McCasker v OMAD

[44] A lease granted under an option to renew is a new lease, not an extension of the old lease. Consequently, as regards the things external to the Lease known to McCasker and OMAD to which regard may be had in its construction, they include the history, background and context just set out, being matters external to the Lease known to the parties as at the date of commencement of the renewed Lease on 4 May 2018.

[45] In exchange for OMAD promptly paying the rent and performing its covenants under the Lease, the Lease conferred a right on OMAD to quiet possession and enjoyment of the Premises (cl 13.1). The term 'Premises' was defined to mean collectively the Land and the Building (cl 1.1). The term 'Land' was defined to mean the land described in Item 1 of the Schedule, which identified that part of the land hatched on the attached plan. By an amendment to the Lease registered on 22 May 2017, the plan was replaced by another plan, which included a new area (Area 3), and a new clause was added, permitting OMAD to alter Area 3 into a gaming room and office (cl 24.9). The term 'Building' was defined to mean the improvements owned by McCasker erected or to be erected on the Land, including all plant and equipment, appurtenances and chattels as owned by McCasker which were located within the Building or on the Land at the date of commencement of the Lease (cl 1.1).

[46] An expressly essential term of the Lease was that OMAD was not to use the Premises otherwise than for the permitted use set out in Item 4 of the Schedule (cl 16.6(e)), which was identified as 'Tavern'. The Lease provided that OMAD would not use the Premises for any purpose other than the Business (cl 6.2). The term 'Business' was defined to mean the business of a hotel keeper carried on under the authority of the Licence at the Premises and elsewhere as authorised pursuant to the Lease (cl 1.1). The term 'Licence' was defined to mean 'the licence or licences issued under the Liquor Act (NT) in respect of the Premises' (cl 1.1).

[47] The Premises comprised a building consisting of a public bar or tavern, which included a gaming room. The 20 gaming machines in that room were owned by the tenant, OMAD.

[48] The Lease obliged the tenant to conduct the business of hotel keeper (or tavern) under the authority of a liquor licence. That obligation reflected the law that such a business could only be conducted under such an authority. The centrality of the Licence to the operation of the Business is confirmed by cll 6.4 and 6.5 of the Lease, which set out nine 'Liquor Act covenants' and four 'Liquor Act prohibitions' directed to the continuation of the Licence and protecting the landlord's interest in it. The Lease also contained a provision permitting the landlord to take steps to acquire the Licence upon the landlord exercising a right of re-entry (cl 21.1).

[49] The Licence, held by OMAD on 4 May 2018, authorised the sale of liquor for consumption on or at the licensed premises (identified as the Premises), subject to various conditions as set out in the Licence, including that the licensed premises would trade as a family tavern and restaurant, during specified hours.[7] Under the Licence, it was the Premises which were licensed; the liquor licence is a licence of the Premises. Recognising this, and by the express terms of the Lease as referred to above, the Licence and the Premises were entwined. Without the Licence, the Premises could not be used for the purpose for which they were leased.

[50] The Lease did not oblige the tenant to operate gaming machines on the Premises. The Lease did not specifically refer to gaming machines or any gaming machine licence. There were no covenants like those relating to the Licence in cll 6.4, 6.5 and 21.1. The Licence held by OMAD in respect of the Premises did not authorise the possession and operation of gaming machines at the Premises. None of its conditions authorised OMAD to possess or operate gaming machines.

[51] By the Lease, the tenant was permitted to operate gaming machines on the Premises because that was a use consistent with conducting the business of hotel keeper under the authority of a liquor licence on the Premises. The tenant was permitted, but was not obliged, to acquire gaming machines and use them in the Business at the Premises. If the tenant wished to do so, the law required that the tenant obtain a gaming machine licence. Like the cost of the gaming machines, the cost of obtaining a gaming machine licence was borne by the tenant.

[52] McCasker relied on the scheme of the gaming machine legislative regime, submitting that a gaming machine licence may only be issued in respect of premises the subject of a liquor licence, and arguing that it is the premises, not the gaming machines, that are licensed. The effect of this was said to be that gaming machines are 'under' a gaming machine licence, and a gaming machine licence is 'under' a liquor licence.

[53] The GM Act provided that gaming and the conduct of gaming on licensed premises under the GM Act is lawful (s 23(1)). The term 'licensed premises' was defined to mean premises on which a licensee (defined to mean the holder of a gaming machine licence) is licensed to conduct gaming (s 3). An application for a gaming machine licence could be made by the holder of a liquor licence or an applicant for a liquor licence (s 24(1)). An application for a gaming machine licence could be made only in relation to premises specified in the applicant's liquor licence or application therefor (s 24(2)). The Director-General of Licensing[8] was required to determine the number of gaming machines authorised for use under the gaming machine licence, which could not exceed the maximum number prescribed for the category of licensed premises (s 25(12), (14)). A gaming machine licence was to specify the name of the licensee, the conditions imposed and such other particulars as determined by the Director-General (s 28(2)). In respect of licensed premises, the Director-General was required to issue a schedule of gaming machines, which identified the licence and the licensed premises to which it applied, specified the number of gaming machines authorised for use under the licence in respect of the licensed premises, and specified the identification number of each gaming machine authorised for use under the licence in respect of the licensed premises (s 29(1), (2)). A gaming machine licence was for an indefinite term (s 32(1)).

[54] All that these provisions establish is that a gaming machine licence may only be held by the holder of a liquor licence and in respect of the same premises the subject of the liquor licence. They do not establish that the part of OMAD's business carried on under the authority of GML244 was part of the 'Business' as that term was used in the Lease, namely the business of a hotel keeper carried on under the authority of the Licence at the Premises. So much is confirmed by the fact that, at the time the Lease was entered into and for around four months thereafter, there were no gaming machines at the Premises and no gaming machine licence in relation to the Premises.

[55] The gaming machine licence related to the Premises, but it licenced the possession of, and allowed a person to play, only the gaming machines that were provided under the gaming machine licence to the licensee for gaming on the Premises. It was not a licence of the Premises per se, but a licence to possess and operate the identified gaming machines, albeit at the Premises. Recognising this, and by the express terms of the Lease, the gaming machine licence and the Premises were not entwined. Without a gaming machine licence, the Premises could nevertheless be used for the purpose for which they were leased.

[56] McCasker argued that it is standard industry practice for leases of hotels to require the tenant to return all licences and permits, including gaming licences, to the landlord at the end of the lease to protect the value of the landlord's business, citing Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner [2014] SASC 147. That reliance was largely misplaced because the Court there was dealing with a lease that expressly provided that the tenant was obliged, at the end of the lease, to do everything necessary to transfer to the landlord, at no cost to the landlord, the liquor licence, the gaming licence and all licenses or permits that were required to carry on the business, and the tenant accepted that the clause obliged it to transfer the gaming machine licence. The Court held that gaming machine entitlements (being a right held by a gaming machine licensee to purchase the right to operate additional gaming machines from another licensee) fell within the meaning of the term 'permits' in the clause of the lease requiring the tenant to transfer all licences or permits. That decision says little about the proper construction of s 22.5 of the Lease, which does not specifically refer to a gaming machine licence. That other hotel leases contain a clause expressly requiring the tenant to transfer both the liquor licence and the gaming licence to the landlord at the end of the lease says little to support McCasker's construction of cl 22.5. Indeed, it may support a conclusion that, in the absence of such an express provision, cl 22.5 is to be construed differently.

[57] On the basis of the matters referred to above, I find that the Lease purpose was to enable and oblige OMAD to use McCasker's Premises to operate the business of hotel keeper, or tavern, under the authority of the liquor licence. OMAD was permitted, by the Lease, to possess and operate its gaming machines at the Premises, and the GM Act required OMAD to hold GML244, but the Lease did not oblige OMAD to possess and operate those gaming machines.

Construction of cll 22.5 and 22.6 in light of the Lease purpose

[58] Clause 22.5 of the Lease contained no internal punctuation or structure which assists in identifying the obligations it conferred on OMAD. There are perhaps a number of ways in which the block of text forming the clause can be structured, but the following requires only a minor insertion to allow the words to make sense. The tenant is required 'to do all acts and things necessary to enable the Landlord or any person authorised by the Landlord to obtain:

(a) the renewal of the Licence and any other licence or permit; or

(b) a new Licence or any other new licence or permit; [or]

(c) the transfer of the Licence or any other licence or permit then existing and in force to any person or corporation nominated by the Landlord,

to enable the Business to continue uninterrupted at the Premises'.

[59] McCasker submitted that, in the natural and ordinary meaning of the words in cl 22.5, GML244 was 'any other licence' 'existing and in force' when the Lease expired.

[60] OMAD submitted that the word 'or' between the words 'Licence' and 'any other licence or permit' in paragraph (c) above demonstrated that the words 'any other licence or permit' referred only to a licence or permit which existed in the place of the Licence, which was defined to mean a licence or licences issued under the Liquor Act, so the phrase 'any other licence or permit' could not refer to a gaming machine licence issued under the GM Act.

