MK & JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2006] NSWSC 810 | Case summary

MK & JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2006] NSWSC 810 | Case summary | Zoe

[49]

Estoppel The Court of Appeal's findings 13 The Court of Appeal held that there is an 'all-or-nothing' doctrine of common law 'estoppel by representation' [or 'conventional estoppel'], rejecting Roche's submission that the common law doctrine of conventional estoppel had been subsumed in an over-arching doctrine of equitable estoppel. 14 However the Court of Appeal held that common law estoppel by representation or conventional estoppel still required proof of assumption, inducement and detriment, rejecting Metro's submission that reliance and detriment were not necessary. 15 The Court of Appeal was satisfied that the first instance finding was that both parties had acted on the assumption "that the contract had not automatically come to an end on 31 March 2004". 16 However the Court of Appeal remitted the matter to this Court to make findings as to whether there was relevant inducement and detriment [incorporating the notion that the conduct must be such as to make Roche's departure from the above-described assumption unjust]. 17 The Court of Appeal also remitted the task of identifying the appropriate remedy if, contrary to the position stated above, there is one over-arching doctrine of equitable estoppel. The estoppel pleading 18 Metro relies on an estoppel alleged to have arisen from conduct by Roche after 31 March 2004. 19 At trial Metro had also relied on estoppel alleged to have arisen from conduct by Roche prior to 31 March 2004, and in particular, from discussion at a meeting on 2 March 2004. That is no longer pursued by Metro, [nor could it be because it failed in its quest for a factual finding as to the conversation for which it contended at that meeting] 20 Metro pleaded that between 31 March and 21 May 2004 Roche participated in preparing the conditions precedent documents, attended site meetings, issued variations to the design of the base building works and participated in preparing applications for the liquor licence and POPE licence required under the Fitout Deed. It is upon that conduct which, Metro pleads, it relied in making the assumption. [Cross Claim paragraph 26 (the cross reference to "paragraph 29" in paragraph 26 is plainly a typographical error and should be a cross reference to "paragraph 24")] 21 Although Metro submitted to the Court of Appeal that detriment is not a necessary element of conventional estoppel, it pleaded detriment as the expenditure of "time, effort and resources" in preparing the conditions precedent documents, finalising plans for Roche's fitout, obtaining fitout approvals, completing building works as varied by Roche and obtaining the liquor licence and POPE licence. 22 Metro claims a declaration that both Roche and the guarantors are estopped from denying that the clause 2A(b) date was extended from 31 March to 30 June 2004, but pleads nothing against the guarantors which fixes on their conscience. In opening Mr Newlinds SC, leading counsel for the defendants, made clear that Metro does not contend for any estoppel other than that as between the principal parties which gives rise to what has been referred to as "the metaphysical problem". [A reference to the awkwardness involved in the notion that an estoppel could operate to prevent the contention that a contract which had terminated, in fact remained on foot] 23 Returning to the first instance factual findings and the holding of the Court of Appeal in that regard, the following appears to be the case:

[62]

iv. two telephone calls to Michael Roche on 4 and 7 May 2004. 37 That work did not involve significant expenditure of time, effort or resources by Metro. Completing building works as varied by Roche 38 In considering what Metro did after 31 March 2004 in reliance on the assumption, the demarcation of roles must be kept in mind. Metro's primary role was to complete the base building works whereas Roche's primary role was to complete the Roche fitout - that is, to fitout the base building so that it could be used as a bar/brasserie. 39 Between 1 April and 21 May 2004 Metro proceeded with the base building works. However neither Mr O'Regan nor Mr Yeo give any qualitative or quantitative evidence of the extent of that work. Mr Boonzaaier had no role in the base building works. Mr Accardo gives (partly hearsay) evidence of the position of the base building works as at 31 March 2004 and some evidence of work carried on after that date. Mr Accardo's evidence provides no indication of the time or expense involved in completing that work. 40 Nor, between 1 April and 21 May 2004, did Roche request variations of the base building works. Indeed, save for one minor exception, none of the base building work done by Metro after 31 March 2004 related directly to the Roche fitout. The exception related to widening certain egress doors. There was no evidence that widening was consequent upon a request made by Roche after 31 March 2004. 41 The detriment which Mr O'Regan suggests Metro suffered by carrying out base building works between 31 March and 21 May 2004 is the costs that will be incurred in altering the base building works to accommodate the needs of another operator. He provides no quantification of those costs and certainly no quantification of the extent to which any such costs are referable to work carried out after 31 March 2004 as opposed to referable to work carried out prior to 31 March 2004. By 31 March 2004 the vast bulk of the base building works had been completed. Mr Jago's evidence, upon which he was not cross examined, was that a new operator is unlikely to require any significant changes to the base building works. Obtaining liquor and POPE licences 42 Metro was responsible for obtaining the liquor licence for the Brasserie. Metro originally proposed that the liquor licence for the Brasserie would be a sub-licence of the Governor's Licence already issued for Luna Park. On 2 March 2004 Metro informed Roche that it had decided to apply for a separate Governor's Licence for the Brasserie, a process which it expected to take approximately 10 weeks. That application was lodged sometime prior to 15 March 2004. 43 Mr O'Regan gave no evidence of doing anything concerning obtaining the liquor licence after signing the application. 44 The only evidence which Mr Yeo gave of work done by him between 31 March and 19 May 2004 concerning obtaining the liquor licence was:

[76]

b) if "Manly Wharf had a look at what has been built now, they would be very uninterested because there is no fit between their fitout design and what the base building has provided"; ix. Mr O'Regan also gave evidence that if he had known that Roche took the view the Development Contract was rescinded on 31 March 2004 he would have taken immediate steps to obtain an alternative operator to replace Roche. 49 This above finding that significant detriment has not been established is in itself, sufficient to put an end to the defendant's estoppel case. 50 Hence the question of the precise part played by Roche in the adoption of the assumption has far less significance absent a finding that Metro would be at a significant disadvantage if a departure from the assumption were permitted. The part played by Roche in the adoption of the assumption 51 It is fair to say however that the evidence established that Roche did play a part in the adoption by Metro of the assumption. The question is how significant a part did Roche play in relation to the adoption of that assumption. 52 The very same matters referred to above [as matters put forward by Metro in written submissions as substantiating significant detriment], establish that Roche indeed played a significant part in the adoption by Metro of the assumption already referred to. Roche induced Metro to believe that performance of the contract was insisted upon and did so quite simply by conducting itself between 31 March 2004 and 21 May 2004 as if the contract was still on foot. 53 Roche misconceives the issue in its submission that on the evidence, it is simply not open for the Court to find that the assumption held by Metro [that the contract was on foot] was something brought about by Roche. The test concerns a parameter of degree. It requires an assessment of the nature and character of the relevant activity by Roche and of the impact of that activity upon a belief induced in Metro. It may be observed that had detriment been able to be established by Metro, it would have been appropriate to hold that Roche indeed played such a part in the adoption of the assumption as to make it unfair to permit Roche to depart from it. At the least, that conduct included the failure of Roche to inform Messrs O'Regan and Yeo that Roche considered the Development Contract to have been rescinded on 31 March 2004 [O'Regan 8/7/04 para 30 (Blue 1/8); Yeo 9/7/04 para 53 (Blue 1/41)]. 54 I reject the submission put forward by Roche that on the evidence, the beliefs of Messrs O'Regan and Yeo [that the development contract remained on foot after 31 March 2004] was gained solely by reason of their belief that Metro had validly extended the clause 2A (b) date prior to 31 March 2004. Nor do I accept that each party held the assumption through March and April, that the contract was on foot by reference to a parallel assumption as opposed to a common or mutual assumption. Election The Court of Appeal's findings 55 In considering the question of election, it must be kept in mind that the right of election, with which the principle is concerned, arises when events occur which enable a party to exercise alternative and inconsistent rights. Thus, in a contractual setting, a right of election arises when a party has a right to terminate for breach and an alternative right to insist on the continuation of the performance of the contract. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655. 56 In the Court of Appeal, Metro submitted that there was conduct by Roche between 31 March and 21 May 2004 which was justifiable only if an election had been made by Roche to affirm the contract. 57 The Court of Appeal held that the consequence of such an affirmation would be that Roche lost any right to rescind prior to the Sunset Date, unless Metro in the meantime gave written notice of a new clause 2A(b) date. [Appeal judgment [66] and [75]. Beazley JA did not decide the point. In her Honour's view there may have been conduct that extended the contract but did not amount to an irrevocable election so that the effect of Roche's conduct depended upon further factual findings: [2]]. 58 In so holding, the Court of Appeal rejected Roche's submission that clause 48 of the Development Contract required the election to affirm to have been in writing. [Beazley JA did not decide the point, in the absence of further factual findings] 59 To establish that Roche elected to affirm the contract Metro must show, applying the principles in Sargent at 658, that:

[86]

ii. that no written notice of extension of time beyond 31 March 2004 had been given. 66 The balance of probabilities is in favour of a rejection of the evidence given by Mr Michael Roche that the matter of the issue of satisfaction of the conditions precedent had completely slipped his mind between 18 December 2003 and March 2004. 67 Hence the finding is that Roche was aware of circumstances giving rise to the right to rescind prior to 21 May 2004. Whether Roche engaged in conduct, after becoming aware of circumstances giving rise to the right to rescind, between 31 March and 21 May 2004, justifiable only upon the footing that an election had been made to affirm the contract. 68 It is true that there is some difficulty in identifying the precise dates upon which particular site meetings were held and that one requires to be very cautious to travel through the evidence of a number of witnesses in order to actually tie down what was the date when a particular site meeting was held. The footnotes to Roche's submissions generally appear to establish the precise dates and to identify what is incorrect and what is in fact correct in the evidence of particular witnesses in that regard. 69 That having been said it remains the fact that particular Roche brothers did attend a number of site meetings and an examination of the evidence in relation to what occurred at those meetings does establish, as one would expect, that the discussions took place with regard to the continuing works. 70 As observed in the initial first instance judgment, there is absolutely no doubt but that both parties continued between 31 March 2004 and 21 May 2004 to conduct themselves as if the contract was still on foot. 71 The following evidence demonstrates that Roche continued to exercise rights under the Development Contract between 31 March 2004 and 21 May 2004: i. on 1 April 2004 Raymond Yeo and Pino Accardo (Metro Edgley's consultant) attended a site meeting with Michael and Christopher Roche and Graham Jago of Nordon Jago (Roche's architect) and discussed the fitout tender, the Liquor Licence and the Roche financing for the Waterfront Brasserie [notes of the meeting appear at blue 3/872-873] ; ii. on 7 April 2004 Christopher and William Roche attended at a meeting with Mr Accordo and Mr Mark Diblen, site manager for Metro at the Luna Park site. they were accompanied by the management team of the Unicorn Hotel in order to review the progress of the works and to give the management team and understanding of the location and premises for the Luna Park Bar. iii. on 22 April 2004 Michael and Christopher Roche and Graham Jago attended a site meeting at the basement of the Waterfront Brasserie with Pino Accardo regarding the panels under the boardwalk. Mr Hindes was also in attendance. The meeting had been arranged by Mr Accordo so that Roche could review the high level awning windows of the Waterfront Brasserie and the existing timber boardwalk and in particular, a panel which had been inserted under the boardwalk. At that stage it was not determined on whether to insert a panels under the boardwalk has Roche wanted to maximise the view from the basement of the Waterfront Brasserie and the panels would obscure that view. At the meeting Michael Roche said to not put in the rest of the panels. ; iv. in late April Pino Accardo had a discussion with Richard Stone of Nordon Jago regarding the tender drawings; v. on 20 April 2004 Michael Roche had a conversation with Raymond Yeo concerning the Liquor Licence; vi. on 23 April 2006 Michael Roche had a telephone discussion with Raymond Yeo regarding the development application for the fitout and the Place of Public Entertainment Licence ("POPE Licence"); vii. on 29 April 2004 Michael and Christopher Roche and Graham Jago attended a meeting at Multiplex's offices with Raymond Yeo, Mark Cogo of McKenzie Consulting and Ian Cady from JBA Urban Planning Consultants regarding the fitout development application; viii. directly after that meeting and on the same day Michael and Christopher Roche and Graham Jago attended a meeting with Raymond Yeo, Mark Cogo, Ian Cady and Stephane Kerr and Nick Fterniatis from the Sydney Harbour Foreshore Authority regarding the fitout development application. The POPE calculations were discussed it being agreed that the council was in error and the statement being made that consent for the Development application could be finalised within a week. ; ix. Directly after that meeting and on the same day Michael and Christopher Roche and Graham Jago attended a lunch with Raymond Yeo, Mark Cogo and Ian Cady at which the fitout tender and the Roche financing for the Waterfront Brasserie were progressed. Various matters were discussed including the Roche fitout Development Application, the status of the fitout tender, the fitout drawings and marketing for Roche; x. Following that meeting Michael and Christopher Roche had a discussion with Mr Yeo during the course of which Mr Yeo asked the Roches to push Mr Jago on the tender and asked how funding with the Commonwealth Bank was position. Mr A Roche indicated that the Roche's were working on the feasibility report and asked for a further update of the status of Luna Park xi. on 28 April 2004 Kalinda Cobby had two telephone discussions with Deborah Bailey (Metro Edgley's solicitor) relating to variations to the documents required under the Development Contract during which Ms Cobby requested on behalf of Roche that the second defendant pay the costs of the variations and provide a copy of the building model; xii. on 30 April 2004 Metro Edgley's solicitors received an email from Kalinda Cobby regarding variations to documents required under the Development Contract; xiii. on 4 May 2004 Michael Roche had a telephone discussion with Raymond Yeo regarding maximum seating capacities of the Waterfront Brasserie; xiv. on 7 May 2004 Michael Roche had a telephone discussion with Raymond Yeo concerning the handover of the Waterfront Brasserie, site access, status of the Liquor Licence, proposed fitout presentation and status of fitout tendering and finance; xv. in early May 2004 Michael and Christopher Roche attended a site meeting at the Waterfront Brasserie with Pino Accardo; xvi. on 17 May 2004 Pino Accardo had a telephone discussion with Richard Stone concerning the tenderers for the fitout; xvii. on 20 May 2004 Pino Accardo received a facsimile concerning the Waterfront Brasserie from Nordon Jago; xviii. on 20 May 2004 Pino Accardo attended a site meeting at the Waterfront Brasserie with Richard Stone of Nordon Jago for a fitout tenderer inspection; xix. on 21 May 2004 Deborah Bailey had a telephone discussion with Kalinda Cobby regarding payment of the costs for variations to the documents required under the Development Contract; xx. Michael Roche gave evidence that he did not inform Nordon Jago of his view that the Development Contract was at an end and permitted Nordon Jago to continue to perform work as if the Development Contract was on foot; xxi. Michael Roche gave evidence that between 31 March 2004 and 21 May 2004 he did not withdraw instructions from Kalinda Cobby and permitted her to continue implementing the Development Contract. 72 The conduct was unequivocal in terms of being justifiable only if an election had been made to affirm the contract. The issues concerning the guarantors The Court of Appeal 73 Each of Michael, Chris and William Roche [the Roche brothers], together with their parents Kevin and Gabrielle [the Roche parents], signed guarantees for Roche's obligations under the Development Contract, the Agreement for Sublease and the Fitout Deed. 74 The Court of Appeal observed that "there would be a real question as to whether the Guarantors remain bound" if Metro succeeds on the combination of conventional estoppel and election. The Court posed 2 issues for determination on the remitter: i. are the relevant guarantors themselves bound by the relevant conventional estoppel; and ii. are any other provisions of the guarantees sufficient to maintain liability of the guarantors notwithstanding that, but for a conventional estoppel as between Roche and Metro, the contract would have been automatically discharged. 75 On the pleadings before the Court for the first trial, the question of the guarantors' liability arose only by adjunct to Roche's claim for declarations that the Development Contract and Fitout Deed had been automatically rescinded on 31 March 2004. 76 On the pleadings now before the Court, the question of the guarantors' liability continues to arise in that fashion, but also by adjunct to Roche's claims for declarations that the Development Contract, Fitout Deed and Agreement for Sublease had been automatically rescinded on 31 December 2004 [and alternatively, in the case of the Agreement for Sublease, on 31 December 2003] or validly terminated on 4 January 2005. In addition, it arises by reason of the claim for damages against them as the Second Cross Defendants. The present position 77 Metro has not succeeded in its case put in terms of conventional estoppel. Hence Metro has not succeeded on the combination of conventional estoppel and election. 78 The material contracts were automatically rescinded on 31 March 2004 79 There is not even a suggestion by Metro that the Roche parents had an involvement in Roche's conduct between 31 March and 21 May 2004 or could have played any part in the adoption of the material assumption by Metro. The guarantee terms 80 The guarantees in each of the 3 agreements were, mutatis mutandis, in identical terms. Outside of the reliance placed upon sub clause (b), the only provisions in the guarantees which Metro suggests might maintain liability of the guarantors notwithstanding the automatic rescission are sub-clauses (d) and (i). Sub-clauses (d) and (i) , together with the introductory words of the guarantee provide:

[94]

"These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue where a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law." 93 It does seem to me to be significant to note that Mason CJ described the step of review or rehearing an issue following a judgment as an 'exceptional' step. 94 In Brimaud v Honeysett Instant Print Pty Limited, unreported, McLelland J, Supreme Court of New South Wales, 19 September 1988, his Honour noted that the private injustice and public undesirability of permitting the re-litigation of matters already litigated is recognised in a number of principles of law, notably the rules relating to res judicata and issue estoppel, vexation and abuse of process, and the restrictive provisions governing the adducing of further evidence on the hearing of an appeal. 95 The overriding purpose of the Civil Procedure Act and of the rules of Court in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. For the purpose of furthering the overriding purpose, proceedings in any court are to be managed having regard to the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources and the timely disposal of the proceedings and all other proceedings in the Court at a cost affordable by the respective parties. The complicating factor 96 There is complicating factor in that Roche on the new pleadings, joined issue on the contention which Roche failed to pursue at the original trial, being that the Fitout Deed and Deed of Agreement for Waterfront Brasserie Sublease was automatically rescinded on 31 December 2003. 97 A close examination of the present state of the pleadings in relation to the matter discloses that Roche [in its statement to the Second Further Amended Summons] pleaded in paragraph 13D that Metro did not, prior to 31 December 2003, notify Roche and the guarantors in writing of an extension to the date of 31 December 2003 referred to in clause 1A (b) of the Agreement for Sublease. Metro [in its response to Statement to the Second Further Amended Summons] denied paragraph 13D and continued:

[97]

ii. in any event, the definition of "Contract" in the Development Contract picks up all of the contract documents including the Sublease (see clause 1). Clause 3 of the Development Contract contains a covenant whereby Roche promises to perform all of its obligations with respect to, inter alia , the Sublease. This is not just the best example of why the parties always intended the contracts to operate together, it also has the consequence that even if the Sublease has been automatically terminated Roche remains obliged to perform its obligations under what would have been the Sublease by reason of its separate obligation created by clause 3 of the Development Contract." Dealing with the issue 103 In my view there is no substance in Metro's submissions. The short position is that plainly Metro failed to extend the clause 1A(b) date in the Agreement for Sublease prior to 31 December 2003. Metro's 18 December 2003 letter, which explicitly extended the clause 2A(b) date in the Development Contract, did not refer to the clause 1A(b) date in the Agreement for Sublease. 104 The automatic rescission provision in clause 1A(b) of the Agreement for Sublease was in identical terms to that in clause 2A(b) of the Development Contract. Four of the five conditions precedent in clause 1A(a) of the Agreement for Sublease were identical to four of the six in clause 2A(a) of the Development Contract. 105 None of the five conditions precedent had been achieved by 31 December 2003. Thus, on the findings of the Court of Appeal, clause 1A(b) operated to automatically rescind the Agreement for Sublease on 31 December 2003. 106 All parties have strongly impressed upon the Court a desire consistently with efficiency, for the Court to proceed to determine the so-called 'new matters' even should it eventuate that Metro would not be able to establish both of the estoppel and election defences. It seems to me appropriate to accede to those joint submissions. In that regard I take into account the possibility that the matter may eventually be treated with by High Court of Australia [where of course, there is still pending an application pursued by Metro for leave to appeal from the reasoning given by the Court of Appeal]. 107 It is next appropriate to turn to the so-called "new matters". Proper construction of commercial contracts 108 Bearing in mind the fact that the opposing contentions in relation to the new matters require attention to be given to the principles applicable to the proper construction of commercial contracts it is appropriate to commence by recording those principles. As Metro submitted the general observations as to the present state of law on these matters to be found in Sagacious Procurement Pty Limited v Symbion Health Limited [2006] NSWSC 654 constitutes a sufficiently informed summary. 109 That summary was as follows:

[114]

iii. Did Roche repudiate the contracts and, if so, what follows? 111 A deal of the submissions of Roche put in relation to the new matters are of substance. As and when appropriate the reasons which follow adopt many of the Roche submissions. However Metro also succeeds on certain issues. Satisfaction of conditions precedent by Sunset Date Construction in general 112 As will be seen in what follows, Metro on a number of occasions draws attention to use of words said to qualify the definition segments of particular contractual provisions. The main example is where clause 2 "Interpretation" of the General Conditions of Contract forming part of the Development Contract Development Contract "commences with the words: "In the Contract, except where the context otherwise requires…" 113 Naturally such terms may qualify particular definitions. Context is always very important. Generally [although not invariably] those terms will take their defined meaning. It is plain that the contracts contain definition sections where terms are used which are capitalised. 114 The general principles of construction apply with particular force to comprehensive contracts regulating a substantial development. Where the meaning in ordinary language of terms of the agreements is plain and unless the context requires, the definitions require to be applied. Overview 115 It is convenient to return to an overview. 116 By a series of four written extensions on 1 June, 21 September, 25 October and 18 November 2004, Metro purported to extend the clause 2A(b) date and, in the latter 3, also the clause 1A(b) date in the Agreement for Sublease, progressively from 30 June 2004 ultimately to 31 December 2004, the Sunset Date. 117 As Roche has submitted, whether it was required to do so may be a moot point. [the Court of Appeal held at [66] (Beazley JA not deciding at [2]) that if Roche, by its conduct, elected to affirm the contract between 31 March and 21 May 2004 then it lost its right to rescind for non-satisfaction of the conditions precedent until the Sunset Date unless Metro in the meantime gave notice of some other date prior to the Sunset Date] 118 The effect of clause 2A(b) the Development Contract, clause 1(A)(b) of the Fitout Deed and clause 1A(b) of the Agreement for Sublease is that each of those agreements is automatically rescinded if the conditions precedent were not satisfied by the Sunset Date [That follows from the findings of the Court of Appeal as to the effect of the automatic rescission provision - Appeal judgment [47]]. If so then Roche had no obligations under any of the agreements and its non performance was neither in breach nor repudiatory. Indeed, Roche is then entitled to the return of its deposit. [Appeal judgment [49]] 119 Roche contends that two conditions precedent remained unsatisfied by 31 December 2004, namely:

[122]

3 the Deed of Consent to Waterfront Brasserie Sublease." 123 Mr Rovers the solicitor for BOS International (Australia) Limited ("BOS"), [the financier of Metro] in connection with the redevelopment of the Luna Park site] gave evidence that on or about 24 July 2004, prior to the execution of the Deed of Consent and Variation, Metro repaid in full the finance provided by BOS to Metro pursuant to the Financing Documents. 124 During the hearing there was close debate whether or not three paragraphs [13, 14 and 15] of the affidavit of Mr Rovers were admissible. Following the debate a ruling on the issue was reserved. 125 Each of paragraphs 13 and 14 sought to prove that Minter Ellison had been given express instructions by BOS to provide a letter to Metro indicating that Metro waived the requirement to consent to the Development Contract, Brasserie Sublease and the Deed of Consent to the Brasserie Sublease. 126 Paragraph 15 simply sought to give evidence of the above-described letter. 127 Following some debate wherein Metro made plain that it sought to prove the authority of Minter Ellison to write the letter, it emerged that the stance taken by Roche was not to deny that Minter Ellison had authority to write the letter, but to deny that Minter Ellison had authority on the face of the letter to convey the material non requirement. 128 In my view each of the paragraphs was admissible and is allowed. They do prove that Minter Ellison had authority to write the letter. They do not prove that the letter on its face served as an advice by the financier's agent that its consent was not required to the subject contracts and deeds. 129 Ultimately the issue is one of short compass for determination by the Court. The letter was not a pleading. Nor was it a contract. Approaching the matter objectively, a reasonable bystander conversant with the circumstances would infer from the terms of the letter that it was sufficient to constitute an advice that the financier's consent was not required to the subject contracts and deeds. Precisely the same inference would have been appropriate to be drawn by Metro on receipt of the letter. 130 For those reasons and by dint of the sending of the letter, the financier waived the need for its consent to the relevant transaction documents. Hence Roche has failed to establish that the first of the conditions precedent on which it relies [in terms of the relevant consent by the financier not having been given] remained unsatisfied by 31 December 2004. Ministers Consent 131 In what follows the submissions put by Metro are accepted as of substance. 132 Roche asserts that:

[124]

ii. all four Ministers responsible for the administration of the Crown Lands Act were required to consent to the Sublease and did not do so. 133 With respect to the first proposition, the Minister's consent was to the Sublease. The consent was a schedule to the Deed of Consent (Waterfront Brasserie). The consent was expressed to be in relation to "the within Deed and the Annexed Documents". Annexure "A" to the Deed of Consent (Waterfront Brasserie) was the Agreement for Waterfront Brasserie Sublease. This position is made clear from recital B in the Deed of Consent (Waterfront Brasserie) and the definition of AWBS under clause 1.1 and clauses 2 and 8. 134 In terms of which Minister had to sign the consent, the word 'Minister' is defined under clause 1.1 under the Sublease as meaning "Minster responsible for the administration of the Crown Lands Act, 1989." The relevant Government Gazette apportioning Ministerial responsibility for the administration of Acts [No. 35 dated Friday 13 February 2004] provides that the Minister for Tourism and Sport and Recreation is responsible for the Crown Lands Act, 1989 "so far as it relates to the …. Luna Park Reserve (within the meaning of the Luna Park Site Act, 1990).." Three other Minister's also share responsibility for the Crown Lands Act in different respects. 135 As a matter of construction, and looking at the matter objectively, the parties cannot have intended that the three Ministers [to whom there had not been allocated the responsibility for the administration of the Crown Lands Act, in so far as it applied to the Luna Park Reserve], would be required to execute a consent wholly outside their responsibility. The Court seeks the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract. 136 This objective view is reinforced by the antecedent lease between the developer and LPRT dated 23 December 2002 (where Minister was not a defined term) which operated with the consent of only one Minister [clause 3.1(e) on Blue AB page 158 and the last page Blue AB 215] being the then Minister responsible for the Crown Lands Act with respect to Luna Park Reserve. 137 The submission to the contrary put by Roche heavily relies upon the requirement for expressions in the Agreement for Sublease to be interpreted so that the singular includes the plural. Hence it is said that "the Minister" in the definition of "Minister" is to be interpreted to include the plural, so that where there is more than one person filling the description "Minister responsible for the administration of the Crown Lands Act 1989 (NSW)", all such persons need to give their consent but did not. In my view this is an area where the context can be taken into consideration. Ultimately the issue is simply a question of construction. And here it is appropriate to invoke the construction which gives a sensible commercial operation. Practical completion by the Sunset Date Metro's specific submission 138 Metro has submitted as follows:

[130]

vi. Compliance with clause 42.3 of the Development Contract and clause 1.21 of annexure part C for the purpose of determining whether practical completion had been achieved was not the intention of the parties. The imposition of the processes set out in those clauses in the context of determining, as a matter of substance, whether practical completion has been achieved to enable Roche to commence its fitout, is a commercial nonsense…" 139 Metro then proceeds to list a number of matters concerning what practical completion actually is; the contention that the majority of matters in clause 42.3 & 1.21 of annexure C of the Development Contract address the process of issuing of the certificate of practical completion rather than the substance and hence do not stipulate conditions precedent that could affect the purely factual question of whether particular building works were achieved to the level required to enable the fit-out to commence; the contention many of the matters stipulated in clause 42.3 & 1.21 of annexure C of the Development Contract are wholly irrelevant to Roche commencing its fit-out; and submitting that there were inconsistent requirements for the serving of notices of intended date for achieving practical completion: under clause 42.3(a)(i) 140 In my view none of these submissions are of substance. The parties are to be taken as intending that the words 'practical completion' in clause 35.2 were to pick up the definition in full. That is the natural meaning of the words used. 141 In my view the submissions of Roche in relation to these issues are generally of substance. They are adopted in what follows. 142 If Metro failed to achieve "Practical Completion" by the Sunset Date then, under clause 35.2, Roche was entitled to terminate the Development Contract, as it purported to do on 4 January 2005, and have the deposit refunded. 143 "Practical Completion" effectively means, in relation to the Works, the date so certified by the Independent Certifier "subject to clause 42.3 and clause 1.21 of Annexure Part C" (emphasis added). The "Works" are those to be executed on the Waterfront Brasserie Lot in accordance with the Development Contract, the Developer's Program and Roche's Project Requirements [The definitions of "Works" and "Site" are at Blue 2/299. The "Contract" referred to in the definition of "Works" is the General Conditions of Contract and the Developer's Program - see Blue 2/293 for the definition of "Contract" and Blue 2/284 for clause 1 of the Formal Instrument of Agreement, referred to in the definition of "Contract". The Developer's Program is Annexure Part F to the Development Contract at Blue 2/366-7 (see definition of "Developer's Program" at Blue 2/294)]. Roche's Project Requirements comprise 185 pages of specifications and drawings, contained in Annexure Part D to the Development Contract [The definition of "Roche's Project Requirements" is in clause 2 of the Development Contract at Blue 2/298. It refers to the document stated in Annexure Part A and the documents in Annexure Part E. The latter is a mistaken reference and should refer to Annexure Part D. The relevant item in Annexure Part A is item 9 at Blue 2/347. Item 9 states that the documents describing Roche's Project Requirements are the Draft Documents and the Preliminary Design. Each of those expressions is defined in clause 2 of the Development Contract at Blue 2/295 and 2/298 in a circular fashion to pick up particular documents referred to in Roche's Project Requirements. Annexure Part D formed part of Ex PX (pages 229-413) at the original trial. It was not reproduced in the Blue Books, but has been extracted from the original exhibit and is provided in a separate binder labelled "Roche's Project Requirements"]. 144 Practical Completion was not achieved by the Sunset Date because the following conditions precedent in clause 42.3 and clause 1.21 of Annexure Part C were not satisfied:

[143]

