period of time, the tenant is not entitled to fail to do what it is required to do under the terms of the lease and then challenge a s 129 notice on the ground that it would now take a lengthy period of time following service of the notice to do what it was required to do prior to service of the notice. SLHD argues that if such an argument were correct then the effect of s 129 would be to double (at least) every time period stipulated in a lease before a lessor could exercise a right of forfeiture.
By way of example, SLHD argues that if (as I interpose to note is now inevitable in the circumstances that have here transpired) Macquarie were to fail to complete construction of the Hospital by 29 October 2019 in accordance with the September Timetable, in circumstances where it had taken no steps to construct the Hospital beyond completion of bulk excavation, a s 129 notice served upon such default would not be defective simply because it did not then allow Macquarie over two years to remedy the breach by constructing the Hospital. It is submitted that a reasonable time to remedy a default must take into account the amount of time the tenant has already had available to it to perform the obligation under the lease in respect of which it has defaulted; and that, a fortiori, that must be so when, as here, time to perform the obligation is of the essence and the landlord has repeatedly reminded the tenant of its obligation to do what it is required of it under the lease. Reference is here made to Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242, where the breach of covenant was a failure to replant seedling trees and to conduct appropriate weed control and Judd J considered that "the fact that the remediation work, identified in the notices, might take one or more years was not a determining factor in the calculation of a reasonable time within which to respond" (at [147]), concluding that the 30 day period identified in the notice was reasonable (at [149]).
Second, it is said that the reasonableness of the 28 day period stated in the notices is informed by the time period chosen by the parties in cl 17.6(b) of the Hospital Lease (which provides that any event of default notified to Macquarie, remediable other than by payment of money, is waived if Macquarie gives a written undertaking within 28 days of receiving the notice to remedy the default and Macquarie then has a reasonable time to remedy having regard to the nature and extent of the breach (but in any event not more than three months). SLHD contends that 28 days was sufficient to allow Macquarie to provide an undertaking under cl 17.6(b) of the Hospital Lease, in which event the relevant Event of Default would have been waived for a further period. It is noted that Macquarie did not give any undertaking under cl 17.6(b) of the Hospital Lease within 28 days of either the February Notices or April Notices (notwithstanding that the February Notices and April Notices expressly drew attention to Macquarie's right to do so). SLHD argues that the 28 days provided for in cl 17.6(b) of the Hospital Lease was a sufficient time for Macquarie to consider its position and give its response to the notices, noting that Macquarie could have admitted the breach and undertaken to remedy it, in which case the Leases provided a further reasonable time for Macquarie to do so. It is submitted that the absence of such a response from Macquarie in the 28 day period satisfied the precondition to SLHD's right to terminate.
Third, SLHD points out that Macquarie's attitude was "steadfastly to refuse to acknowledge the validity of the September Timetable" and to proceed instead on the basis that it would work to its own "indicative" timetable (in which regard, SLHD refers to the evidence as to the steps taken by Macquarie to progress its SSD application for the "complete complex" long after service of the February Notices and April Notices). It is submitted that Macquarie had no intention of remedying its default in failing to lodge a construction certificate application by the dates in the September Timetable; and hence that it was not necessary to stipulate a period greater than 28 days because Macquarie's position was so entrenched that it would not have remedied the breaches regardless of the time allowed. In that regard, reference is made to Billson v Residential Apartments Ltd [1992] 1 AC 494 (Billson), where Sir Nicolas Browne-Wilkinson VC (Parker and Nichols LJJ there agreeing) said (at 508): … even if the breach was capable of remedy the defendants' actions in continuing to press on with the work in defiance of the warnings and in defiance of the section 146 notice demonstrated that the defendants had no intention to remedy the breach at all. It is to be noted that the section 146 notice itself does not have to limit a time within which the breach is to be remedied. All that the statute requires is that a reasonable time to remedy the breach must elapse between service of the notice and the exercise of the right of re-entry or forfeiture. If the actions of the lessee make it clear that he is not proposing to remedy the breaches within a reasonable time, or indeed any time, in my judgment a reasonable time must have elapsed for remedying the breaches once it is clear that they are not proposing to take the necessary steps to remedy the breach but are committing further breaches. … The only effective remedy of a landlord, faced with intransigent behaviour such as that of the defendants in the present case, must be to forfeit the lease on the ground that whatever time was allowed the defendant was showing no intention of remedying the breach at all. In my judgment, given the stance adopted by the defendants in response to the section 146 notice, a reasonable time did elapse for the defendants to stop doing the work and either apply for the necessary consents or put forward proposals for remedying the breach.
Reference is also made to what was said in Casquash (No 2) at [55]-[56]: Further, I see no difficulty with the time for compliance in all three Section 129 notices. The period of 14 days for remedying the breaches that was stipulated in each notice was reasonable as a matter of fact. This is especially so in relation to the notices concerning the breaches of Articles 10 and 24 in the light of the nature of the obligations, the ease with which compliance with those obligations was capable of being achieved if the plaintiff was prepared to behave reasonably and the history of the events that preceded the issue of the notices on 5 March 2012. In the circumstances that had occurred and given the plaintiff's wilful refusal to comply with reasonable requests, it was not necessary for the defendant to allow 28 days for compliance. It was obvious that the plaintiff would not remedy its breaches, and would not comply with its obligations, unless and until there were an order of the court requiring it to do so. At a practical and commonsense level, nothing would have been achieved - except further prejudice to the defendant - if 28 days were allowed. The plaintiff's position was so entrenched that it would not have voluntarily remedied the breaches whether the time for doing so was 14 days or 28 days. The same reasoning explains why a 14-day period was reasonable in relation to the breach of the obligation to pay outgoings. The plaintiff would never have paid the amount due unless and until a court ordered it to do so. It was never voluntarily going to avail itself of the opportunity to remedy that breach. The defendant knew that. Further, even if it were the only default relied upon, I would have been reluctant to grant relief against forfeiture for the failure to pay the outgoings, given my findings of dishonesty. In the particular context of this case, the notice period was reasonable. In any event, the plaintiff put no evidence before me of its financial capacity to pay the outstanding outgoings. The time for doing so is at the hearing, not after judgment has been given. I say more about relief against forfeiture in what follows.
Fourth, SLHD notes that s 129 of the Conveyancing Act does not require a notice to stipulate a fixed time; the relevant inquiry under the section being whether the time in fact permitted to the lessee to remedy the breach was reasonable before any right of forfeiture is exercised (referring to Billson at 508). SLHD points to the fact that in the present case the first termination notices were not served until August 2017, some six months after the February Default Notices; and that the October Termination Notices were not served until some eight months after the February Default Notices. It is submitted (and I agree) that a six (or eight) month period was a reasonable time within which Macquarie could have remedied the defaults for the purposes of s 129 of the Conveyancing Act.
SLHD argues that the notices in the present case are distinguishable from those in Harris v Thallon (on which Macquarie relies - see [373] above), where the notice simply required the breach to be remedied within 14 days and Street CJ (at 461-2) said that the difficulty with such a notice is that it might mislead a tenant who was ignorant of the terms of s 129 into not appreciating that the tenant had a reasonable time to comply with the notice, irrespective of whether 14 days was in fact a reasonable time. SLHD notes that, by contrast, the notices in the present case expressly state that SLHD will be entitled to re-enter or forfeit the Lease in the event of Macquarie failing to comply with the notice "within a reasonable time" together with a reference to s 129 (and then proceed to state what SLHD considered to be a reasonable time).
As to the Car Park Sub-Lease, insofar as Macquarie has suggested that the February Notices and April Notices served under the Car Park Sub-Lease were defective on the basis that cl 3.8 of the Car Park Sub-Lease did not apply cl 16.2 of the Car Park Lease (which provided that cl 2.1 of the Construction Deed was an essential term of the Car Park Lease), SLHD points out (correctly) that cl 16.4(c) of the Car Park Lease applies to the Car Park Sub-Lease (that clause providing that an Event of Default occurs if Macquarie does not comply with an essential term of a Transaction Document, which term includes the Construction Deed). SLHD says that this was the basis for termination of the Car Park Sub-Lease - that it did not terminate the Car Park Sub-Lease for breach of an essential term of the Car Park Sub-Lease itself; rather, it terminated the Car Park Sub-Lease for breach of an essential term of the Construction Deed, which was an Event of Default under the Car Park Sub-Lease under cl 16.4(c) of the Car Park Lease as incorporated by cl 3.2 of the Car Park Sub-Lease; and that this was the basis for the Event of Default notified to Macquarie in the February Notices and April Notices served under the Car Park Sub-Lease. (That contention seems to me to be well-founded and the complaint made as to these notices was not ultimately pressed by Macquarie.)

[47]