[61] McCasker's construction of cl 22.5 required the word 'or' to be read as 'and', that is, the tenant was obliged to transfer both the Licence and any other licence or permit then existing and in force in relation to the Premises. OMAD's submission would have greater force if the word 'or' between the words 'the Licence' and the words 'any other licence or permit' appeared consistently in the clause in respect of the three obligations set out in paragraphs (a) to (c) above. However, the word 'and' appears in paragraph (a) while the word 'or' appears in paragraph (b). It is therefore less clear that the word 'or' is used deliberately in paragraph (c) in its ordinary disjunctive sense. Nevertheless, the word 'or' is used in the relevant part of the clause, and the ordinary meaning of that word is disjunctive, with the effect that the obligation relating to a transfer is, on the natural meaning of the words used in the clause, an obligation relating to either the Licence or any other licence or permit then existing. OMAD's construction accords with the ordinary meaning of those words whilst McCasker's does not.

[62] Both parties pointed to the words 'to enable the Business to continue uninterrupted at the Premises' in cl 22.5. McCasker submitted that those words direct attention to the business actually carried on by the tenant at the Premises when the Lease ends which included, as a matter of fact, the income earned from the 20 gaming machines, which comprised 49.4% of the business's revenue in the year ending September 2021. However, as OMAD submitted, and has been accepted above, the operation of gaming machines at the Premises was not required by the Lease and was not the business carried on under the authority of the Licence, that being how the term 'Business' appearing in cl 22.5 is defined.

[63] In light of the matters set out in paragraphs [45] to [48] and [57] above, it makes commercial sense for the Licence to revert to the landlord with the Premises at the end of the Lease at no cost to the landlord. That is the purpose of cl 22.5 of the Lease.

[64] In light of the matters set out in paragraphs [50] to [54] and [57] above, where the tenant had acquired plant and equipment such as gaming machines for use in the Business operated at the Premises, and the landlord wished to purchase the tenant's gaming machines at the end of the Lease, it makes commercial sense for the landlord to purchase the gaming machines for the sale price prescribed by the Lease. That is the purpose of cl 22.6.

[65] For the reasons set out in paragraphs [121] to [125] below, there was a term implied into cl 22.6 for business efficacy requiring OMAD to transfer to McCasker any licences, permits or other authorities that permitted the plant and equipment to be used for the Business, along with possession of the plant and equipment. This is confirmed by the words in cl 22.6(c) that the sale price of the plant and equipment is their market value for sale 'as part of a business'. Those words contemplate that the use of the plant and equipment as part of a business is lawful, and the gaming machine licence made that use lawful.

[66] It would make commercial nonsense for the gaming machine licence to be captured by cl 22.5 when the landlord's entitlement to purchase the tenant's plant and equipment (including the gaming machines) under cl 22.6 is optional. If the landlord elected not to purchase the tenant's plant and equipment under cl 22.6, the tenant would nevertheless be obliged to transfer to McCasker every licence or permit associated with the plant and equipment which the landlord did not elect to acquire. In addition to the gaming machine licence, OMAD gave examples of the licences or permits associated with registered vehicles, automatic teller machines, and software installed on laptops and cash registers. In relation to the gaming machines, such a course would be pointless because GML244 related to the gaming machines identified in the licence schedule. It would also separate the gaming machine licence from ownership of the gaming machines to which it related.

[67] I find that the proper construction of the Lease is as follows:

(a) Clause 22.5 of the Lease referred only to the Licence and any replacement thereof, and did not capture GML244. OMAD's construction of cl 22.5 is the one which accords with the Lease purpose, the other terms of the Lease, particularly the definition of the term 'Business', the optional nature of the entitlement conferred by cl 22.6, and commercial sense.

(b) Clause 22.6 of the Lease conferred a right on McCasker to purchase the gaming machines. That is not in dispute, although what flowed from the exercise of the right is in dispute.

(c) The purchase of the gaming machines under cl 22.6 necessitated the transfer of GML244, being the legal authorisation held in relation to the Premises to possess and operate the gaming machines.

(d) The purchase of the plant and equipment, including the gaming machines, was at the sale price prescribed by cl 22.6(c), namely 'market value for sale as part of a business', which was to be agreed or, if not agreed, to be determined by an expert appointed by the President of the Law Society.

Was McCasker bound by his exercise of the right to purchase the plant and equipment under cl 22.6?

[68] The parties were at odds as to the nature of the legal arrangement between them following the letters from McCasker dated 2 December 2021 and 10 February 2022 (see paragraphs [18] and [19] above) in which McCasker indicated he intended, pursuant to cl 22.6 of the Lease, to purchase the plant and equipment, and the letter from OMAD to McCasker dated 10 March 2022 (see paragraph [20] above) in which OMAD accepted those letters as valid notice of the election and provided an inventory of the plant and equipment, which included the gaming machines.

[69] McCasker argued that cl 22.6 of the Lease created an option to purchase which, when exercised, gave rise to a new contract between the parties and from which McCasker could resile in the face of repudiatory conduct by OMAD. OMAD argued that cl 22.6 of the Lease created an election which did not give rise to a new contract but to an agreement which was embodied in cl 22.6 of the Lease, and which was irrevocable. OMAD argued that even if there was a new contract, OMAD's conduct was not repudiatory and did not entitle McCasker to resile. McCasker argued that even if there was an election, it was revocable in the face of repudiatory conduct by OMAD. The issue of repudiation will be addressed below.

[70] Taking into account the context within the Lease of cl 22.6, including that 'plant and equipment' may include both chattels owned by the tenant and chattels initially owned by the tenant and affixed to the Premises such that they have become the landlord's fixtures, and its terms (which included a mechanism for determination of the sale price, and prescription of the period within which that price was to be paid in exchange for possession), the better characterisation of cl 22.6 is that, by the Lease, OMAD agreed to sell its plant and equipment in the Premises and used for the Business to McCasker if two conditions were satisfied, namely that the Lease was terminated and McCasker gave OMAD notice of exercise of the cl 22.6 entitlement prior to the Lease's termination.[9]

[71] The effect of cl 22.6 is of a binding agreement between the parties to sell and purchase the plant and equipment, on conditions subsequent, namely the termination of the Lease and the exercise of the option by McCasker before the Lease terminated.[10] If those conditions subsequent were fulfilled, there was no new contract; the contractual obligations were embodied in cl 22.6 of the Lease. They were: (a) that OMAD was obliged to give to McCasker possession of the plant and equipment and stock-in-trade; and (b) McCasker was obliged to pay to OMAD the sale price as prescribed by cl 22.6(c) of the Lease.

[72] McCasker argued that OMAD's conduct both before and after McCasker's exercise of the option[11] affected the characterisation of cl 22.6 as creating a new contract rather than conferring an irrevocable election. For the reasons set out in paragraphs [70] and [71] above, that submission is rejected. The conduct relied on has no rational bearing on what is plain on the terms of cl 22.6 itself. In any event, for the reasons set out below in relation to repudiation, characterisation of cl 22.6 as one or the other has no effect on the capacity of McCasker to terminate the contractual relationship created by cl 22.6 for repudiation by OMAD.

[73] There is no doubt that the Lease terminated within the meaning of cl 22.6. It did so on 3 May 2022.

[74] McCasker argued, effectively, that he did not exercise the option in cl 22.6 of the Lease in relation to GML244, because his letter of 2 December 2021 giving notice that he wished to acquire the stock in trade and the plant and equipment made clear that he was of the view that cl 22.5 of the Lease obliged OMAD to transfer GML244 to him, without cost, pursuant to cl 22.5.

[75] This submission cannot be accepted. The view held by McCasker about the effect of cl 22.5 of the Lease is inconsistent with the construction found in paragraph [67] above. As O'Connor J observed in Goldsbrough, Mort & [12] v Quinn:12

As was pointed out by Lord Watson in Stewart v Kennedy (No. 2) (1890) LR 15 App Cas 108 at 123, a party by delivering to another an offer in writing represents to that other that he is willing to be bound by all its conditions and stipulations construed according to their legal meaning, whatever that may be. He contracts, as every person does who becomes party to a legal contract, to be bound in case of dispute to the interpretation which a Court of law may put upon the instrument. It is in my opinion abundantly clear that the true interpretation of the words, the meaning of which has been disputed, is that upon which the appellants have based their case. Under these circumstances the respondent cannot at law escape from the binding effect of his contract on the ground that he did not in his own mind intend the [disputed words] to have the meaning which the Court is bound to place upon them.

[76] McCasker was wrong about the effect of cl 22.5, but he is nevertheless bound by the terms of his contract as declared by this Court, which include that, if the landlord elects by notice in writing to purchase the stock in trade and plant and equipment of the tenant in the Premises and used for the Business, the obligations there set out take hold, so the tenant is obliged to confer possession and the landlord is obliged to pay the sale price as prescribed.