Determination

In the Court of Appeal Decision, Hodgson JA accepted the contentions made for Macquarie that the primary judge had erred in holding that the notices of default served by SLHD in September 1999 satisfied the requirements of s 129 of the Conveyancing Act. This was because, contrary to the requirements of s 129(1), the default notices did not require either remedy of any of the breaches specified or payment of compensation; and because, even if (as SLHD had contended) the notices could be read in combination with cl 16 of the Car Park Lease and cl 17 of the Hospital Lease (and thus as requiring what was identified in those clauses as sufficient to avoid forfeiture) this would still not comply with s 129 because those requirements were different from the requirements specified by s 129 (see at [306]).
His Honour (at [307]) noted the genesis of s 129 and at [308]-[309] said: The purpose of s 129 is to give the lessee an opportunity to remedy any alleged breaches before the lessor exercises its legal right of forfeiture: Fletcher v Nokes [ 1897] 1 Ch 271 at 274; Horsey Estate Ltd v Steiger [ 1899] 2 QB 79 at 91; Ex parte Dally-Watkins; Re Wilson (1956) 72 WN (NSW) 454 at 456. In my opinion, a proper opportunity is not afforded unless the lessee is alerted to the particular breaches on which the lessor proposes to rely and what the lessor requires in order to bring about a position where termination would not occur.
Hodgson JA (from [310]) reviewed the statements made in the above cases concerned with notices issued pursuant to alleged breaches of covenants to repair, and noted that those statements had been quoted with approval in Fox v Jolly. His Honour noted that the Australian position reflected the position espoused in those authorities, referring to the second reading speech to the Forfeiture of Leases Bill (the Hon F B Suttor, New South Wales Legislative Council, Parliamentary Debates (Hansard), 4 July 1900 at 619; 11 July 1900 at 816) and to Gerraty v McGavin (1914) 18 CLR 152 at 160; [1914] HCA 23 per Griffith CJ; 164-165 per Isaacs J; Dogan v Morton (1935) 35 SR (NSW) 142 at 148, Davidson J (with whom Stephen and Street JJ agreed); Ex parte Dally-Watkins; Re Wilson (1956) 72 WN (NSW) 454 at 456, Street CJ (with the concurrence of Roper CJ in Eq and Sugerman J); Johnson v Senes (1961) 78 WN (NSW) 861 at 864 per Wallace J; and Visser v Jacobs (1987) NSW ConvR 55-350 at 57,164 per Bryson J, as his Honour then was. Hodgson JA concluded at [323]-[324] that: In my opinion, the above authorities clearly indicate that a notice under s 129 must not only allege breach, but must also describe the particular acts or omissions constituting the alleged breach; and the notice must indicate the acts of the tenant which the landlord would consider sufficient for the lease to continue, and upon completion of which the landlord would abandon its claim to forfeit. The standard of particulars or degree of specificity depends upon the circumstances, including the nature of the covenant alleged to be breached, the tenant's actual or constructive knowledge, and whether the landlord claims reasonable compensation. To use the example of Lord Buckmaster LC, where there are several options open to a tenant to waterproof a leaking ceiling, then that choice is at the tenant's discretion. Thus s 129 is, in my opinion, directed at allowing the tenant to bring about (within a reasonable time) a state of affairs under which the landlord would not pursue forfeiture. In particular, the lessee should not be left to speculate as to whether, if it took whatever action it could to remedy the specified breaches, the lessor might nevertheless proceed to terminate the lease on the basis that the breaches were not capable of remedy or that, because what the lessee did was insufficient to eliminate loss caused to the lessor by the late performance of the lessee's obligations, the lessee was still in breach.
His Honour held that the termination notices issued in 2000, which "did not express any requirement to do anything", did not alert Macquarie as to whether SLHD was asserting that the breaches were remediable by payment of money (and if so, what was "all money necessary to remedy the Event of Default"), or were remediable other than by payment of money (and if so, by what), or were not remediable (and if so, what compensation would be to the reasonable satisfaction of SLHD); and said that, "[s]pecifically, the notices did not indicate whether [SLHD] was claiming interest on money that had not been paid at the times required by the agreements, or was claiming that the failure to complete the Car Park or substantially commence the Hospital by 31 June 1999 caused loss entitling it to compensation even if Macquarie proceeded in response to the notice to do these things" (at [325]); and (at [326]) that the notices did not convey to Macquarie what SLHD claimed Macquarie needed to do to avoid the failure referred to in s 129(1) which would then permit SLHD to exercise its right of re-entry or forfeiture.
At [327], his Honour said: A s 129 notice is not invalidated if the lessor includes in it specification of breaches that a court later finds were not committed: Fox v Jolly. In my opinion, it would follow from this that an otherwise valid s 129 notice is not invalidated just because the lessor requires the lessee to remedy a breach that has not in fact occurred, or to pay an amount in compensation that is more than what is reasonable. In such cases, if the lessee does not wish to comply with requirements in the notice to the extent that the lessee considers them excessive, the lessee may take the risk of not complying fully with the lessor's requirements; and if the lessor then purports to forfeit the lease and the matter comes to litigation, the lessee may or may not be successful. But in such a case, at least the lessee is given information as to what the lessor requires and can be confident that if these things are done there will be no forfeiture. The notices in this case did not perform that function.
His Honour did, however, accept (at [329]) that it would be possible for the one notice both to comply with s 129 ("in effect conveying what was required in order to obtain the statutory protection") and to alert Macquarie to the different options available under the Leases to obtain the contractual waiver provided by the Leases.
At [332], his Honour addressed the question as to whether, since the Construction Deed is not a lease, non-compliance with s 129 meant that the Construction Deed was not effectively terminated; noting that there was a "very close relationship" between the Leases and the Construction Deed, concluding at [333] that: … while it may in some circumstances be possible for the Construction Deed to be terminated for breach without at the same time bringing about termination of the leases, and vice versa, that did not happen in this case. The termination procedure adopted by [SLHD] recognised the close interdependence of the Construction Deed and the leases, and the intention manifested by [SLHD]'s conduct was to terminate the whole package, not to terminate any single part of it in the absence of termination of other parts. [His Honour understood this to have been accepted by Counsel appearing for SLHD]
His Honour also considered that it would not be open to Macquarie to claim the protection of s 129 in order to avoid forfeiture of Leases containing a covenant by it to comply with the Construction Deed, and yet to claim that the Construction Deed had been terminated by SLHD by a notice of default and a notice of termination given at the same times and on the same grounds as those in respect of the Leases ("which have turned out to be ineffectual because of s 129"). Thus, his Honour considered that, by pursuing relief under s 129 in those proceedings, Macquarie was confirming that it has the obligations provided by the Leases, including the obligation to comply with the Construction Deed; and was thereby recognising that the Construction Deed is still binding on it; and accordingly that the Construction Deed continued to bind both SLHD and Macquarie (see [334]-[336]). Relevantly, his Honour also observed (at [338]) that: It may of course then be open to [SLHD] immediately to seek again to obtain possession on the basis of Macquarie's breaches, particularly in relation to construction of the hospital. A question may then arise as to whether the procedure required by cl 7 of the Construction Deed, cl 16 of the Car Park Lease and cl 17 of the Hospital Lease would need to be gone through again, or whether it would be sufficient for [SLHD] just to comply with s 129. This question does not arise in this case, and I express no view on it.
The position in relation to the notices here under consideration is very different from that which pertained when the matter was before the Court of Appeal. In my opinion, the default notices issued in 2017 very clearly described the omissions constituting the alleged breaches and indicated with sufficient particularity what SLHD considered would be sufficient for the Leases to continue (and upon completion of which SLHD would abandon its claim to forfeit the Leases).
Unlike the position in relation to the 2000 notices, the relevant default notices here did specify a requirement to take action to remedy the breaches; made clear that SLHD considered that the alleged breaches were remediable; and did convey to Macquarie what SLHD claimed Macquarie needed to do in order to avoid the failure referred to in s 129(1) of the Conveyancing Act which would then permit SLHD to exercise the right of re-entry or forfeiture of the Leases. In particular, I do not consider that this is a case where it can be said that Macquarie was left to speculate as to whether, if it took action to remedy the specified breaches, SLHD might nevertheless proceed to terminate the Leases.
The alleged breaches were specified as the failure to lodge a construction certificate with SLHD (the February Default Notices) and then with the private certifier (the April Default Notices) by the dates specified in the September Timetable. The internal communications in relation to the project (as referred to in the chronology set out above) make it clear that Macquarie (as were its consultants) was well aware of what was necessary in this regard and what had to be done to achieve it. The suggestion that there was some ambiguity as to what the private Hospital, the subject of the requisite applications, was to comprise is in my view belied by those communications. The position of Macquarie and its consultants was clearly that Macquarie was seeking to put in place some kind of stop-gap measure(s) in order to preserve its ability later to obtain approval for a very different kind of development and to prepare the documentation leading up to that stage in such a way as to minimise the ability of SLHD or the Council to refuse consent (or, in the words of Mr Wenkart, to make it "much harder again for SLHD to kick us out of the site", "much harder for SLHD to argue against the Senior Living apartments" and "more challenging" for the Council to reject the foreshadowed new development application once there was a "build on foot" - see [139]-[140] above). The suggestion that Macquarie did not well understand what it was required to build in order to comply with the contractually agreed design is simply not plausible.
I consider that there was more than adequate particularity in the wording of the default notices to indicate to Macquarie what it was required to do. The default notices outlined Macquarie's obligations under cl 2.1 of the Construction Deed and what SLHD asserted Macquarie needed to do to remedy the alleged defaults - namely, that Macquarie was required to lodge a construction certificate application in accordance with the Construction Deed with SLHD and then with the private certifier. I accept the submission by SLHD that Macquarie was obliged under the Construction Deed to build the Hospital as approved by the Hospital Development Approval (unless and until it sought and obtained a modification of that approval) and that this factor made the remedy for the asserted defaults easily identifiable. The manner in which Macquarie chose to prepare and lodge the requisite construction certificate application (consistent with its obligations under the Construction Deed) was ultimately a matter for it (just as a tenant might choose to repair a leaking roof in the example postulated in the authorities referred to above would be a matter for it).
As to the reasonableness of the time in fact allowed to remedy the defaults (which is the relevant question, not the time specified in the notices themselves), SLHD ultimately allowed some six to eight months before issuing the October 2017 termination notices for the remedy of the defaults identified in the February and April default notices. As indicated above, I consider that to have been a reasonable time in the circumstances (and I have reached that conclusion without placing any weight on the time frame permitted under the original Timetable in this regard - rather, I have done so by reference to the expert evidence to which I have referred above as to the time frame within which it would have been possible to prepare a modification application dealing only with the necessary amendments required by the changed regulatory regime and progressing the applications expeditiously as there contemplated).
Macquarie's own submissions appear to accept that a time frame of approximately six months to remedy the default specified in the February Default Notice would have been reasonable; with another three weeks to remedy the breach specified in the April Default Notice, with an estimate of four to five weeks for approval once the construction certificate application is submitted to the private certifier. I accept the submissions of SLHD as to the limited weight to be accorded to Mr Brady's estimates, for the reasons there set out; and I take into account Mr Quigley's evidence as to the manner in which progress could have been achieved. It was conceded that certain of the material could be prepared concurrently and Macquarie also accepted that it would be reasonable to proceed on the basis that it would have adopted whichever course allowed it to obtain the modification application in as short amount of time as possible. On the expert evidence adduced by SLHD, which I accept and to which I have already referred, it is apparent that a reasonable time was afforded to Macquarie in which to remedy the respective defaults (particularly having regard to the October 2017 termination notices); it simply chose not to do so.
As to the default notices issued under the Construction Deed, to which s 129 of the Conveyancing Act does not apply, I consider again that there was sufficient particularity and a reasonable time specified for the breaches to be remedied. Again, Macquarie was ultimately given a much longer period than 28 days in which to remedy the defaults, something that it chose not to do.
Thus, I consider the default and termination notices to have been validly issued under the respective Transaction Documents and, as I concluded above in relation to the promulgation of the September Timetable, I consider that it has not been established that SLHD was in breach of its obligations under the Construction Deed or other Transaction Documents by issuing those notices.
That makes it strictly unnecessary to consider the argument that, by wrongfully issuing the termination notices, SLHD was in breach of an implied obligation to co-operate and not to deny Macquarie the benefit of its contractual bargain. However, for completeness I consider that issue below in the context of the relief sought for an inquiry as to damages (lest I be wrong in the conclusion that the default and termination notices were validly issued).

[49]

Macquarie's submissions

Macquarie submits that the February Notices and April Notices purportedly issued by SLHD pursuant to the September Timetable, and the purported termination of, inter alia, the Hospital Lease and Construction Deed, have prevented Macquarie from obtaining the benefit of the Hospital Lease and the Construction Deed. It says that SLHD's ongoing refusal (from August 2017) to recognise the Construction Deed and the Leases as being on foot is a failure to do all that is necessary for Macquarie to have the benefit of the contract (referring to Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607-608; [1979] HCA 51, per Mason J (as his Honour then was) at 607-608 and Mackay v Dick (1881) 6 App Cas 251 (Mackay v Dick) at 263).
Macquarie says that, fundamental to Macquarie having the benefit of the contract, is SLHD acknowledging that the Construction Deed and Leases are on foot; and that the moment that SLHD purported to terminate the contract and asserted that it is no longer on foot SLHD was in breach of its duty to give Macquarie the benefit of the contract. It is said that this is because, absent that acknowledgment, Macquarie cannot do anything under the contract (for example, that Macquarie without SLHD's consent cannot lodge a modification application with Council (cl 4.15 of the Construction Deed)).
Macquarie argues that SLHD's assertion that there are no obligations under the Construction Deed and Leases, by reason of the purported termination, is the breach of the obligation articulated in Mackay v Dick as set out at [19A] and [63C.8] of the fourth further amended statement of claim; and that the recognition that the contract remains on foot is central to the bargain struck between Macquarie and SLHD. It argues that SLHD's recognition of the existence of the contract is essential to the contractual regime between the parties and the purported termination is a failure by SLHD to do all that is necessary for Macquarie to have the benefit of the contract.
Macquarie argues that the purported termination and the failure by SLHD to give effect to the benefit of the Construction Deed and Leases has significant consequence for it. It says that, because the Transaction Documents are intrinsically (and expressly) linked, the purported termination means that Macquarie: cannot "carry out and complete the Works in accordance with the Timetable" (cl 2.1 Construction Deed) and therefore enjoy the benefit of the Hospital Lease; is unable to take advantage of the benefits of early completion of the Works and is exposed to the costs consequences of a delay in the completion of the Works pursuant to cll 3.3 and 3.4 Construction Deed; cannot prepare and lodge all necessary applications to the Council and all other necessary authorities for the carrying out of the Works (as required under cl 4.1 Construction Deed) and therefore enjoy the benefit of the Hospital Lease; is unable to lodge a modification application with Council (pursuant to cl 4.15 Construction Deed) and, accordingly, is unable to progress further work on such a modification application and in any event such an application would be futile; is unable to lodge any other application for approval of any authority, including a SSD application (pursuant to cll 4.13 to 4.15 Construction Deed) and, accordingly, is practically unable to progress further work on any such application, and in any event such an application would be futile; and is unable to obtain finance for the completion of the construction of the Hospital (referring to the evidence of Mr Ballantyne at T 228.35-229.20).
Thus, it is asserted that, by reason of the breach, Macquarie has suffered, and continues to suffer, loss and damage and, as such, an order for an inquiry into damages in accordance with prayer for relief 3AC of the fourth further amended statement of claim should be made.
Macquarie notes that the test as to when an inquiry as to damages will be ordered is "impressionistic" and requires consideration of the nature of the breach. It says that, here, the breach is the purported termination of the Transaction Documents such that Macquarie was prevented from obtaining the benefit of the bargain it had struck, namely the ability to construct a hospital on the Hospital Site. In the circumstances of this case, it is submitted that the loss of that benefit is analogous to the loss of a chance or the loss of an opportunity to construct the Hospital and derive an economic return from it. It is said that that loss has a temporal element and manifests itself in the delay in constructing the Hospital (with the escalation of the costs of the construction) and the delay in Macquarie's ability to derive an economic return from the Hospital.
Macquarie says that determining the impact of the delay on the construction of the Hospital requires the examination of a counterfactual as to what Macquarie would have done, or was likely to have done, absent the purported termination. Macquarie contends that (contrary to SLHD's submission), there is no requirement for Macquarie to establish, as a requirement for an inquiry into damages, that it was ready, willing and able to perform at the time of the breach. It notes that SLHD's submission is based on Hodgson JA's comments at [162] of the Court of Appeal Decision where his Honour referred to his decision in Sharjade Pty Ltd v The Commonwealth of Australia [2009] NSWCA 373 (Sharjade) at [59] to [73]. Macquarie distinguishes Sharjade on the basis that it concerned a circumstance where a party, itself in breach, purported to repudiate and accept the breach of the other party and that it was in those circumstances that his Honour held that the party seeking an inquiry had to be ready, willing and able to perform at the time of the breach.
Macquarie contends that it is reasonably probable that substantial damages will reasonably and naturally result from the breach. In Macquarie's submission, the "correct" counterfactual is one in which Macquarie would have built the Hospital that it was contractually obliged to build (with a minimum of 200 beds) by 29 October 2019 and admitted the first patient by 25 February 2020 (those dates being taken from the September Timetable). Macquarie accepts that SLHD was able, by reason of cl 2.5 of the Construction Deed, to extend dates referable to the unsatisfied activities in the Timetable. Macquarie says that, while those dates are relevant for the purpose of considering the counterfactual, they are no longer relevant to actual events by reason of the purported termination of the Transaction Documents in August and October 2017.
Macquarie submits that the evidence establishes that it is reasonably probable that Macquarie: had an intention to build the Hospital; was significantly advanced in preparing its application to modify the Hospital Development Approval; would have obtained SLHD's consent to lodge a modification application with the consent authority; would have obtained approval for a modification application from the consent authority; would have obtained the finance necessary to construct the Hospital; was progressing on a path that would allow it to complete construction of the Hospital by 29 October 2019; and would admit the first patient to the Hospital by 25 February 2020. I do not propose here to summarise the matters to which Macquarie points in its submissions as evidencing its intention to build the Hospital on the Hospital Site (though it must be said that the exact scope of the development it wished to progress seems to have varied throughout the period and there remains in my mind some doubt as to whether Macquarie presently does wish to build the hospital and medical centre the subject of the agreed contractual design - i.e., the "7-9 storey private hospital and medical centre, including ancillary facilities", as opposed to the much larger development that it is acknowledged would require the making of an SSD application); save to note that Macquarie relies upon the operation of cl 3.4 of the Construction Deed and cl 17.8 of the Hospital Lease (which specify financial consequences of failure to complete the Works and on termination of the lease) as reinforcing its intention to construct the Hospital.
In essence, Macquarie argues that it can reasonably be inferred that (given the significant potential cost to Macquarie of failing to construct the Hospital in accordance with its contractual obligations), Macquarie, acting as a commercially rationally entity, had (and would in the counterfactual have) the intention to build the Hospital that it was contractually obliged to build. To the extent that Macquarie wished to build something beyond its contractual obligations (and in oral submissions Senior Counsel emphatically embraced the proposition that Macquarie wanted to do so - see T 287.45ff and, in particular, T 288.5, where Senior Counsel submitted that "[e]very developer worth his, her or its salt wants as much as they can possibly get. It's called "entrepreneurial flair"), it is submitted that that desire is not inconsistent with Macquarie's contractual obligation to construct the Hospital (and is not indicative of any intention to repudiate the agreement); and provides no proper basis on which to refuse to order an inquiry as to damages. It was made clear that Macquarie accepted that any departure from the contractual obligations in relation to the design and construction of the Hospital complex would require SLHD's (and the relevant authority's) approval (see T 288-289).
Nor is it necessary here to set out the matters to which Macquarie points in its submissions as establishing the reasonable probability on this counterfactual that it would have completed construction of the Hospital by 29 October 2019. Suffice it to note that Macquarie has itemised the work carried out to date, the consultants it has engaged and asserts that it has "spent thousands of hours and incurred hundreds of thousands of dollars in costs" in preparing the modification application and that "delaying the construction of the private hospital by submitting frivolous applications would serve no economic or other benefit to Macquarie or the project".
Macquarie submits that it can be reasonably concluded that it would have obtained SLHD's approval to submit a modification application with the consent authority or, alternatively, reached some consensus with SLHD (noting that it now does not cavil with the reasonableness of SLHD's refusal of the May Modification Application based on the information that was, at that time, before SLHD in relation to traffic flows); and submitted that Macquarie, acting rationally, would have every reason to meet the reasonable concerns of SLHD with respect to the May Modification Application (and noting that SLHD was required to act in good faith in assessing any modification application submitted).