[77] The letters from McCasker to OMAD dated 2 December 2021 and 10 February 2022 comprised the election by notice in writing referred to in cl 22.6(a). So much was confirmed by: (a) the provision of the inventory of the plant and equipment by OMAD by its letter dated 10 March 2022 (see paragraph [20] above) and effectively agreed by McCasker's letter dated 19 April 2022 (see paragraph [21] above); and (b) McCasker's taking possession of the plant and equipment, including the gaming machines, in the Premises on 4 May 2022. The fact that OMAD subsequently demanded a price for the plant and equipment which McCasker did not accept has no bearing on the binding nature of the obligations which arose under cl 22.6 upon fulfilment of the conditions subsequent. Clause 22.6(e) contains the contracted means by which any dispute about the sale price was to be determined and resolved.

Did McCasker validly terminate the cl 22.6 agreement?

[78] McCasker argued that, by his letter dated 30 June 2022 (see paragraph [34] above), he validly terminated his obligation to purchase the gaming machines or, alternatively, to purchase all of the plant and equipment.

[79] OMAD relied on the doctrine of election between contracting parties, which essentially provides that an election by one contracting party between two inconsistent rights conferred by the contract is irrevocable where the election is evinced by words or conduct sufficient to amount to the making of an election between the two inconsistent rights and is made with the relevant knowledge.[13] It was argued that, in exercising the option under cl 22.6 of the Lease, McCasker irrevocably elected to purchase the plant and equipment, including the gaming machines, rather than requiring OMAD to remove the plant and equipment from the Premises pursuant to cl 22.4 of the Lease.

[80] Given the proper construction of cl 22.5 (set out in paragraph [70] above) as a binding agreement between the parties to sell and purchase the plant and equipment on the two conditions subsequent, which conditions were fulfilled, there is no warrant for resort to the doctrine of election. Clause 22.6 operates in its terms to create the binding agreement. There is nothing in the terms of cl 22.6 which permits the landlord to unilaterally withdraw from the obligations contained within the clause once they have become binding. The binding effect of cl 22.6 flows, not from an irrevocable election, but from the operation of the clause in the Lease. In any event, none of the authorities relied on by either party about the doctrine of election establish that, once an irrevocable election is made and the parties stand in the contractual relationship which that election dictates, the party who made the election cannot terminate the contract in response to conduct by the other party, at the time of or subsequent to the election, which repudiates their ongoing obligations under the contract affirmed by the electing party's election. To so conclude would be contrary to ordinary contractual principles.

[81] OMAD also relied on the doctrine of estoppel as precluding McCasker from resiling from his exercise of the right under cl 22.6 and its binding effect. Given the conclusions above, it is unnecessary to consider estoppel in this case.

Was the obligation to purchase the gaming machines severable?

[82] McCasker argued that the parties had conducted themselves as though the obligations to purchase the things in cl 22.6 were severable and McCasker could withdraw from his obligation to purchase any particular thing or things. This submission was founded upon McCasker's notice to OMAD in his letter dated 19 April 2022 (see paragraph [21] above) that he would not be purchasing the stock in trade, and the absence of any demur from that position by OMAD. Effectively, McCasker argued that this was a variation to the agreement in cl 22.6 by conduct, the variation permitting McCasker to unilaterally withdraw from his obligation to purchase the plant and equipment or some part of it. This submission is rejected. First, the conduct related only to the stock in trade. That conduct says nothing about the plant and equipment, or any particular items of plant and equipment, such as the gaming machines. Secondly, references by the parties in their correspondence to the gaming machines separately from the other plant and equipment (for example, in the identification of the sale price for the plant and equipment) cannot elevate a variation of the contract (if that is what it was) in relation to the purchase of the stock in trade, to a variation in relation to the plant and equipment, whether all or part of it. Thirdly, the failure on the part of OMAD to demur to McCasker's withdrawal from his obligation to purchase the stock in trade is better characterised as an election to affirm the contract rather than terminate it in response to McCasker's foreshadowed breach of his obligation to purchase the stock in trade. It is not conduct which is only consistent with a variation rendering the otherwise binding obligations in cl 22.6 ones from which McCasker was free to withdraw.

[83] McCasker argued that his letter of 30 June 2022 was an acceptance of OMAD's breach of an essential term or repudiation of its obligations under cl 22.6 of the Lease.

[84] The evidence does not sustain that argument. Firstly, in the letter of 30 June 2022, McCasker's solicitors stated that McCasker had 'reconsidered his position in respect of the acquisition of [OMAD's] chattels' and he did 'not wish to purchase the gaming machines', but continued 'in his desire to purchase the other chattels' and offered $50,000 for them. The letter stated that, otherwise, McCasker required OMAD to transfer GML244 pursuant to cl 22.5 of the Lease. There is no statement that OMAD was in breach of the Lease, or the obligation under cl 22.6. There is no suggestion that McCasker was exercising a right to terminate his obligation under cl 22.6 to purchase the plant and equipment in the face of repudiation by OMAD. No repudiatory conduct was identified. The letter affirmed McCasker's obligation under cl 22.6, at least in relation to the plant and equipment other than the gaming machines. The reference to McCasker having reconsidered his position followed a letter from McCasker to OMAD dated 10 June 2022, in which McCasker indicated that he was content for the issue of the proper interpretation of the terms of the Lease to be referred to an appropriately qualified expert such as a senior barrister, and thereafter, depending on that determination, the matter may need to be referred to a valuer. In that context, the letter of 30 June 2022 indicated only that McCasker had simply changed his mind about purchasing the gaming machines.

[85] Secondly, McCasker's oral evidence confirmed what appeared in the letter of 30 June 2022. In cross-examination, McCasker agreed the letter of 30 June 2022 was his solicitor communicating to OMAD's solicitor his decision to change his mind about purchasing the gaming machines,[14] that the reason he made that decision was because he did not want the risk of having to pay $1 million for the gaming machines,[15] that reducing the risk of having to pay the $1 million for the gaming machines was why he changed his mind,[16] and that McCasker did not think, at that time, that OMAD was in breach of a contractual obligation by the position it had taken.[17]

[86] On the basis of that evidence, I find that McCasker's letter of 30 June 2022 was not acceptance of any breach or repudiation by OMAD of its obligations under cl 22.6 of the Lease which meant that McCasker's obligations thereunder were terminated.

[87] The above conclusion makes it strictly unnecessary to determine this question. Nevertheless, for the reasons set out below, I find that OMAD did not breach or repudiate the obligations under cl 22.6 as alleged by McCasker.

[88] McCasker argued that OMAD's letter of 27 April 2022 (see paragraph [23] above) was either a breach of an essential term or repudiatory conduct which entitled McCasker to terminate the agreement under cl 22.6, because OMAD insisted on a sale price for the gaming machines that was referable to the Levy and 'threatened' to refer any dispute about the sale price to expert determination. This was said to be a 'dogged insistence on an untenable position coupled with a threat to have that position determined inappropriately, and perhaps conclusively'.

[89] There is no evidence relied on by McCasker to indicate that OMAD did not have a bona fide belief as to the correctness of its interpretation of cll 22.5 and 22.6 of the Lease. Consequently, this is a case of a bona fide dispute as to the true construction of a Lease expressed in terms which are not entirely clear, and the Court is not justified in drawing an inference that OMAD intended not to perform cl 22.6 of the Lease according to its terms or that it repudiated it.[18]

[90] Furthermore, McCasker's argument as to repudiation or breach rested on the proposition that the question whether the market value of the gaming machines included the Levy or any amount in respect of it did not fall within cl 22.6, so OMAD's 'threat' to refer the question was repudiatory or a breach. The question was said to be a legal issue unsuited to determination by an industry expert envisaged by cl 22.6(e). Reliance was placed on two authorities: Raskin v Mediterranean Olives Estate Ltd [2017] VSC 94 ('Raskin') and Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] QSC 135; [2005] 2 Qd R 563 ('Zeke'). Both cases concerned whether a proceeding concerning a contractual dispute should be stayed pending an expert determination in accordance with a clause in the contract.

[91] Raskin concerned a registered managed investment scheme under the Corporations Act 2001 (Cth), and a dispute resolution clause in the project constitution which included, amongst other things, capacity in the parties to refer a dispute in relation to the project to an independent expert for final and binding decision. The clause identified that there may be disputes in relation to agricultural matters, project management, legal interpretation of the project documents, or financial and accounting matters. The Court held that the dispute resolution clause was void for uncertainty because the disputes that had arisen related to overlapping horticultural, accounting, management and legal interpretation issues, each of which involved disputed questions of fact, law (including legal interpretation of the project documents) and mixed fact and law, and there were no agreed procedural directions to the expert and no agreement as to how disputes involving overlapping fields of expert disciplines were to be resolved.