Macquarie further submits that, regardless of the pathway to approval, it is reasonably probable that some form of modification application would have been obtained, pointing to the following: Macquarie's lengthy fight to regain possession of the Hospital Site; Macquarie's intention to build the Hospital; the significant financial consequences of failing to build the Hospital; and the significant efforts applied by Macquarie to prepare and provide the May Modification Application to SLHD; from which it is submitted that it can be inferred that Macquarie would have been open to compromise with Council in order to have an approved modification application, fulfil its contractual obligations and realise the benefits of a hospital on the Hospital Site. To the extent that Macquarie wished to build something beyond its contractual obligations and which was to be the subject of a SSD application, again it is submitted that that desire is not inconsistent with its contractual obligation to construct the Hospital because whatever the ultimate SSD application the development still needed "at its core" a hospital so as to comply with the permissible use of the Hospital Site.
As to the reasonable probability of Macquarie obtaining the finance necessary to construct the Hospital, Macquarie says that: prior to 10 August 2017, Macquarie had recognised and acted upon the need to obtain finance as can be seen from the fact that it had: been in discussion with the Commonwealth Bank of Australia; produced and published an Information Memorandum; and received indicative expressions of interest from three separate potential financiers. Macquarie says that there is no further evidence of progress towards obtaining finance because the purported termination by SLHD brought the pursuit of finance to a halt (referring to the acceptance of that proposition by Mr Ballantyne (SLHD's expert) at T 229.19). It notes that the expert evidence of Mr Ballantyne is that obtaining a bank finance facility can be done in parallel with the development activity but that obtaining commitments from a bank to finance could not be done until "commercial arrangements are reasonably settled" which would require the release of a "comprehensive information package"; and that Mr Ballantyne was of the opinion that a total of 24 weeks would be required from the time a "comprehensive information package" was provided for a bank to provide a Committed Term sheet, conduct due diligence and provide finance (see the Expert Report of Mr Ballantyne of May 2008 at [4.3]). It is submitted that that evidence ought to be accepted. Macquarie notes that Mr Palassis (also SLHD's expert) opined that securing finance would take longer but says that there is no reason to suggest that Mr Ballantyne, an experienced banker, is wrong in his opinion. Further, it is noted that Macquarie: was tendering for the main contractor and had a draft contract prepared by Norton Rose Fulbright, and had prepared a business case including a detailed case mix and financial plan as summarised in the "opportunity overview" dated June 2017.
Thus Macquarie contends it is reasonably probable (on this counterfactual) that it would have completed construction by 29 October 2019. Macquarie further argues that, in the event that it had failed to complete the construction of the Hospital by 29 October 2019, but the construction was substantially advanced as at that date, it is unlikely that SLHD would have terminated the Transaction Documents for a breach of the Timetable prior to the completion of the construction (noting that no evidence is called by SLHD to the effect that it would have terminated, and having regard to its good faith obligations). Reference is also made in this respect to the provisions under the Transaction Documents by which Macquarie could have proffered a written undertaking to remedy any such breach at that stage, which would allow Macquarie a further four months to complete construction of the Hospital (on this hypothesis to 29 February 2020); and to the provisions under which it could elect to explore a sale or assignment of the Hospital Lease under cl 7.6(d) of the Construction Deed, pursuant to which Macquarie would have a further six months to complete the sale and assignment, within which period it is submitted that it would likely have completed the construction of the Hospital.
It is submitted that the combined effect of cll 7.6(b) and (d) of the Construction Deed is that Macquarie had a period of 10 months after the issue of the notice of default (i.e., until 29 August 2020) to complete construction of the Hospital.
Macquarie further submits that, as a matter of practicality, it is unlikely, in circumstances where the construction of the Hospital was substantially advanced, that SLHD, being required by cl 10.8 of the Construction Deed to act in utmost good faith in the exercise of its powers, would have terminated the Transaction Documents for a failure to construct the Hospital by 29 October 2019, when: completion of the construction of the Hospital was "inevitable and simply a matter of time"; SLHD had the benefit of cl 3.4 of the Construction Deed which obliged Macquarie to pay additional rent of $33,000 per month (and a proportional amount calculated on a daily basis for any part of a month) if it failed to complete the Works and did not admit the first patient by the Rent Commencement Date (25 February 2020); and there is no evidence to suggest that SLHD, acting in good faith, would have terminated the Transaction Documents in those circumstances. It is submitted that if SLHD were to terminate in such circumstances it would be exposed to a claim for relief against forfeiture.
For the same reasons, it is submitted that if Macquarie had failed to admit the first patient by 25 February 2020, but had either completed the construction of the Hospital or was substantially advanced in the construction of the Hospital as at 25 February 2020, it is unlikely that SLHD would have terminated the Transaction Documents for a failure to admit the first patient by that date.
As to the question of damage, Macquarie says that, since the purported termination of the Transaction Documents by SLHD on 10 August 2017, it is a minimum of 20 months behind where it would have been in the construction of the Hospital but for the purported termination; and argues that it is common ground that delay equates to an increase in the cost of construction (referring to the report of August 2017 of Mr Matthew Harris, a quantity surveyor) in which Mr Harris opined (admittedly based on the Hospital the subject of the May Modification Application) that a delay in the commencement of the construction of the Hospital of a period of greater than 18 month would result in increased costs in the range of $14,400,000 and over $14,400,000 (see [52] of his Report).
It is submitted that, given that the delay arising from the purported termination is at least 20 months, the escalation rates in the period 2017 to 2020 (as to which Mr Harris opined at [28]-[29]) and the example of the increase in the cost of constructing the Hospital the subject of the May Modification Application, the potential cost of constructing a hospital will have substantially increased by reason of the purported termination and, hence, it is reasonably probable that substantial damages would reasonably and naturally result from SLHD's purported termination of the Transaction Documents because Macquarie is delayed in gaining the benefit of its bargain and that delay will result in substantial damage.
In this regard, Macquarie does not dispute that, from approximately August 2016, it was "considering and then actively pursuing" an opportunity to design a larger building than that for which it had development approval (those designs included integrating basement levels, a hospital hotel and club floor and assisted and unassisted senior living with seven levels of hospital services). That hospital complex potentially extended to 25 levels. Macquarie, prior to the purported termination on 10 August 2017, had taken steps to design and plan the complex. Macquarie says that it was under no obligation, contractual or otherwise, to inform SLHD of its possible plans for the Site at a time when those plans were conceptual, evolving and being developed; pointing out that the parties are not in a fiduciary relationship and Macquarie could choose, if, and when it wished to disclose its proposal for the Hospital Complex to SLHD. (That submission, I note, does not address the import of cl 10.8 of the Construction Deed.)
Macquarie does, however, point to the notes of the JWP meeting held on 13 October 2015 (at which Dr Anderson was present) which record Dr Wenkart as saying that "[e]ven if it is on foot, the existing DA does not meet the requirements of the present circumstances. Therefore Macquarie will need to talk to people and survey the issues, including the position of Lifehouse, the need for a hotel, referrals from the islands, whether additional levels should be included above the 9 Levels pursuant to the existing DA"; and submits that this shows that, as early as 13 October 2015, Macquarie had informed SLHD that it was contemplating a hotel and additional levels beyond the nine storey building approved by the Hospital Development Approval.
Moreover, it is said that Macquarie expressly recognised that whatever the final design, it would require SLHD's approval. Accordingly, it is submitted that Macquarie would have, at a time of its choosing, approached SLHD for its approval of the Hospital complex design (a circumstance said to be expressly contemplated by cll 4.13 to 4.16 of the Construction Deed which allows for replacement development applications and any other application for approval to be lodged with SLHD). It is submitted that this is entirely sensible and commercial given the long term relationship contemplated by the 103 year Leases. It is noted that SLHD has a contractual obligation to consider any such proposal the subject of a modification application or new development application with utmost good faith (cl 10.8 of the Construction Deed). Macquarie submits that there is no reason to believe that SLHD would have done otherwise and rejected a development application referable to the Hospital complex (noting that SLHD has not called evidence to the effect that it would have rejected such a proposal) and that SLHD or the Council, may have welcomed such an application as "an opportunity to modernise".
In any event it is said that had the proposal, following a good faith consideration, been rejected it does not follow that Macquarie would have abandoned or failed to build the Hospital required by the contract; rather, it is said, Macquarie had every incentive to build the Hospital. Macquarie accepts that it "may have hoped that SLHD would approve the Hospital complex (recognising that that ultimately would be a decision for SLHD to make in light of its contractual obligations under cll 4.16 and 10.8 of the Construction Deed)" but says that there is no basis rationally to conclude that a refusal by SLHD to approve the Hospital complex would lead to a failure on the part of Macquarie to build the Hospital. Rather, it is said that it is SLHD's purported termination and refusal to give effect to the contract that has caused the progress toward the realisation and advancement of the opportunity represented by the Hospital complex to come to a halt.
Macquarie thus argues that the Court can be reasonably satisfied that Macquarie will pursue the advancement of the Hospital complex if the purported termination is set aside; but that in the meantime a period of at least 20 months has elapsed and the delay in the realisation of the opportunity to continue with the planning, development, ultimate submission to SLHD and (if approved) construction of the proposed Hospital complex is such that "substantial damages would reasonably and naturally result from it".

[50]

SLHD's submissions

SLHD notes that at the commencement of the hearing there was a dispute as to whether Macquarie's entitlement to an inquiry as to damages, in particular whether Macquarie had likely suffered some loss from the alleged breach beyond nominal damages, was an issue to be determined in this hearing (see at T 70.5-7, where I indicated that the issue of causation - at least to the extent of showing some damage other than nominal damage caused by the alleged breaches - was an issue to be determined at this hearing) (see also at T 77.35-50).
SLHD says that the default position is that a plaintiff must prove that the alleged breach has caused it some loss in order to justify an inquiry into damages; and hence that Macquarie is required to prove in this hearing that the alleged breach has caused a delay in Macquarie's construction of the Hospital (even though damage is not an essential element of the cause of action sued upon).
Reliance is placed on the summary of the authorities by McDougall J in OzEcom v Hudson Investment Group [2007] NSWSC 1441 (OzEcom) at [48]-[49], as follows: The relevant principles were not in dispute (although no party referred to them in its final submissions at the conclusion of the hearing). For example, in Enkelmann v Glissan (1982) 2 BPR 9640, in dealing with a tenant's claim for damages through having been wrongfully locked out overnight, Rath J said that there should be no order for an inquiry as to damages unless there was some evidence of damage, or some circumstances suggesting that damage was likely to have occurred: "Before an order is made for an inquiry as to damages, the court requires to be satisfied that it is proper to direct such an inquiry, and ordinarily the court will not be so satisfied unless there is before the court evidence of damage, or there are circumstances indicative of a probability of damage." Hodgson J expressed a similar view in Frank Davies Pty Ltd v Container Haulage Group Pty Ltd (No 2) (1989) 98 FLR 324 at 325. His Honour said that there must be proof - if only at a prima facie level - of damage before an inquiry would be ordered; and that this was so even where damages were not of the gist of the action, so that a cause of action could be made out without proof of actual damage: "... The party seeking the inquiry as to damages does have to prove that it has suffered some damage. This may only be perhaps a prima facie case of some damage, but at least a prima facie case of some damage must be shown. In my view, this is the case, not only where the existence of damage is part of the course [sic] of action, but is also the case where a cause of action is made out although no actual damage is suffered. Accordingly, I adhere to the view... that without at least a prima facie case of damage, the court should not order any inquiry as to damages..."
SLHD points out that the requirement to prove some loss will entail the burden of proving such loss was caused by the alleged wrong, referring to OzEcom where, on a cause of action for contractual reliance damages in accordance with the principle in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79, McDougall held that the plaintiff had failed to prove that any loss was caused by the alleged breach, such that no inquiry was ordered, stating (at [51]) that there was no pleading or evidence of reliance; (at [56]) that no inferences should be drawn in favour of the party bearing the onus of proof of reliance when no attempt had been made to prove it by direct evidence; and (at [59]) that, reliance being an essential element of the claim for "McRae" damages, there was no prima facie case of damage nor were there "circumstances indicative of a probability of damage".
As to Macquarie's damages case (pleaded at [63C.5] of the fourth further amended statement of claim), SLHD notes that there is a reference to the "wrongful purported termination" of the Construction Deed and Leases but complains that the pleading does not identify how the purported termination constituted a breach of any of those agreements. It is submitted that the only pleading potentially capable of identifying the alleged breach is that at [51]-[51A] of the fourth further amended statement of claim, which does no more than allege that the September Timetable was beyond the power conferred in cl 2.5 and in consequence that "each subsequent action taken by [SLHD] in reliance on the September 2016 Timetable is, by reason of the matters that follow, a breach of each Transaction Document". SLHD notes that Macquarie's closing submissions refer only to SLHD's "failure to give effect to the contract", asserting that "[h]ere the breach is the purported termination".
SLHD says that it does not follow that a party exercising contractual rights in good faith commits a breach of an implied Mackay v Dick term simply because it transpires that there was no legal justification for the exercise of those rights; and submits that, absent repudiatory conduct, a party bona fide exercising rights under the contract is not refusing to co-operate with the other party or do all such things necessary to enable the other party to have the benefit of the contract. SLHD argues that if, as Macquarie asserts, the termination notices were invalid then they were ineffective and have not inhibited Macquarie's enjoyment of its contractual rights; thus, by definition, it is said that ineffective termination notices could not deprive Macquarie of the benefit of the contracts (particularly where it is said that Macquarie has not identified anything which SLHD is required under the Construction Deed and Leases to have done, but has failed to do so, since service of the termination notices to enable Macquarie to have the benefit of those agreements). SLHD notes that Macquarie remains in possession of the Site; and that the Construction Deed has not required SLHD to perform any obligation since August 2017 ("let alone an obligation necessary to enable [Macquarie] to have the benefit of the Construction Deed or Leases").
Thus, it is submitted that neither the termination notices themselves nor anything done by SLHD since their service has prevented Macquarie from having the benefit of the Construction Deed and Leases; and that if, as Macquarie maintains, the Construction Deed and Leases remain on foot, then the contractual position taken by SLHD has in no way prevented Macquarie from performing its obligations under the Construction Deed. By way of example it is said that there was nothing to prevent Macquarie from preparing a further modification application; nor was there anything preventing Macquarie from preparing and finalising its business case or preparing the information needed to obtain finance and approaching prospective financiers. It is submitted that Macquarie cannot, in one breath, say that the Construction Deed remains on foot and, in another, fail to perform its obligations under the deed. SLHD, thus, contends that the damages case should be dismissed and no inquiry ordered.
Further, SLHD points to a failure on Macquarie's part to plead and prove causation. It is submitted that, in order to prove that it has suffered some loss more than nominal damage, so as to justify the ordering of an inquiry, Macquarie must prove that the alleged breach has caused it some damage (noting that the damage which Macquarie alleges it has suffered is an increase in the cost of constructing the Hospital due to delay, by reference to the report dated August 2017 of Mr Harris).
It is said that Macquarie must prove causation of some loss on the balance of probabilities (noting that no loss of chance or valuable opportunity case is pleaded in the fourth further amended statement of claim and that even if it were, it would not dispense with the need for Macquarie to prove causation on the balance of probabilities). Reference is made in this regard to Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307 at [131]-[151] per Meagher JA (Bathurst CJ and Beazley P, as Her Excellency then was, agreeing); and to Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18, where the plurality (French CJ, Kiefel J (as her Honour then was) and Keane J) said (at [41]): The onus of proving causation of loss is not discharged by a finding that there was more than a negligible chance that the outcome would be favourable, or even by a finding that there was a substantial chance of such an outcome. The onus is only discharged where a plaintiff can prove that it was more probable than not that they would have received a valuable opportunity. ...
SLHD contends that Macquarie must prove that service of the termination notices has delayed construction of the Hospital; and that, leaving aside that there is no pleaded or particularised claim articulating how service of the termination notices has caused delay to the project, there is no evidence to support an allegation that the termination notices have led in a causal sense to a delay in the project.
In this regard, SLHD points to the following as to the state of the project at the time of service of the August and October Termination Notices: that Macquarie had repeatedly maintained in correspondence with SLHD that the necessary first step in constructing the Hospital was obtaining approval for a modification of the Hospital Development Approval plans because those plans did not comply with current regulatory requirements; that Macquarie had sought SLHD's consent to the May Modification Application on the basis that it was necessary so that the Hospital complied with current regulatory requirements; that the May Modification Application included elements that went well beyond changes to the Hospital Development Approval plans to bring them in line with current regulatory requirements, including a basement level, a significant increase in the building footprint and removal of the traffic condition in the Hospital Development Approval prohibiting vehicle access to Church Street; that SLHD had refused its consent to the May Modification Application because of these elements of the application (but emphasises that it had indicated that it would consider an alternative application which "more closely aligns with the building footprint in [the Hospital Development Approval] and retains the original traffic condition prohibiting vehicular access along Church Street"; and that Macquarie did not take up SLHD's invitation and did not submit any alternative modification proposal.
It is noted that Macquarie maintained in correspondence that there was no basis for SLHD's refusal of consent to the May Modification Application and that SLHD was bound to approve it, asserting, in its letter of 2 June 2017, that: in relation to access via Church Street, that "[o]ur town planning advice is that these changes are appropriate and reasonable for the purposes of a [modification] application. On the basis of our expert advice, we do not understand why you have an issue with this" and, in relation to the increase in the size of the building footprint, that SLHD's comment that there was a real risk that Council would not accept the reduced setbacks was "contrary to our expert evidence on this matter'" (a statement said to be false, since both Mecone and Mr Nash had advised to the contrary). It is noted that Macquarie made no effort to refine its modification application to address the legitimate issues raised by SLHD (instead, it ignored the modification application and proceeded with its SSD application).
SLHD emphasises that, following service of the August and October Termination Notices, Macquarie maintained at all times until the commencement of the hearing its claim that the May Modification Application was appropriate and that SLHD's refusal to consent to its lodgement with Council was wrongful.
Thus, SLHD argues that by the time of service of the August and October Termination Notices the project had effectively stalled and that Macquarie was not undertaking any activities to perform its obligations under the Construction Deed (on the asserted basis that it was prevented from doing so by SLHD's refusal of the May Modification Application). It is submitted that one of the obstacles to construction of the Hospital in August and October 2017 was Macquarie's insistence on a modification application (to which Macquarie now accepts SLHD was justified in withholding its consent) as a precondition to lodgement of a construction certificate application and construction of the Hospital. Thus, it is said that the submission by Macquarie based on the counterfactual that SLHD would have approved the May Modification Application is not tenable in circumstances where SLHD did not in fact approve it and the challenge to that refusal of consent has been abandoned. It is noted that that submission by Macquarie is based on an open offer made by SLHD, which was not accepted by Macquarie. (SLHD notes that the context of that offer was that SLHD put to Macquarie that, in circumstances where Macquarie was insistent that the May Modification Application was reasonable and necessary, SLHD would grant its consent provided the Construction Deed were amended such that if approval was not obtained by 11 June 2018 the Transaction Documents would terminate automatically and that Macquarie rejected the offer.) (It is noted that the counter-offer, which proposed that Macquarie's right to advance further modifications be determined by an "expert", would have removed SLHD's right to refuse the SSD application on which Macquarie was then working unbeknownst to SLHD).
SLHD argues that, in order to establish on the balance of probabilities that service of the termination notices has caused delay in construction of the Hospital, Macquarie would need to prove that, but for the service of the termination notices, it would have submitted to SLHD an alternative modification application which did not have the deficiencies that Macquarie now accepts justified SLHD's refusal of consent to the May Modification Application, and that both SLHD and Council would have approved the application; and it argues that Macquarie has not discharged this evidentiary burden; noting that Macquarie has led no evidence from Dr Wenkart (or any other witness) to the effect that, had SLHD not served termination notices, Macquarie would have proposed an alternative modification application which overcame the now admitted deficiencies in the May Modification Application; nor has Macquarie identified, through evidence, the content of any hypothetical, alternative application. It is submitted that this is not a matter which can be established by inference alone, not least because the objective acts and statements of Macquarie to which reference has been made are directly inconsistent with a counterfactual in which it admits the defects in the May Modification Application and voluntarily submits an alternative application. It is submitted that it was within Macquarie's power to call evidence to establish what it would have done had the termination notices not been served, and an inference should be drawn that such evidence would not have assisted it (citing Blatch v Archer (1774) 98 ER 969 (Blatch v Archer) at 970); and that a Blatch v Archer inference can more comfortably be drawn having regard to the evidence of Dr Wenkart's requirements for the project (to which I have referred above in the chronology of events) in relation to the car park and traffic issues.