[92] Zeke concerned a corporate share sale agreement and the effect of 45 directors' warranties falling into 8 categories, one of which involved accuracy of disclosed information, essentially in the company's financial statements. An expert determination clause permitted the parties to refer a dispute under the warranties to an expert accountant. An expert was appointed but one party refused to cooperate. The Court held that most of the disputes were suitable for expert determination because they involved the state of the company's accounts and the expert appointed was an accountant. The others were not suitable because they involved questions of mixed fact and law, which were more readily answered by a lawyer than an accountant.

[93] The present case did not involve an application for a stay. Nor did it involve an allegation that cl 22.6(e) was void for uncertainty. The only allegation was that cl 22.6(e) did not extend to the question whether the 'market value for sale as part of a business' of the plant and equipment including the gaming machines included or was referable to the Levy because that was a legal issue, with the consequence that OMAD's 'threat' to refer the matter for expert determination was a breach or repudiation of its obligations in cl 22.6.

[94] It is difficult to see how a party's insistence, in the face of a dispute between the parties to a contract, on resort to a dispute resolution clause in the contract constitutes a repudiation (or a breach) of its obligations under the contract, ie evinces an intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with its obligations and not in any other way.[19] The authorities relied on by McCasker did not sustain that proposition. Further, cl 22.6(e) did not stipulate that the expert had to be an 'industry expert' without legal expertise and OMAD did not insist that the expert be an 'industry expert' without legal expertise. No expert was appointed, so it cannot be said that the appointed expert was unable to express an opinion on the market value for sale as part of a business of the gaming machines.

[95] In any event, for the reasons set out in paragraph [122] and following below, determination of the 'market value for sale as part of a business' of the gaming machines, and whether that market value included an amount referable to the Levy, was not a question which turned on the proper legal construction of the terms of the Lease. Whether that market value included a component referable to either the amount paid by OMAD for the gaming machines to be licensed (including the Levy), or to any amount which McCasker would have to pay for the gaming machines to be licensed (including any Levy), was a matter upon which an expert valuer could properly express an opinion.

Market value of the plant and equipment other than the gaming machines (and GML244)

[96] It was not in dispute that the plant and equipment of which McCasker took possession on 4 May 2022 was that set out in Annexure A to OMAD's letter of 10 March 2022 (see paragraph [20] above).

[97] The only evidence before the Court regarding the market value for sale as part of a business of the plant and equipment other than the gaming machines was the opinion of Tony West, a professional valuer of Colliers International, set out in his report dated 3 May 2022.[20] Mr West valued the plant and equipment, excluding the gaming machines, at $85,000 (ex GST). He was not cross-examined about that part of his report and McCasker appeared to take no issue with it.

[98] I find that the market value for sale as part of a business and, consequently, the sale price of the plant and equipment other than the gaming machines purchased by McCasker pursuant to cl 22.6 of the Lease was $85,000 (ex GST).

Market value of the 20 gaming machines and GML244

[99] McCasker relied on an affidavit and oral evidence from Samuel McClure, the managing director of a company that, for 17 years, had supplied new and used gaming machines to the Northern Territory market. Mr McClure valued the 20 gaming machines as part of a business, excluding any levy payable to the Northern Territory government in respect of the machines, at amounts of $1,500, $3,500, $11,000 and $13,000 per machine, yielding a total value of $143,000.[21] That valuation was based on a written identification of each gaming machine and information he downloaded from an electronic monitoring system database about the gaming machines.[22] After viewing a video of the 20 gaming machines taken on 28 February 2023, he reduced his valuation of six of them from $1,500 to nil, yielding a total valuation of $134,000.[23] The reason for the altered valuation for those six machines was that 'substantial faults' with their operation were apparent to Mr McClure on the video. He said that when gaming machines sit dormant for an extended period of time, especially in the hot weather, issues getting them back up and running can be expected, and spare parts for these machines were not readily available.[24]

[100] In this regard, there was evidence before the Court that the gaming machines were all in working order on 4 May 2022 when McCasker took possession of them.[25] It follows that Mr McClure's revised valuation of the gaming machines does not reflect the condition of them at the relevant time. It should therefore not be taken into account.

[101] Mr McClure was not a professional valuer, and had never 'put his name' to a professional valuation of gaming machines.[26] However, he had been consulted many times by professional valuers undertaking valuations of businesses, in relation to their valuation of gaming machines.[27] He said that in making his assessment of the value of the 20 gaming machines the subject of this proceeding, he had assumed that both the seller and the buyer would be licensed to own and operate the gaming machines, and he did not include in his valuation any amount relating to the cost of obtaining a gaming machine licence.[28]

[102] McCasker relied on various evidence from Alex Heath, a professional valuer of Heath Valuation & Advisory Services. The evidence comprised: (a) Mr Heath's oral evidence; (b) a statement of evidence including Mr Heath's opinions, along with various extracts from three valuation reports prepared by Mr Heath in 2020, 2021 and 2022 valuing the Business; and (c) a letter sent by Mr Heath to McCasker's solicitors responding to various questions about his reasons for and assumptions made in his opinions. Mr Heath's statement of evidence included his opinions that: (i) the market value of the 20 gaming machines for sale as part of a business would not include or be the amount of the Levy, but would be calculated by reference to their depreciated value and their remaining life; and (ii) gaming machines are becoming outdated and lower in value sooner than previously. Mr Heath's letter included his opinion that:

...the valuation of the leasehold interest includes the value of the business including any goodwill, and the value of plant and equipment including the gaming machines on any approach. The gaming machines are to be valued as part of the business. The levy is a government charge and is an administrative cost unrelated to the operation of the business, the earnings the hotel generates and thus its value.

[103] In his valuations done in 2020, 2021 and 2022, Mr Heath had valued the Business as follows, depending on the unexpired term of the Lease at the date of valuation:[29]

(a) 0.6 years unexpired: $125,000

(b) 1.55 years unexpired: $210,000

(c) 16 years unexpired: $860,000 in 2020 and $1.25 million in 2022.

[104] He also expressed the opinion that the value of the gaming machine licence is a function of the profit or earnings the gaming machines are able to generate for the hotel operation and not an arbitrary amount linked to the cost of applying for a gaming licence.[30]

[105] In cross-examination, Mr Heath said that underlying his valuation of the gaming machines was the assumption of what he referred to as 'tenure', which he explained to mean the legal tenure over the premises in respect of which the gaming machine licence for the gaming machines subsisted.[31] It was his assumption that the gaming machine licence would, at the end of the Lease, transfer to the landlord free of charge, or be forfeited to the government.[32] He agreed that the valuation of a gaming machine as part of a business required it to be valued on the basis that it was lawfully to be used in the business, but considered the proposition that that valuation would have to bring to account the cost of getting a gaming machine licence as 'ambiguous', which I understood to mean difficult to comprehend.[33]

[106] In re-examination, Mr Heath said that, on the assumption that the gaming machine licence went back to the landlord free of charge, and the landlord continued the business with the gaming machines, the most appropriate method of valuing the 'bundle' comprising the business (being the licences, the machines and the goodwill) would be a capitalisation of adjusted profit approach, which captures the added value of the gaming machines as plant and equipment as well as the bundle of rights associated with the gaming machine licence itself.[34]

[107] OMAD argued that all of Mr Heath's evidence was inadmissible and should not be received. The objection was that Mr Heath's opinions were irrelevant because he did 'not express an opinion as to any aspect of the value of the plant and equipment which is the relevant issue in these proceedings'. The argument seemed to be that, because Mr Heath did not express his opinion as to what the value of the gaming machines was, his opinions were irrelevant. Reliance was placed on s 76(1) of the Evidence (National Uniform Legislation) Act 2011 (NT) ('the hearsay rule'), s 79(1) of that Act ('the expert opinion exception to the hearsay rule') and the observations of the plurality in Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 at [31]. Their Honours there held as follows:

Section 76(1) expresses the opinion rule in a way which assumes that evidence of an opinion is tendered 'to prove the existence of a fact'. That manner of casting the rule does not, as might be supposed, elide whatever distinction can be drawn between 'opinion' and 'fact' or invoke the very difficult distinction which sometimes is drawn between questions of law and questions of fact. It does not confine an expert witness to expressing opinions about matters of 'fact'. Rather, the opinion rule is expressed as it is in order to direct attention to why the party tendering the evidence says it is relevant. More particularly, it directs attention to the finding which the tendering party will ask the tribunal of fact to make. In considering the operation of s 79(1) it is thus necessary to identify why the evidence is relevant: why it is 'evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding'. That requires identification of the fact in issue that the party tendering the evidence asserts the opinion proves or assists in proving.

[108] That passage does not assist OMAD. The fact in issue in these proceedings is the market value for sale as part of a business of the gaming machines, specifically whether that market value includes a value referable to the value or cost of GML244 or otherwise referable to the Levy. If Mr Heath's opinions are accepted, they could rationally affect (directly or indirectly) the assessment of the probability of the existence of the fact in issue, namely whether the market value for sale as part of a business of the gaming machines includes or is referable to the value or cost of GML244 or the Levy. Simply because Mr Heath did not express his own opinion, in dollar terms, about the market value of the gaming machines does not deny that his opinion (that the market value for sale as part of a business of the gaming machines would not include or be the amount of the Levy, but would be calculated by reference to their depreciated value and their remaining life) could rationally affect (directly or indirectly) the assessment of the probability of the existence of the fact in issue. That has additional force in this case, where there are other expert opinions about the valuation of the gaming machines both with (Mr West's opinion) and without (Mr McClure's opinion) a component referable to GML244 or the Levy.