It is submitted that it could not be found on the balance of probabilities that Dr Wenkart would change his mind about these matters and voluntarily submit a replacement modification application which removed the traffic flows via Church Street, particularly given his insistence following SLHD's refusal of consent to the May Modification Application that the utilisation of Church Street for traffic flows was both appropriate and justified. Thus, it is said that, if Macquarie refused to submit an amended modification application after SLHD had pointed out the problems with the May Modification Application and invited it to remove the problematic elements, absent evidence that Macquarie would have taken a different course if the termination notices had not been served, no finding to that effect could be made.
SLHD argues that Macquarie must also prove on the balance of probabilities that the hypothetical modification application it would have submitted would have been approved by SLHD and Council; and that, without knowing what such a hypothetical application might contain it could not be found on the balance of probabilities that either SLHD or Council would have consented to it. (For example, it is submitted that if the hypothetical modification application removed vehicle access via Church Street but maintained the same increased building footprint in the May Modification Application, on the evidence before the Court it would be found that Council would likely reject the application as "not substantially the same development", referring to Mr Harrison's report of May 2018 at Part 2.7 (on which he was not challenged) and the evidence of Mr Nash (at T 252.8ff).
It is said that Macquarie must further prove on the balance of probabilities that it would have constructed the Hospital by 29 October 2019, there being no challenge to the reasonableness of that date in the September Timetable; and that the matters on which Macquarie relies to support such a finding are "patently not capable" of so doing. It is said that there is no evidence that Macquarie was tendering for a main contractor (simply evidence of the existence of a very preliminary draft form of building contract) and that the "opportunity overview" document said to evidence the preparation of a business case for the Hospital does no such thing. It is submitted that the only evidence of the content of Macquarie's business case (being the casemix analysis and financial model summary) is comprised of the two documents about which Mr Palassis' (unchallenged) evidence was that they do not form a bankable business case and could only be regarded as elements of pre-feasibility work.
SLHD submits that Macquarie's claim that it would have completed the Hospital by 29 October 2019 is contrary to the evidence. It is noted that, as at 10 August 2017, when the first termination notices were served, in order to complete construction of the Hospital Macquarie would have needed (within a period of less than 27 months) to: apply for and obtain a modification to the Hospital Development Approval; apply for and obtain a construction certificate, prepare a bankable business case; obtain finance for the construction; and complete the construction works. It is submitted that the evidence establishes that there was no prospect of Macquarie doing all those things within 27 months; in particular, it is said that, on Macquarie's own case it would need six months to lodge a construction certificate application; that Macquarie had not prepared a bankable business case (and whether the business case, once prepared, would ultimately support the viability of the Hospital is unknown); Macquarie did not have finance for the project and has not established that it could finance the project from its own resources (noting Mr Palassis' unchallenged evidence that it would take between 32 and 39 months to undertake the steps required to obtain project financing and that there is no evidence as to which, if any, of the steps identified by Mr Palassis were undertaken by Macquarie, such that the Court cannot form any meaningful conclusion of how long it would have taken for Macquarie to be in a position to obtain financing (if it ever could)); that Mr Ballantyne's unchallenged evidence was that there was no prospect of an external financier providing debt finance for the project unless and until Macquarie could provide a detailed information package, including a detailed business case, financial model and commercial terms of any agreement with an operator (and there were, in Mr Ballantyne's unchallenged opinion, two fundamental flaws in the financing proposition, namely: the lack of a constructive relationship between SLHD and Macquarie; and the absence of an operator with appropriate experience for a hospital of this size); and that on Macquarie's own construction program, the construction phase of the Hospital was never forecast to take less than 30 months.
It is noted that there is no evidence that Macquarie had entered into an agreement with an established third party operator or was likely to do so and that the REIT proposals on which Macquarie relies were "highly preliminary and conditional" and depended upon satisfaction of the same commercial factors that would be required by bank lenders. It is further noted that, before SLHD refused consent to the May Modification Application, Macquarie was forecasting in its May 2017 monthly report the completion of construction by 30 April 2020. It is submitted that, even if Macquarie were to have submitted a replacement modification application immediately after service of the August Termination Notices and SLHD were to have approved it, that would have completion of construction of the Hospital on Macquarie's own construction program occurring by July or August 2020 and that Macquarie's more detailed construction program was forecasting a longer construction time of some 33 months, with completion in June 2020 (which would become at least September or October 2020 given the delay between submission of the May Modification Application and the August Termination Notices).
As to any causation case based on submission of an SSD application for the "full complex", which is not pleaded, SLHD says that it is speculation as to what the final form of the proposal would have contained and it could not be found on the balance of probabilities that SLHD or the consent authority would have approved the application. In that regard, SLHD points to the requirements of the Construction Deed contained in cl 4.14; and argues that insofar as such a development would not enable Macquarie to carry out the Works in accordance with the Timetable as validly extended by SLHD under cl 2.5 of the Construction Deed, it would have had complete discretion whether to grant its consent to the application. It is said that such an application would have entailed very significant further delay in the project; and that the evidence clearly demonstrates that SLHD was keen for the Hospital to be built as soon as possible. SLHD says that "why a public health authority would see any merit in dedicating valuable hospital land for high-density private residential accommodation has not been explained". SLHD further says that any such causation case is inconsistent with Macquarie's own documentary evidence, which recognised that Macquarie was "unlikely to get Seniors Living through without a massive fight" and that the seniors living proposal "will surely be challenged by SLHD and possibly council"; and that the unchallenged expert evidence was that an SSD application for the "full complex" as identified in the Architectural RFP would likely be rejected - referring to Mr Harrison's May 2-18 Report at Part 2.9; and to Mr Nash's evidence at T 247.44-248.1, T 248.39-42.)
SLHD maintains that in order to demonstrate an entitlement to anything more than nominal damages, Macquarie must prove that it was ready, willing and able to perform its obligations under the Construction Deed, pointing to what was said by Hodgson JA in the Court of Appeal Decision (at [164]) to the effect that it is generally not necessary for a plaintiff to plead readiness, willingness and ability to perform a contract in order to be entitled to damages because such a plea is taken to be implied under r 14.11(d) of the UCPR but that it remains essential to proving an entitlement to substantial damages.
SLHD argues that the deficiencies in Macquarie's damages case considered by the Court of Appeal in 2010 bear strong similarities with those afflicting its claim to damages in this case, noting that that claim was described by Hodgson JA at [167]-[168] as follows: Accordingly, in relation to the breach that I have found to have been committed as at February 1995, it is necessary to consider what would have happened but for the breach; that is, what would have happened if Area Health had disclosed to Macquarie that planning processes were under way such that it could no longer be reasonably expected that there would be substantial RPAH facilities to the west of the King George V building or even of Missenden Road. Macquarie's case is that, in that event, it would have either sought to terminate or be released from the HOA, or sought to carry out a more appropriate development than that accepted by MHC in January 1994; and that in either case, Area Health either would have been bound by its obligation of utmost good faith to accede to this or at least enter into bona fide negotiations to that end, or would in fact have done so. As I have noted, from early 1995 MHC was in any event negotiating with Area Health for its agreement to a smaller hospital; but Macquarie's contention is to the effect that, with knowledge of Area Health's plans, the case for a more appropriate development could have been related to these different plans and accordingly been more focussed and effective; and that when confronted with what it had done, Area Health would have felt obliged by its obligation of good faith to have acceded to this case. and that his Honour said (at [181]): Although Macquarie seeks reliance damages and not expectation damages, even reliance damages requires proof that the breach made a material difference; and in my opinion Macquarie has not proved that, in relation to Area Health's breach of its obligation of utmost good faith as at February 1995. This would be enough to defeat this aspect of Macquarie's damages claim; but in addition, it must fail because in my opinion Macquarie has not proved on the balance of probabilities that MHC and/or Macquarie would have been ready, willing and able to afford substantial performance of the HOA, even if it had been able to negotiate an early agreement by Area Health for a more appropriate development.
SLHD argues that here, as was found to be the case there (see at [188]), Macquarie led no evidence to prove that the project would have attracted external financial support or that its own assets were sufficient to proceed with the project. SLHD points to the evidence of Mr Palassis is that Macquarie had not completed a business case establishing the viability of the project appropriate for provision to potential financiers (see Mr Palassis' report dated May 2018 at Part 8); and that Macquarie had not secured external financing for the project; and as to Macquarie's willingness to perform, points to the chronology of events which it asserts demonstrates that Macquarie had no intention of complying with its obligation under the Construction Deed (relevantly, to build the Hospital the subject of the Hospital Development Approval unless and until a modification to that approval was approved by both SLHD and Council). It is submitted that Macquarie never intended to build "the hospital [SLHD] want us to build in line with the lease conditions"; and that there is no evidence that it would have been feasible to construct the Hospital on a standalone basis and then apply to add the additional elements of seniors living apartments, basement car park, hotel and club floor (since it was only feasible to excavate the second basement level of car parking prior to pouring the slab for the ground floor level). It is noted that STH never actually performed an assessment of whether the Hospital Development Approval plans complied with the AHFG (contrary to STH's response to the RFP which indicated that such an analysis would be required), and that some of areas shown in the 2017 plans do not in fact comply with the AHFG. It is submitted that, without doing the exercise that STH failed to do, it would be difficult to say what needs to be done to bring the Hospital Development Approval plans into conformity with the AHFG.
SLHD submits that Mr Crook's affidavit evidence, that STH commenced working on the modification application in July 2016, should be rejected (it being said to have been falsified by the contemporaneous documentary record) noting that Mr Crook accepted under cross-examination that this was wrong, although he sought to retract that clear concession. It is further submitted that Mr Crook's evidence in cross-examination that most of STH's team were working on the May Modification Application should also be rejected, noting that, when confronted by his own email which falsified the claim ("Adam, we will dedicate a small team to do the section 96 proposal as we know it will become academic once the major project is submitted"), Mr Crook sought to explain it away on a basis inconsistent with the terms of the email and the objective facts.
SLHD says that the most compelling evidence that the May Modification Application was a device to lead SLHD into believing Macquarie was proposing to build the Hospital it was contracted to build is that, immediately following its submission, Macquarie and its consultants proceeded to work on the main project. It is submitted that Mr Crook's affidavit evidence sought to convey the misleading impression that STH ceased its work on the 2017 plans with the 21 April 2017 plans which accompanied the May Modification Application; whereas in fact, STH was engaged to design the complete project of 25 storeys and prepared plans for the project as late as July 2017 (noting that Mr Crook accepted that this was all part of STH's work in redesigning and redrawing the Hospital Development Approval plans, a concession which it is said falsifies [53] of his affidavit (reading that paragraph in light of the definition of "2017 Architectural Plans" in [50] of his affidavit)).
Thus, SLHD contends for a finding that Macquarie has failed to prove that it was and remains ready, willing and able to proceed with the project in accordance with its obligations under the Construction Deed, which SLHD says is a further basis for dismissal of Macquarie's damages claim.

[51]

Determination

The final iteration of the amended statement of claim pleads (at [19A]) the existence of an implied term (or implied obligation) of each of the Transaction Documents that SLHD do all things necessary for the relevant contract to be performed and to enable the plaintiff to have the benefit of each of the said Transaction Documents. This is defined in the pleading as the Implied Obligation to Cooperate. It is said to arise by operation of law and the construction of the respective documents. It is an obligation of the kind recognised in Mackay v Dick. Macquarie also pleads (at [17.9]) an express obligation on the part of SLHD to act in the utmost good faith (in the performance of its duties and exercise of its powers under the Construction Deed and its dealings with Macquarie) and (at [18]) an implied term of the Construction Deed on the part of SLHD to act reasonably (in the performance of its duties and exercise of its powers under the Construction Deed and its dealings with Macquarie).
SLHD admits (at [19A] of its defence) that there existed, by implication, a duty for each of SLHD and Macquarie to do all such things as were necessary to enable the other party to have the benefit of the said documents and otherwise denies [19A] of the third amended statement of claim. It admits the express term of utmost good faith pleaded at [17.9] but denies the implied term alleged at [18].
Macquarie pleads (at [63C]) that, by reason of one or more of the conduct there pleaded, SLHD has wrongfully prevented it from being able to perform its obligations under the Transaction Documents; has caused the Works to be delayed; and has prevented it from attaining the benefit of the Hospital Lease and the Construction Deed. The conduct there relied upon is: the wrongful purported imposition of the September Timetable ([63C.1]); the wrongful issue of, relevantly, the February Notices and April Default Notices ([63C.2]); the unreasonable period of time allowed to remedy the asserted breaches in those notices ([63C.3]); and the wrongful purported termination of each of the said Transaction Documents ([63C.5]). Macquarie claims that by reason of the matters alleged at [63C] it has suffered and will continue to suffer, loss and damage. (It no longer presses a claim for relief against forfeiture if SLHD is otherwise entitled to terminate one or more of the Transaction Documents (previously pleaded at [65]); T 62.23) and it no longer seeks any equitable compensation, there being no equitable case now put (see T 14). The allegation that Macquarie was ready, willing and able to perform its obligations was not pressed.)
None of the conduct relied upon as constituting a breach of the Transaction Documents (see [63C] read with [51A]) (i.e., as grounding a breach of the obligation of utmost good faith or the alleged implied obligation to act reasonably or the implied obligation to co-operate) has been established.
What was in essence contended in the course of oral argument was that the damages claim was founded on there having been a wrongful purported termination of the Transaction Documents (see at T 15.24). The breach of the implied Mackay v Dick obligation was put on the basis that it was fundamental to Macquarie obtaining the benefit of the Construction Deed that SLHD not assert that it was at an end (see T 38.24). It is said, in effect, that the denial of the Construction Deed being on foot prevented Macquarie from taking steps (such as obtaining consent to any proposed modification of the development approval necessary to construct the Hospital under the new regulatory regime) (see T 38).
At T 47.11, Senior Counsel for Macquarie clarified that the basis of the damages claim now put is the denial of the existence of the Construction Deed after the issue of the termination notices. Complaint was made (see T 48.18) by Senior Counsel for SLHD that breach of the implied duty to co-operate had not been pleaded. I agree that it is not expressly pleaded as such. As I read the pleading, what is alleged (relevantly) is that: by reason of the matters pleaded at [36] (i.e., as to the correct construction of cl 2.5 of the Construction Deed), the purported issue of the September Timetable is beyond the power contained in cl 2.5 and a breach of the Construction Deed ([51]); each subsequent action taken by SLHD in reliance on the September Timetable (particularised by reference to [63C.1-63C.7]) is a breach of each Transaction Document; by reason of the matters pleaded at [63C.1]-[63C.3] and [63C.5], SLHD has (inter alia) wrongfully prevented Macquarie from attaining the benefit of the Hospital Lease and Construction Deed ([63C.8]); and, Macquarie has thereby suffered loss and damage ([63E]).
In that fashion, I consider that the issue as to breach of the implied obligation to co-operate has been (admittedly in a somewhat circuitous route) sufficiently pleaded (which disposes of the pleading complaint made by SLHD). However, I do not consider that even if the termination notices were wrongfully issued it has been established that there was a breach of the implied obligation to co-operate.
What occurred was, in my opinion, the bona fide exercise of perceived rights under the Transaction Documents. The fact that it might ultimately have been held that SLHD was not entitled under the contractual arrangements to take the action that it did does not to my mind amount to a breach of the implied obligation to co-operate - rather, it would invalidate the purported action and might have other consequences (such as, for example, precluding SLHD from complaining as to the delay in completion of other activities in the timetable).
The duty to co-operate (per Mackay v Dick) has been recognised as including a "negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises" (see Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45 at [36] (Gleeson CJ, Gummow, Kirby and Hayne JJ)). In Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 378; [1931] HCA 21, Dixon J noted that: … [t]he express promise of the appellant to use his best endeavours to obtain orders for the respondent and to influence business on its behalf necessarily includes an obligation not to hinder or prevent the fulfilment of its purpose… the contract… required a continual co-operation… Such an agreement inevitably imported a tacit condition that the appellant should perform the services faithfully which he contracted to give the respondent and should not endeavour to impede or defeat the respondent in the sale of its manufactures at the prices it might think proper to ask.
See also JC Williamson Ltd v Lukey (1931) 45 CLR 282; [1931] HCA 15; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; [1956] HCA 25; Ultimo Document Storage v Liquid Vision [2003] NSWSC 1175; and ACT Cross Country Club Inc v Cundy [2010] FCA 782.
The duty to co-operate has been said to preclude unreasonable termination (see Cheshire & Fifoot Law of Contract (LexisNexis, 11th edn, 2017) which notes that "[t]he duty to co-operate also precludes the arbitrary, capricious or unreasonable exercise of a right to terminate for breach" (at [21.33])). In Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187, the Court of Appeal upheld a finding that Burger King had breached its implied duty of co-operation by, among other things, issuing notices of termination to Hungry Jack's. The conduct in that case was also held to constitute a breach of the duty to act in good faith (reference being made to Sir Anthony Mason's 1993 Cambridge Lecture in which he stated that it was probable that the concept of good faith "embraced no less than three related notions: an obligation on the parties to co-operate in achieving the contractual objects (loyalty to the promise itself); compliance with honest standards of conduct; and compliance with standards of contract which are reasonable having regard to the interests of the parties"). The Court there held that there is "no distinction of substance between the implied term of reasonableness and that of good faith" (at [169]).
As to consideration of the implied term of reasonableness see Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 and Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 (cases in which clauses permitting conduct by the principal were found to be tempered by an implied term of reasonableness).
In Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; (1999) ATPR 41-703, which involved termination on a longer period of notice than provided under a standard form dealership agreement, Finkelstein J said (at [35]): … There is no reason to think, prima facie at least, that the obligation of good faith and fair dealing would not act as a restriction on a power to terminate a contract, especially if that power is in general terms.
Similarly, in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288, Finkelstein J held that the power to terminate a sub-licence was fettered by the duty of good faith.
It is recognised that a bona fide but wrongful exercise of a right of termination will not necessarily amount to a repudiation of contract. See, for example, Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444; [1976] HCA 21, where Barwick CJ said at 453 that: No doubt, in general, an unwarranted termination of a contract in consequence of a purported acceptance of what is wrongly claimed to be [a] repudiation will be regarded as a repudiation by the person giving the notice of termination. But it seems to me not necessarily to be so in all cases and in all circumstances.
Heydon on Contract (at [24.380]), while noting that a very common form of repudiation is an invalid termination of the contract, observes that in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12, Stephen, Mason and Jacobs JJ said (at 432): No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contact could not be attributed to him.
Lord Wilberforce in Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 at 283 said: … it would be a regrettable development of the law of contract to hold that a party who bona fide relies upon an express stipulation in a contract in order to rescind or terminate a contract should, by that fact alone, be treated as having repudiated his contractual obligations if he turns out to be mistaken as to his rights. Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations.
I appreciate that distinctions may be drawn between repudiation of an agreement and non-compliance with an implied duty to co-operate, nevertheless it seems to me that there is a difficulty in contending for a breach of an implied duty to co-operate and to permit another party to have the benefit of a contract where the party alleged to be in breach is bona fide (albeit, as it may turn out, wrongly) exercising rights under that very contract. In any event, were a breach of the implied obligation to co-operate to have been established, the next issue that would have arisen would have been as to whether an inquiry as to damages ought be ordered.
The legal principle with respect to the ordering of an inquiry as to damages was stated in ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 660 per Clarke, Handley and Sheller JJA: The principles which guide a Court in granting or refusing an inquiry as to damages were explained in Griffith v Mercantile Bank (1890) 11 LR (NSW) Eq 231 at 248, 253 and 258. As Foster J said (at 253) a plaintiff is entitled to an inquiry "if it seems reasonably probable from the nature of the breach that substantial damages would reasonably and naturally result from it, even though it may be difficult to show specifically what the damage was, or to define the particular loss which has been sustained". The Court should not direct such an inquiry unless it is satisfied that it would serve a useful purpose.
This gave rise to the complaint made as to whether Macquarie was required, in the context of the present inquiry, to establish causation - at least to the extent that it adduce evidence sufficient to establish a reasonable probability that at least some damages had been suffered as a result of the breach.
The issue arose in circumstances where SLHD's solicitors had taken issue with the inclusion in the Court Book for the present hearing of the expert quantity surveyor (Mr Harris)'s report which went to the consequences of delay in the construction of the Hospital. SLHD's solicitor, by email on 25 February 2019, requested that the report be removed on the basis that it was understood that the Mr Harris' report related to quantum damage and the hearing was on liability only.
By letter dated 29 May 2018, SLHD's solicitors had earlier advised that "[we] understand that the report served by Macquarie is intended to prove the existence of some damage so as to enliven the power to order an inquiry and is not intended to be evidence of the quantification" and it was said that, on the basis of that understanding, SLHD had not served any evidence in relation to the quantification of damages in the proceedings.
Macquarie's solicitors' response was to confirm agreement that the hearing would be on liability only; and orders were made to that effect by me by consent on 8 June 2018 (see note 7).
At the directions hearing on 4 December 2018 it was said (see T 39.7) that the hearing was a liability hearing "in the sense that there's a claim by the plaintiff for damages for delay and it's common ground that there won't be quantification issues about that to be determined", as a result of which I noted that the question of any damages would be dealt with in a subsequent hearing, if it arises.
As I read the correspondence to which I was taken on this issue, the distinction was being drawn between the quantification of damages (to be dealt with at a separate hearing) and whether or not damages had been suffered (to be dealt with at this hearing). I was of the view that, to establish liability for breach of contract claim, the plaintiff (i.e., Macquarie) would have to show that some damage more than nominal damage had been suffered as a result of the alleged breach. Macquarie did not cavil with that proposition but says that it prepared for the hearing on the basis of an understanding (as set out in the February email) that SLHD's position was (as there stated "for the avoidance of doubt") that "in the event that Macquarie is successful at the hearing and the Court finds that Macquarie is entitled to damages [SLHD] will not take the point that Macquarie is not entitled to a damage on the basis it did not lead any evidence at the liability hearing of damage allegedly suffered".
SLHD's position was that it had been made clear in the correspondence that Macquarie needed to establish at the principal hearing an entitlement to damages so as to justify the inquiry (at which the damages would later be quantified). SLHD said that its position (reinforced by the contents of the Court Book, which included three affidavits ultimately none of which was read of Dr Wenkart) was that the issue whether any damage was caused by the alleged wrongful conduct was to be a part of the present hearing. Macquarie's response to that was that the paragraphs of Dr Wenkart's affidavits to which reference was made by SLHD in this context were paragraphs relevant to the claim for relief against forfeiture and for unconscionable conduct cases, all of which claims Macquarie has now abandoned.
Ultimately, I was of the view that the communications between the solicitors were consistent with the distinction being drawn between an entitlement to damages being established and the quantification of those damages; but I accepted that it appeared there had been a misapprehension as between the respective parties as to this issue and in that context I indicated that I would permit the expert report from Mr Harris to be tendered. I proceeded on the basis that causation was "in play" at least to the extent of showing that some damage more than nominal damage had been caused.
I have considered the complaints raised by SLHD in the causation issue. However, on that issue, had it been necessary to do so I would have concluded that the evidence before me was sufficient to establish that it was reasonably probable from the nature of the breach (on this hypothesis, a breach consisting of the wrongful termination of the Transaction Documents) that more than nominal damages would reasonably and naturally result from it, even though Macquarie's desire to construct a hospital in accordance with the Hospital Development Approval (as opposed to its apparent desire to construct a much larger complex of the kind that would require an SSD application) might well be said to be in doubt and even though it may be difficult to show specifically what the damage was, or to define the particular loss which has been sustained. In that regard, I would have left the issue of damages (both causation and quantification) to be ultimately determined in the context of the damages inquiry. As it is, this issue does not here arise.