[109] The objection to Mr Heath's evidence based on relevance is overruled.

[110] Mr West valued the 20 gaming machines at amounts of $2,000, $5,000 and $15,000 per machine, yielding a total value of $182,000, plus $47,500 per machine for the 'gaming licence', yielding a total value of $1,132,000 for the 'gaming machines and entitlements'.[35] This total value for the gaming machines and entitlements was reported separately from the value of the other plant and equipment.

[111] Mr West identified three potential approaches to determine the market value of plant and equipment: (1) the income approach; (2) the market comparison approach; and (3) the depreciated replacement cost approach.[36] He said it was not possible to use the income approach because it was not considered possible to determine cash inflows and outflows that applied to individual assets, and the income approach is likely to value all assets, both tangible and intangible, and is therefore only useful as a check method when completing valuations of the underlying fixed assets of a business.[37] He also said he did not have access to the profit and loss statements for the business, and even if they were available, it would be difficult to accurately apportion the individual components of business goodwill and the value of plant and equipment.[38] He said the market comparison approach was not wholly appropriate because some of the plant and equipment was not readily traded or traded as part of a business.[39] He said that approach had been used in conjunction with the depreciated replacement cost approach, where appropriate.[40]

[112] In cross-examination, Mr West agreed that the Business's profit and loss statements did isolate the revenue from the gaming machines from other trading, and some, but not all, of the expenses from the gaming machines.[41] In cross-examination, Mr West said he did not have those profit and loss statements when he made his valuation report.[42] In re-examination, when referred to the material he was provided by OMAD's solicitor, he agreed that he was provided the financial statements of the Business after the time he made his valuation report.[43]

[113] Mr West considered the depreciated replacement cost approach to be appropriate where market evidence is limited, such as with the plant and equipment.[44] That method involves establishing the gross current replacement cost of an asset and then depreciating its value to reflect its anticipated effective working life from new, its age and its estimated residual value at the end of its working life.[45]

[114] Section 5.6 of the report was headed 'Value of gaming machines and entitlements'.[46] In that section, Mr West referred to the 20 gaming machines operated under GML244 and stated it is illegal to own or sell a gaming machine without a gaming machine licence. He said, therefore, a gaming machine licence has no value unless attached to a gaming machine. He said the sale of a gaming machine licence and entitlements is typically based on the return the gaming machines can provide, ie the price paid is typically a function of the net income capitalised on a market based rate of return, usually on the net income of the whole business. He noted that he could not provide a valuation based on the income approach (because he did not have the profit and loss statements). Consequently, his valuation of the gaming machines and GML244 was based on the amount of the current Levy for 20 gaming machines (said to be $54,405), with a slight reduction to reflect that these gaming machines were in-situ as part of a going concern, taking the value to $47,500 per machine, plus the estimated market value of the gaming machines based on a combination of the market comparison approach and the depreciated replacement cost approach.

[115] After preparing his report and being provided with profit and loss statements for OMAD's business, Mr West undertook an income based valuation of the Business as a whole.[47] He used the profit and loss for the 2018 financial year to calculate Earnings before Interest, Tax, Depreciation and Amortisation ('EBITDA') of $540,000. He could not use the profit and loss for later financial years as they were combined with trading from another tavern run by OMAD. As the 2018 figures were dated, and to be very conservative, he adopted an EBITDA of $400,000. He then applied what he considered to be an appropriate multiplier of 4.0 or a 25% yield, assumed an industry standard lease of 30-50 years and an 'average competent' standard of management. By this means, he calculated a value of $1.6 million for the Business. He considered that to indicate an adequate buffer over and above the plant and equipment value he had assessed of $1,217,000. He said he did not consider an income based approach to be the appropriate valuation methodology for this valuation, but used it as a means of cross-checking the earlier valuation.

[116] McCasker argued that Mr West's valuations should not be accepted on a number of bases. One of those was that Mr West undertook valuations in this case and on earlier occasions despite there being a real, perceived or potential conflict of interest, in contravention of his professional conduct standards. The asserted conflict appeared to be Mr West having undertaken valuations of the Business in the past, either on behalf of both OMAD and McCasker for the purpose of market rent reviews under the Lease, or on behalf of banks for the purpose of assessing OMAD's financial capability or performance. I do not accept that these prior retainers gave rise to any conflict of interest, whether real, perceived or potential. Valuers are obliged to maintain the strictest independence and impartiality when providing professional services and/or where the exercise of objective judgement is required, and not to adopt the role of advocate.[48] In that context, merely having undertaken earlier valuations of the same Business on behalf of different clients, does not permit the serious inference that a valuer undertook a valuation in a situation of conflict of interest in breach of their professional obligations. The submission is rejected.

[117] Other bases also made assertions about Mr West's professionalism, including that he did not comply with the requirements of Practice Direction 6 of 2015 and seek the profit and loss statements of the Business before preparing his valuation, and that his valuation of GML244 was not only based on flawed factual assumptions but a valuation methodology arbitrarily derived. I reject that the matters referred to provide any basis to doubt Mr West's professionalism, impartiality or objectivity.

[118] McCasker argued that Mr West's valuation of the gaming machines and GML244 should be rejected because the total value he attributed to the plant and equipment ($1,217,000) exceeded the value of the business of which they form part. Reference was made to an income based valuation of the Business undertaken by Mr West in 2018, and it was argued that Mr West's valuation of the Business of $1.6 million (see paragraph [115] above) was 'too coincidental to be reliable', as it was a 'neat' combination of the 2018 valuation which was said to be $500,000 and the valuation of the gaming machines and GML244 which was around $1.1 million. Reference was also made to Mr West having done that income based valuation as a check on his valuation of the plant and equipment only a few days before the trial, but not having mentioned it to OMAD's lawyers until after Mr Heath gave evidence. It was argued that, 'to deepen the coincidence', Mr West had come to that valuation by adopting a 'discretionary' multiplier of 4 to the annual income of the Business of $400,000, which multiplier was based on a lease term of 30 to 50 years, even though the Lease had only been for an overall term of 16 years.

[119] In cross-examination, Mr West agreed that, unless a business is saddled with massive debt, it is logically impossible for the value of that business to be less than the value of its assets, assuming there is a market for them.[49] Mr West agreed that in 2018, he valued the Business at between $500,000 and $750,000.[50] He agreed that, if the valuation was undertaken on the basis of a four year lease, the multiplier would be 0.8 to 1.25.[51] He agreed that if the multiplier was 3, the value of the Business would have been $1.2 million, which would give very little value above the value of the gaming machines for the rest of the business.[52] He agreed that if the lease was for 16 years, the multiplier of 3.25 adopted by Mr Heath was appropriate.[53] He said that he knew that the Lease had been for a total of 16 years, but said an industry standard lease was 30 to 50 years.[54] In re-examination, Mr West said that, if the Business was valued on the basis that McCasker would operate it, on the land which he owned, the multiplier would be around 8 (based on a return of 12-15%), and the income would increase to $550,000 because the rental cost would be avoided.[55] He agreed that would yield a value for the Business of over $3 million.[56]

[120] I do not accept McCasker's submission to the effect that Mr West's valuation of the Business was connived to sustain his valuation of the gaming machines and GML244. Mr West accepted that Mr Heath's multiplier was appropriate for a lease of 16 years. His evidence was consistent with Mr Heath's (see paragraph [103] above) which demonstrates that the value of a business under a lease depends in large part on the length of the lease and the multiplier is chosen to reflect that. The multiplier Mr West chose reflected an industry standard lease of 30 to 50 years. That was not an unreasonable assumption to make when undertaking his checking process of his valuation of the plant and equipment made as at the date the Lease expired. His adoption of an annual EBITDA of $400,000 was also 'very conservative' when compared to the 2018 EBITDA of $540,000.

[121] As held above, once the conditions subsequent were satisfied, cl 22.6 of the Lease obliged OMAD to confer possession upon McCasker of the plant and equipment of OMAD in the Premises and used for the Business. Although neither party expressly submitted to this effect, it was implicit in OMAD's arguments and position that there was a term implied into cl 22.6 for business efficacy requiring OMAD to transfer to McCasker any licences, permits or other authorities that permitted the plant and equipment to be used for the Business along with possession of the plant and equipment. As the analogies put by OMAD suggest, this would include motor vehicle registrations, automatic teller machine and cash register software licences, and so on. This was confirmed by OMAD transferring GML244 to McCasker despite its position that cl 22.5 did not oblige it to do so. The only reason to effect that transfer was because of an acceptance of an obligation to do so under cl 22.6.[57] That obligation was not express in cl 22.6, but would, I find, be implied on the basis that it is reasonable, necessary for business efficacy, is so obvious it goes without saying, is capable of clear expression and does not contradict any express term of the Lease.[58]

[122] Pursuant to cl 22.6(c) the sale price of the plant and equipment is its market value for sale as part of a business. A gaming machine licence is not an item of plant and equipment because it is not a tangible asset. This is confirmed by the International Valuation Standards ('IVS').[59] A gaming machine licence is the lawful authorisation for possession and use of gaming machines (which are plant and equipment) in the Business.

[123] OMAD relied on: (a) a passage from the IVS which states that, while intangible assets fall outside the classification of plant and equipment, an intangible asset may have an impact on the value of plant and equipment assets (such as intellectual property rights associated with patterns and dies, or operating software, technical data, production records and patents associated with items of plant and equipment);[60] (b) the requirement in the IVS when valuing plant and equipment to consider whether intangible assets impact on the valuation of the plant and equipment and follow the IVS on intangible assets when there is such an impact;[61] and (c) a reference to gaming licences in the section on valuing intangible assets by the income approach in the IVS.[62]

[124] In the IVS, the term 'asset' is defined to mean 'an item that might be subject to a valuation engagement'.[63] The inclusion of gaming licences as an example of an 'intangible asset' in the IVS does not assist in characterising a gaming licence as an intangible asset which has an impact on the value of a gaming machine, let alone what that impact might be.

[125] In my view, a gaming machine licence is no more an asset (in the ordinary sense of the word) of the Business than the registration of a motor vehicle. The motor vehicle registration authorises the use of the motor vehicle. The transfer from one owner to another of the motor vehicle is effected by transferring the registration. In a similar way, a gaming machine licence authorises the use of the gaming machines, and the transfer of gaming machines from one owner to another is effected by transferring the gaming machine licence. Amounts paid for registration of a motor vehicle used in a business are a business expense, not the price of acquiring an asset of the business. In a similar way, amounts paid to obtain a gaming machine licence (including the Levy) for gaming machines used in a business are a business expense, not the price of acquiring an asset of the business. That was the effect of Mr Heath's opinion (see paragraphs [102] and [104] above). It is also consistent with Mr McClure's opinion, which valued the gaming machines upon the assumption that both the buyer and the seller of the gaming machines would have a gaming machine licence. It is also consistent with OMAD's treatment of the cost associated with obtaining GML244 in 2016 (including the Levy) as an operating expense rather than an asset reported in the Business&#[64]s balance sheets.64

[126] None of the valuers expressed an opinion that the market value of the gaming machines includes any component referable to the cost of obtaining a gaming machine licence.

[127] Mr West undertook a valuation of the market value for sale as part of a business of the plant and equipment culminating in a report dated 25 March 2022.[65] In that report, Mr West valued the gaming machines at $0, $2,000 or $12,000 per machine (which yielded a total of $128,000).[66] The value of the gaming machines was included in the total value for the plant and equipment (which was $213,000).[67] He valued GML244 at between $45,000 to $50,000 per machine, and this was reported separately from the total value of the plant and equipment.[68] In this report, section 5.6 was headed 'Value of gaming machine entitlements' and it did not refer to the gaming machines.[69] That part of the valuation was solely concerned with the valuation of GML244.

[128] In his subsequent report of 3 May 2022, the gaming machines and 'gaming entitlements' were treated differently from that earlier report. The value of each machine was added to the sum of $47,500 (the reduced replacement cost of GML244 across each machine) so as to record a 'market value' for each machine comprising the total of the two amounts.[70] In cross-examination, Mr West agreed that his initial, natural inclination was to separate the Levy from the gaming machines and to include the value of the physical machines in the value of the other plant and equipment.[71] He made the changes to reflect his instructions.[72]

[129] As Mr West was at pains to point out, he was not expressing an opinion that the value of GML244 was required to be paid to McCasker, rather he was simply valuing GML244 because that is what he was instructed to do.[73] When referred, in examination-in-chief, to the IVS requirement to consider whether an intangible asset might impact on the value of an item of plant and equipment, he said 'in some circumstances there is a requirement to have the value of the intangible alongside the value of that [item of] plant and equipment'.[74] He did not say whether the valuation in this proceeding gave rise to such circumstances, nor explain why that was so. In cross-examination, he agreed that in preparing his valuation, he was instructed to assume that the valuation of the gaming machines includes the value of the 'gaming licence / entitlement for each machine'.[75] He said he was always of the opinion that the value of the gaming machine and the value of the 'entitlement' were separate and, based on his instructions, he provided the two values and then the combined value.[76] In other words, Mr West was not expressing an opinion that the market value of the gaming machines encapsulated or was tied to the market value, specifically the replacement cost, of GML244.

[130] The mere fact that a professional valuer is able to ascribe a value to something using an accepted valuation method does not give that thing the character of plant and equipment within the meaning of cl 22.6 of the Lease, or render the thing's value (or replacement cost) part of the market value for sale of the plant and equipment for the purposes of cl 22.6 of the Lease.

[131] A value ascribed to GML244 by the cost approach is contrived in the circumstances of this case. That is not a criticism of Mr West's professionalism, objectivity or impartiality. It is simply to state that a valuation was undertaken because it was sought, and the methodology underpinning the approach is too removed from the circumstances of this case to give the market value attributed to GML244 any real weight.

[132] First, Mr West's valuation of GML244 is founded on an assumption that the replacement cost of GML244 would be $1,088,100 (being $54,405 x 20 gaming machines). OMAD submitted that, if McCasker were to apply for a new gaming machine licence to replace GML244, it would cost him $1,145,603.50 in application fees and levies. However, it is neither necessary nor in contemplation that GML244 be replaced by a new gaming machine licence. GML244 will persist. It has been transferred to McCasker. The capacity to transfer gaming machine licences was introduced in 2015 so that hotel businesses could be transferred from one owner to another without the need for payment by the new owner of the Levy.[77] It seems unduly artificial to adopt a valuation methodology based on a replacement cost which is effectively the Levy (slightly discounted) payable for a new gaming machine licence when one of the inherent characteristics of GML244 is its transferability without the need for the transferee to pay the Levy.

[133] Secondly, OMAD submitted that it had paid around $1.61 million to acquire GML244 and the 20 gaming machines. How this sum was arrived at was not expressed in submissions. The closest I can come is that it comprised the sum of: (a) $290,000 to acquire 10 new gaming machines in 2016; (b) $518,000 being the Levy to add the 10 new gaming machines to GML244 in 2016; (c) $200,000 of the purchase price paid to Sollac in 2008 attributed by Mr O'Brien, the sole director of OMAD, to the 10 gaming machines OMAD acquired from Sollac with the Lease; and (d) $500,000 of the purchase price paid to Sollac in 2008 attributed by Mr O'Brien to 'gaming entitlements associated with the 10 gaming machines'. This yields a total of $1.508 million.

[134] Mr O'Brien's evidence about this was as follows: [78]

Of the $975,000 I paid as the purchase price, I considered that around $500,000 was for the value of the gaming entitlements associated with the 10 gaming machines, and that the machines themselves were worth about $200,000.

[135] In cross-examination, he agreed that when OMAD acquired the Lease from Sollac in 2008, the gaming machine licence it held could not be transferred so OMAD was required to apply for, and did apply for, a new gaming machine licence for the 10 gaming machines owned by Sollac.[79] The Levy was not in effect at that time, and OMAD did not pay any Levy on that application.[80] On that application, GML244 was issued.[81] Referred to his evidence-in-chief set out in paragraph [134] above, Mr O'Brien said that the $500,000 he was referring to was the income he hoped to generate from the use of the gaming machines. It is clear that Mr O'Brien was not referring to the cost of GML244.

[136] Consequently, it cannot be accepted that OMAD paid $500,000 for GML244 in 2008, or that OMAD paid a total of around $1.61 million for the 20 gaming machines and GML244. Leaving aside what OMAD paid for the 20 gaming machines (which is now captured by the valuations of those 20 machines dealt with above), OMAD paid around $518,000 for GML244, not $1,018,000 as appeared to be submitted by OMAD.

[137] In any event, for the reasons set out in paragraphs [127] to [129] above, none of the valuation evidence established that the market value for sale as part of a business of the gaming machines includes the value calculated by reference to the replacement cost of GML244.

[138] I find that the market value for sale as part of a business of the 20 gaming machines does not include any value calculated by reference to the replacement cost of GML244.

[139] That leaves the contest between Mr McClure's valuation of the gaming machines at $143,000 and Mr West's valuation of the gaming machines at $182,000.