[53]

Conclusion

For the above reasons, Macquarie's claims have been unsuccessful and its statement of claim should be dismissed. In that event SLHD sought declarations as to the validity of the respective notices. I will make those declarations other than in respect of the August 2017 notices of termination. It is not necessary for SLHD to rely on those notices in circumstances where the October 2017 notices were validly issued and hence I have not addressed the issues raised by Macquarie in respect of reliance by SLHD on the earlier August 2017 termination notices. Accordingly, I make the following orders: 1. Dismiss the plaintiff's fourth amended statement of claim. 2. Declare that each of the following notices was validly issued by the defendant to the plaintiff: 1. notices of default dated 20 February 2017 and 7 April 2017 issued under the Construction Deed dated 2 December 1996; 2. notice of termination dated 17 October 2017 issued under the Construction Deed dated 2 December 1996; 3. notices of default dated 20 February 2017 and 7 April 2017 issued under registered lease no. 3553375Q dated 2 December 1996 in respect of the real property comprising Folio Identifier 12/809663; 4. notice of termination dated 17 October 2017 issued under registered lease no. 3553375Q dated 2 December 1996 in respect of the real property comprising Folio Identifier 12/809663; 5. notices of default dated 20 February 2017 and 7 April 2017 issued under registered lease no. 3553373 U in respect of the real property comprising Folio Identifier 11/809663; 6. notice of termination dated 17 October 2017 issued under registered lease no. 3553373U in respect of the real property comprising Folio Identifier 11/809663; 7. notices of default dated 20 February 2017 and 7 April 2017 issued under registered sub-lease no. 355374S dated 2 December 1996 in respect of the defendant's estate as tenant in common the tenancy of the registered lease no. 3553373U; and 8. notice of termination dated 17 October 2017 issued under registered sub-lease no. 355374S dated 2 December 1996 in respect of the defendant's estate as tenant in common of the tenancy of the registered lease no. 3553373. 1. Judgment for possession of the whole of the land comprising Folio Identifier 11/809663 and Folio Identifier 12/809663 located at the rear of Royal Prince Alfred Hospital in Missenden Road, Sydney, New South Wales. 2. Leave to issue a writ of possession forthwith, subject to any application for a stay. 3. Reserve the question of costs to be dealt with, on the papers if possible, following brief written submissions to be filed by the parties within 14 days.

Parties

Applicant/Plaintiff:

Macquarie International Health Clinic Pty Ltd

Respondent/Defendant:

Sydney Local Health District

Legislation Cited (8)

Environmental Planning and Assessment (Savings and Transitional) Regulation 1998(NSW)

Environmental Planning and Assessment Amendment Act 1997(NSW)

Environmental Planning and Assessment Regulation 2000(NSW)

Statute Law (Miscellaneous Provisions) Act 1998(NSW)

Local Government Act 1993(NSW)

Conveyancing Act 1919(NSW)

Environmental Planning and Assessment Act 1979(NSW)

Uniform Civil Procedure Rules 2005(NSW)

Cases Cited (75)

CONTRACTS - Remedies - Damages - whether inquiry as to damages should be ordered - whether causation of more than nominal damage established Legislation Cited: Conveyancing Act 1919 (NSW), s 129 Environmental Planning and Assessment (Savings and Transitional) Regulation 1998 (NSW), cll 37, 38 Environmental Planning and Assessment Act 1979 (NSW), ss 91, 91AB, 95, 96, 96AA, 121B(1), Pt 4 Environmental Planning and Assessment Amendment Act 1997 (NSW) Environmental Planning and Assessment Regulation 2000 (NSW), cl 55 Local Government Act 1993 (NSW), ss 103, 104, 315, Ch 7 Statute Law (Miscellaneous Provisions) Act 1998 (NSW) Uniform Civil Procedure Rules 2005 (NSW), r 14.11(d) Cases Cited: ACT Cross Country Club Inc v Cundy [2010] FCA 782 Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; [1956] HCA 25 Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 Billson v Residential Apartments Ltd [1992] 1 AC 494 Blacktown City Council v Hocking [2008] NSWCA 144; (2008) Aust Torts Reports 81-956 Blatch v Archer (1774) 98 ER 969 Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 Casquash Pty Ltd v NSW Squash Limited (No 2) [2012] NSWSC 522 Currey v Sutherland Shire Council [2003] NSWCA 300; (2003) 129 LGERA 223 Day v Pinglen Pty Ltd (1981) 148 CLR 289; [1981] HCA 23 Dogan v Morton (1935) 35 SR (NSW) 142 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Ex parte Dally-Watkins; Re Wilson (1956) 72 WN (NSW) 454 Fox v Jolly [1916] 1 AC 1 Goode v Angland [2017] NSWCA 311 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; (1999) ATPR 41-703 Gerraty v McGavin (1914) 18 CLR 152; [1914] HCA 23 Harris v Thallon [1926] 26 SR (NSW) 456 Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307 Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 JC Williamson Ltd v Lukey (1931) 45 CLR 282; [1931] HCA 15 Johnson v Senes (1961) 78 WN (NSW) 861 Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 Mackay v Dick (1881) 6 App Cas 251 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 9) [2016] NSWSC 155 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 12) [2019] NSWSC 916 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 10) [2016] NSWSC 1587 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 11) [2017] NSWSC 1249 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2008] NSWSC 738 Macquarie International Health Clinic Pty v Sydney South West Area Health Service [2010] NSWCA 268 Macquarie International Health Clinic Pty v Sydney South West Area Health Service [2010] NSWCA 348 Macquarie International Health Clinic Pty v Sydney South West Area Health Service [2015] NSWCA 323 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 North Sydney Municipal Council v Middle Harbour Investments Pty Ltd [1964] NSWR 934 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444; [1976] HCA 21 OzEcom v Hudson Investment Group [2007] NSWSC 1441 Pace Property Management Services Pty Limited v South Sydney City Council (Land and Environment Court (NSW), Dr J Roseth, 19 June 1997, unrep) Pace Property Management Services Pty Ltd v South Sydney City Council (Land and Environment Court (NSW), Dr J Roseth, 24 December 1997, unrep) Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45 Platinum United II Pty Ltd v Secured Mortgage Management Ltd (in liq) [2011] QCA 162 Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242 Radray Constructions v Hornsby Shire Council [2006] NSWLEC 155; (2006) 145 LGERA 292 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51 Sharjade Pty Ltd v The Commonwealth of Australia [2009] NSWCA 373 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 Smith v Wyong Shire Council (No 3) (1984) 53 LGRA 170 Solution 1 Pty Ltd v Optus Networks Pty Ltd [2010] NSWSC 1060 Strike Australia Pty Ltd v Data Base Corporate Pty Ltd [2019] NSWCA 205 Sundararajah v Teachers Federation Health Ltd [2011] FCA 1031; (2011) 283 ALR 720 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 Tomlin v Ford Credit Australia Ltd [2005] NSWSC 540 Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165; (2012) 268 FLR 433 Troupakis v Adams [1999] FCA 609 Ultimo Document Storage v Liquid Vision [2003] NSWSC 1175 United Dominions Corporation Limited v Woollahra Municipal Council [1973] 1 NSWLR 616 Visser v Jacobs (1987) NSW ConvR 55-350 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 Texts Cited: JD Heydon QC, Heydon on Contract (Thomson Reuters, 2019) NC Sneddon and RA Bigwood, Cheshire & Fifoot 's Law of Contract (LexisNexis, 11th edn, 2017)s New South Wales Legislative Council, Parliamentary Debates (Hansard), 4 and 11 July 1900 Category: Principal judgment Parties: Macquarie International Health Clinic Pty Ltd (Plaintiff) Sydney Local Health District (Defendant) Representation: Counsel: N Hutley SC, E Hyde, S Kanagaratnam (Plaintiff) I Jackman SC, J Williams, S Scott (Defendant)

[2015] HCA 37

[2011] QCA 162

[2011] VSC 242

[2012] WASCA 165

(1946) 72 CLR 435

(2016) 257 CLR 440

(2003) 129 LGERA 223

(1981) 148 CLR 289

(2017) 261 CLR 544

(2014) 251 CLR 640

(1914) 18 CLR 152

(1993) 31 NSWLR 91