[140] In Mr West's valuation report of 25 March 2022, he valued the 20 gaming machines at a total of $128,000. In his valuation report of 3 May 2022, using the same valuation method, with the same information for each gaming machine, namely its type, year of manufacture or installation, replacement cost, age, estimated useful life, estimated remaining useful life, residual percentage and depreciated value, he valued the 20 gaming machines at a total of $182,000. Both valuations were undertaken following an inspection of the plant and equipment at the Premises on 25 March 2022. There is no explanation for the different values in either Mr West's reports or his oral evidence. The absence of any explanation for the different valuations, apparently undertaken on precisely the same methodology and underpinning assumptions, raises a question about the reliability of the higher valuation in the later report.

[141] The IVS provide that 'market value' is the estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.[82] The IVS states that the market approach provides an indication of value by comparing the asset with identical or comparable (that is similar) assets for which price information is available.[83] It says the market approach should be applied and afforded significant weight where, inter alia, there are frequent and/or recent observable transactions in substantially similar assets.[84]

[142] Mr McClure has been engaged for many years in the business of supplying new and used gaming machines to the Northern Territory market. That indicates that there are frequent and/or recent observable transactions in substantially similar assets in the Northern Territory. It also indicates that Mr McClure is aware of, and has considerable experience with, the amounts for which gaming machines exchange between willing sellers and buyers in arm's length transactions. His valuation of the gaming machines identified his opinion as to the market value for sale as part of a business of the gaming machines, on the basis of his experience with the sale and purchase of new and used gaming machines in the Northern Territory. For these reasons, and the reasons referred to in paragraph [140] above, I prefer Mr McClure's valuation evidence over that contained in Mr West's report of 3 May 2022.

[143] Consequently, I find that the sale price of the plant and equipment prescribed by cl 22.6(c) of the Lease is as follows:

(a) For the plant and equipment other than the gaming machines: $85,000.

(b) For the plant and equipment being the 20 gaming machines: $143,000.

[144] OMAD is entitled to judgment in the sum of $228,000.

[145] McCasker claimed damages for OMAD's breach of cll 22.5 and 22.6 of the Lease.[85]

[146] The pleaded breach of cl 22.5 was OMAD's breach of its obligation to transfer GML244 to McCasker at no additional cost to McCasker and no later than 3 May 2022.[86] As held above, cl 22.5 did not oblige OMAD to transfer GML244 to McCasker. The claim for damages for breach of cl 22.5 must fail for this reason.

[147] McCasker pleaded that OMAD's breach of cl 22.5 caused McCasker to suffer loss and damage, including an inability to let the Premises to another lessee.[87] It was pleaded that full particulars would be provided. The evidence of McCasker relating to this pleading was objected to on the basis that no particulars were provided, and the pleaded breach of cl 22.5 could not be made out because OMAD had transferred GML244 to McCasker shortly after McCasker demanded it.

[148] The objection is overruled. No particulars were provided by McCasker, but none were ever sought by OMAD. McCasker's evidence was relied on as the particularisation of loss and damage he alleged he suffered. OMAD should not be permitted to sit on its hands and raise, for the first time at the hearing, the absence of particulars as a basis for objecting to the evidence put forward in support of the damages claim.

[149] McCasker's evidence-in-chief was that he received expressions of interest for leasing the Premises prior to expiry of the Lease, but his preferred potential tenant did not proceed 'while a dispute over the value of the gaming machines was on foot'. McCasker said '[i]t is a big difference in investment by a tenant if it has to pay an additional $1 million to operate the gaming machines'. He said that, because of the ongoing dispute in relation to the price of the gaming machines, he was unable to lease out the Premises, and if there had not been a dispute, he was confident he would have been able to re-lease the Premises at a monthly rental of approximately $14,300 per month to either of two named parties.[88] McCasker said that he would be able to re-lease the Premises within three or four weeks of the Court's decision in his favour.[89] In cross-examination, McCasker said that the proceedings were holding up his re-leasing the Premises because of what OMAD was seeking for the sale price for the gaming machines and GML244.[90]

[150] There was no evidence that McCasker's preferred potential tenant did not proceed with a lease over the Premises because of the existence of the dispute between OMAD and McCasker about the sale price of the gaming machines. There was nothing to explain why the prospective tenant would have to pay an additional $1 million to lease the Premises, or why a dispute about how much McCasker had to pay to OMAD for the plant and equipment would affect a prospective tenant's capacity to take, or interest in taking, a lease of the Premises. There was no evidence about the other prospective tenant referred to by McCasker who had expressed an interest in the Premises around the time the Lease expired. McCasker gave no evidence about the basis for his belief or expectation that the Premises could be re-leased within a short period of time from the resolution of the dispute. There was no evidence about the existence, identity or capacity of any other prospective tenants, or what they would be prepared to pay by way of rent, that would provide any basis for his belief or expectation.

[151] The onus of proving damages sustained for breach of contract lies on a plaintiff and a plaintiff must prove, on the balance of probabilities, that his expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.[91] McCasker's evidence did not rise above a mere expectation. There is no other evidence which demonstrates a likelihood that the Premises would be re-leased shortly after the dispute has been resolved, or supports a likelihood that the Premises would have been re-leased but for a failure on the part of OMAD to comply with its obligations under the Lease.

[152] The usual and standard practice to effect a transfer of a gaming machine licence is for the transferee to provide the necessary documentation to the transferor for execution,[92] and the transferee to lodge the documentation with the Director of Licensing.[93] On 27 April 2022,[94] 8 June 2022[95] and 26 June 2022,[96] OMAD asked McCasker what he required OMAD to do to effect the transfer of GML244. It was not until 18 July 2022 that McCasker demanded that OMAD transfer GML244 to him by close of business on 20 July 2022, threatening to commence these proceedings if that was not done.[97] In response to that demand, OMAD obtained the form for the transfer of a gaming machine licence, completed the transferor's details, signed it and forwarded it to McCasker on 20 July 2022.[98]

[153] I am not satisfied, on the balance of probabilities, that the alleged breach of cl 22.5 (failure to transfer GML244) has caused the alleged loss or damage. OMAD transferred GML244 to McCasker, with the transfer taking effect on 10 August 2022. On 29 July 2022, McCasker's position was that he was continuing in his efforts to source a third party operator of the Premises,[99] and as at 9 March 2023 (the date McCasker gave evidence), he had still not re-leased the Premises to another person. The dispute between the parties is as to the sale price for the plant and equipment, and has not included any denial by OMAD of McCasker's right to hold GML244. McCasker has not established that the alleged breach of cl 22.5 of the Lease has caused him any loss or damage.

[154] The pleaded breaches of cl 22.6 were OMAD's demand for a sale price for the gaming machines that 'was, or included, the Levy' and OMAD's 'threat' to refer the dispute to expert determination pursuant to cl 22.6(e) of the Lease.[100] As held above, OMAD's conduct was not in breach of cl 22.6. The claim for damages for breach of cl 22.6 must fail for this reason.

[155] McCasker has not pleaded that OMAD's breach of cl 22.6 caused McCasker to suffer loss and damage. The amended statement of claim pleads only that: (a) OMAD's conduct was a repudiation or breach of cl 22.6;[101] (b) McCasker accepted the repudiation or breach on 30 June 2022 with the effect that McCasker's obligation to purchase the plant and equipment or the gaming machines was terminated;[102] (c) alternatively to (a) and (b), no contract to purchase the plant and equipment was formed;[103] (d) alternatively to (a), (b) and (c), OMAD is entitled only to the market value of the gaming machines not including the Levy or any amount in respect of GML244, to be determined;[104] and (e), alternatively to (a), (b), (c) and (d), if OMAD is entitled to any amount on account of the Levy, OMAD is only entitled to the amount in respect of 10 gaming machines, not 20.[105]

[156] The pleaded case regarding cl 22.6 is not one that founds a claim for damages. The alleged breach of cl 22.6 is relied on only to found an entitlement to terminate McCasker's obligation to purchase the plant and equipment or the gaming machines, with the pleaded alternatives being that OMAD is entitled to the market value of the gaming machines not including any amount referable to GML244 or the Levy, or only in respect of 10 gaming machines. Unlike the pleadings relating to the breach of cl 22.5, there is no suggestion that the alleged breaches of cl 22.6 caused McCasker loss or damage, and no indication of the nature of that loss or damage, let alone any particularisation of that loss or damage.

[157] Even adopting a practical and pragmatic approach to the arguments about the pleadings,[106] the failure to plead that the alleged breaches of cl 22.6 caused McCasker loss and damage is a material omission.

[158] In any event, there was no specific attribution, in McCasker's evidence about loss and damage, to OMAD's demand for a sale price in excess of $1 million for the gaming machines and 'threat' to refer the matter for expert determination. Even if that is captured by his references to the existence of 'the dispute', for the reasons set out in paragraphs [149] to [153] above, I am not satisfied, on the balance of probabilities, that the alleged breaches of cl 22.6 of the Lease have caused McCasker any loss or damage.

[159] OMAD has claimed interest on the sum for which judgment is given pursuant to s 84 of the Supreme Court Act 1979 (NT). Section 84(1) permits the Court to order interest 'for the whole or any part of the period between the date when the cause of action arose and the date of the judgment'.

[160] Clause 22.6(d) of the Lease provides that the sale price will be paid to the tenant on the day which is 14 days after the sale price 'has been agreed or otherwise determined'.

[161] OMAD argued that interest should be ordered from either 3 May 2022, when McCasker took possession of the plant and equipment, or from 2 June 2022 on the basis that 30 days was a reasonable period of time for agreeing or paying the appropriate sale price.

[162] McCasker made no submissions regarding interest and, consequently, did not resist either approach.

[163] I will order that interest is payable by McCasker to OMAD on the judgment sum from 2 June 2022 to the day of judgment.

[164] OMAD argued that the Court should not make a final decision as to interest, particularly the rate of interest and the precise amount of interest, without hearing further from the parties, including because OMAD may seek an award for enhanced interest under Practice Direction 6 of 2009. Again, McCasker did not resist that approach.

[165] I will adopt that approach, noting that the practice is to apply the interest rates applicable to post-judgment interest, which are the interest rates fixed pursuant to s 52(2)(a) of the Federal Court of Australia Act 1976 (Cth).[107]

[166] OMAD submitted that GST should be added to the assessed sale price under cl 22.6 because the purchase of the plant and equipment is a 'taxable supply' within Part 2-2, Subdivision 9-A of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). McCasker did not make any submission in relation to GST. Again, I will adopt the approach pressed by OMAD.

[167] The Court declares that, pursuant to cl 22.6 of the Lease, the sale price of the 20 gaming machines acquired by McCasker from OMAD is the market value for sale as part of a business of the gaming machines, which does not include any amount in respect of GML244 or the Levy.

[168] McCasker's other claims for declarations and for damages are dismissed.

[169] OMAD is entitled to judgment in the sum of $228,000, plus GST and interest to be determined.

[170] I will hear the parties as to interest and costs.

[1] Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6 at [27] per Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ, citing Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 at [16], citing Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35].

[2] Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at [50] per French CJ, Nettle and Gordon JJ.

[3] Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [11] per Gleeson CJ, Gummow and Hayne JJ; Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6 at [33] per Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ.

[4] Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [11] per Gleeson CJ, Gummow and Hayne JJ; Amcor Ltd v Construction, Forestry, Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241 at [50] per Gummow, Hayne and Heydon JJ, at [64] per Kirby J.

[5] Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at [51] per French CJ, Nettle and Gordon JJ.

[6] Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 at [16] per Gleeson CJ, McHugh, Gummow and Kirby JJ.

[7] No copy of the Licence as held by OMAD was in evidence, but the Licence as held by Solloc was Exhibit P1, Tab 30, TB pp 553-562. It is assumed the Licence remained in those terms upon its transfer to OMAD. On 1 October 2019, the Liquor Act 2019 (NT) commenced operation. Section 324 of that Act provided that a licence issued under the Liquor Act 1978 (NT) and valid immediately before the commencement of the 2019 Act continued in effect in accordance with its terms and conditions after commencement of the 2019 Act until the earlier of 1 October 2020 or the date it was converted into a licence under the 2019 Act. Given that the Licence was in a form consistent with the 2019 Act after its transfer to McCasker (Exhibit P1, Tab 97, TB pp 1240-1241), it is assumed it was converted into a licence under the 2019 Act at some time prior to 1 October 2020.

[8] An office established by the Licensing (Director-General) Act 2014 (NT), s 5.

[9] See JLF Bakeries Pty Ltd (in liq) v Bakers Delight Holdings Ltd (2007) 64 ACSR 633 at [20] per White J.

[10] See Goldsborough, Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674 at 678 per Griffith CJ, at 685-686 per O'Connor J, see also at 691-692 per Isaacs J. See also Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115 at 123 per Isaacs J. These authorities deal with the obligations of the owner of the property to sell, rather than the obligations of the purchaser of the property to buy, but as a matter of logic, the agreement to buy and sell binds each party equally.

[11] That conduct was: (a) OMAD 'refusing to accept' McCasker's purported exercise of the option by his letter dated 24 May 2018 (referred to in paragraph [15] above); (b) OMAD failing to raise the issue relating to the transfer of GML244 under cl 22.5 or cl 22.6 in May-June 2018; (c) OMAD responding to McCasker's letters dated 2 December 2021 and 10 February 2022 (see paragraphs [18] and [19] above) with its letters dated 10 March 2022 and 3 May 2022 (see paragraphs [20] and [25] above), specifically the statements that OMAD agreed with McCasker's interpretation of how the clauses of the Lease operate; and (d) OMAD not indicating that the sale price it sought for the gaming machines included an amount referable to the Levy until 27 April 2022.

[12] Goldsborough, Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674 at 685 per O'Connor J.

[13] See, for example, Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634. See also Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 [2022] HCA 38; (2022) 97 ALJR 1 at [41]- [53] per Kiefel CJ, Edelman, Steward and Gleeson JJ.

[18] See DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1977) 138 CLR 423 at 432-433 per Stephen, Mason and Jacobs JJ.

[19] See, for example, JD Heydon, Heydon on Contract (LawBook Co, 2019) at [24.240], citing Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 at [44] per Gleeson CJ, Gummow, Heydon and Crennan JJ and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634 per Mason CJ.

[20] Exhibit D2, Tab 19, Trial Bundle pp 123, 135 ('TB').

[29] Exhibit P4, Tab 126, Supplement to Trial Bundle p 1465 ('STB').

[30] Exhibit P4, Tab 126, STB p 1470.

[35] Exhibit D2, Tab 19, TB pp 123, 135, 143.

[36] Exhibit D2, Tab 19, TB pp 131-132.

[39] Exhibit D2, Tab 19, TB pp 131-132.

[57] OMAD pleaded that it took the step of consenting to the transfer of GML244 to McCasker in the belief that McCasker became the owner of the plant and equipment including the 20 gaming machines licensed under GML244; and that OMAD was obliged to provide such consents and assistance as was necessary for McCasker to obtain ownership of the 20 gaming machines licensed under GML244: Amended Defence and Counterclaim, [25], [26.2], [35.1], [35.3]. As to OMAD's plea in [45] that it would never have transferred GML244 to McCasker free of charge, I repeat the observations in paragraphs [75] and [76] above.

[58] See Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.

[60] Exhibit D6, IVS 102, [20.4].

[62] Exhibit D6, IVS 72, [60.4(d)].

[64] The financial accounts for the Business for 2016 were not before the Court. Mr O'Brien, the sole director of OMAD, provided the financial accounts for each financial year from 2013 to 2021, none of which list GML244 as an asset. Mr O'Brien was unable to obtain the financial accounts for 2016. Nevertheless, a Credit Assessment Credit Memorandum from the ANZ Bank dated 13 March 2018 showed the sum of $518,000 for 'Poker Licences Expensed' for the 2016 financial year.

[67] Exhibit P1, Tab 61, TB pp 882, 894.

[73] Exhibit D7, [2.1]; Transcript, pp 90-91.

[77] Northern Territory, Parliamentary Debates, Legislative Assembly, 29 April 2015, 6390-6391 (Peter Styles, Minister for Business).

[78] Exhibit D2, Tab 13, TB p 79 at [8].

[85] Amended Statement of Claim, prayer for relief E.

[86] Amended Statement of Claim, [20].

[87] Amended Statement of Claim, [21].

[88] Exhibit P1, Tab 9, TB p 63 at [35]-[38].

[91] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 80 per Mason CJ and Dawson J.

[92] Exhibit D2, Tab 16, TB 104 at [5].

[94] Exhibit P1, Tab 68, TB pp 946-947.

[95] Exhibit D2, Tab 81, TB p 1138.

[96] Exhibit P1, Tab 84, TB p 1147.

[97] Exhibit P1, Tab 89, TB p 1162.

[98] Exhibit P1, Tab 90, TB p 1172.

[99] Exhibit P1, Tab 93, TB p 1204.

[100] Amended Statement of Claim, [52], [54].

[101] Amended Statement of Claim, [54].

[102] Amended Statement of Claim, [55].

[103] Amended Statement of Claim, [56].

[104] Amended Statement of Claim, [58].

[105] Amended Statement of Claim, [59].

[106] Aldebaran Contracting Pty Ltd v Tiwi Islands Regional Council [2021] NTSC 89 at [10] per Luppino AsJ, citing Fluor Australia Pty Ltd v Sherritt International Corporation [2002] VSC 203 at [40] per Byrne J.

[107] TTG Nominees Pty Ltd v Aileron Pastoral Holdings Pty Ltd [2020] NTSC 15 at [2] per Mildren AJ, citing Sherwin v Commens [2008] NTSC 45 at [67]- [68] per Southwood J; Acer Forester Pty Ltd v Complete Crane Hire (NT) Pty Ltd [2013] NTSC 62 at [51] per Kelly J; Ceccon Transport Pty Ltd v Tomazos Group Pty Ltd (No 2) [2017] NTSC 55 at [89]- [91] per Hiley J.