v. Metro, Roche and others to carry out a joint "final" inspection no earlier than the date stated in the first notice (clause 1.21(d)) and, presumably, after Metro considers Practical Completion to have been reached since the purpose of the inspection is to allow the Independent Certifier to certify Practical Completion. 152 The Independent Certifier was not appointed by the agreement of the parties by the execution of the Deed of Variation of Independent Certifiers Deed until 30 December 2004. Until that time there was no Independent Certifier within the meaning of the Development Contract. 153 The contention by Metro that the Deed of Variation of Independent Certifiers Deed delivered by Roche on 30 December 2004 had a retrospective operation so as to convert the purported Certificate of Practical Completion dated 17 November 2004 into a Certificate of Practical Completion is rejected. Without express words an instrument is not to be construed so as to operate retrospectively. 154 A Certificate of Practical Completion which could not have bound Roche when it was given could not have become and did not become a Certificate of Practical Completion valid against Roche with retrospective effect. Keating on Building Contracts [5th edition, page 112] makes clear that a certificate will not be a binding certificate unless the person had, at the time when the certificate was given, the power to certify. 155 Additionally, under the Accession Deed Roche agreed to become bound by the Independent Certifiers Deed with respect to certification "of the matters required to be certified by the Independent Certifier under the Waterfront Brasserie Development Contract". Given that all obligations under that contract were suspended until the conditions precedent were fulfilled it is difficult to see how a certificate which pre-dated fulfilment was "required to be certified" under the Development Contract within the meaning of the Accession Deed. 156 A submission was advanced by Metro to the effect that on the state of the pleadings, it was not open to Roche to litigate the issue as to the late December 2004 execution of the Deed of Variation of the Independent Certifiers Deed. However the amended cross claim contended that a valid certificate of practical completion had been issued on 17 November 2004 following an achievement of practical completion on 8 November 2004. This allegation was denied in Roche's response. 157 In my view the issue was available to be litigated. 158 Metro gave only one notice. It was given on 25 October 2004. It was, in terms, given pursuant to clause 42.3(a)(i). In it Metro stated that it anticipated Practical Completion would be reached on 10 November 2004 and nominated 1 November 2004 as the date for joint inspection. 159 The Roche brothers attended a meeting with Mr Yeo and others on the Site on 1 November 2004. They did so expressly on the basis that Roche did not concede the meeting was "a or the" meeting contemplated by the Development Contract. That meeting was the only inspection of the Works carried out after 25 October 2004 [there is no evidence of any other meeting. Mr Nicholas from Incoll Group, the Independent Certifier, has not put on evidence]. 160 Incoll purported to issue two certificates of Practical Completion. It is not clear whether Metro relies on both certificates or only on the later [Defence paragraph 9B(b) refers to both but Cross Claim paragraph 42 refers only to the latter]. The first was issued on 18 June 2004 and certified Practical Completion of the Bar/Brasserie (Base Building Works) as having been reached on 17 June 2004 [the certificate actually states the date of Practical Completion as "17 June 2003", but that is a typographical error]. The second was issued on 17 November 2004 and certified Practical Completion as having been reached on 8 November 2004. 161 The entire certification process was fatally flawed.

[152]

175 Roche required, by law, a development approval permitting it to embark on the Roche fitout before it could use and occupy the Works to do so. Such a development approval was thus an Approval within the meaning of clause 42.3(f)(v), and possibly also 42.3(f)(iv). 176 Metro delivered a Development Consent for Roche's Fitout (Fitout DA) to Roche on 31 August 2004. It did not comply with Roche's Project Requirements. Roche's Project Requirements provided that the operating hours for the Brasserie were to be 7am to 1pm Monday to Saturday and 7am to 12 midnight Sunday. However clause F7 of the Development Consent permitted only substantially reduced hours for external areas - namely 10am to 10pm for Sunday to Thursday and 10am to 12midnight for Fridays. 177 Secondly, the Fitout DA did not comply with the requirements for the POPE Licence. 178 The issue of POPE licences is provided for in s68 read with s89 of the Local Government Act 1993. Those provisions provide that a person may carry out an activity only with the prior approval of the Council in certain cases, one being to "use a building or temporary structure as a place of public entertainment or permit its use as a place of public entertainment". 179 The POPE Licence was also an Approval required to be delivered to Roche under clause 42.3(f)(v). In any event, the Works were required to be completed so as to permit the POPE Licence to be issued. The POPE Licence was defined in clause 6.1 of the Fitout Deed as a Place of Public Entertainment Licence "which permits the maximum capacity and use of the Premises having regard to the Design Documents and the requirements of … the relevant Authority which is to issue the POPE Licence". However the Fitout DA did not permit the maximum capacity and use of the premises because, by clause A3, it confined the use of the Brasserie as a dance venue to 20% of the Brasserie's annual events and, by clause F7, it limited the Brasserie's external operating hours. 180 The proposition that North Sydney Council had no power to grant such a licence after completion of the building but before the Roche fitout is without substance. 181 What was sought was an approval in principle, for which the legislation makes no provision. The Council's attitude to that application establishes nothing. Nothing in law inhibited it from granting a POPE Licence. 182 The way the Development Contract is structured is unexceptional. By the time the fitout would commence all of the conditions precedent would be fulfilled. Payment of the price under the Development Contract would only occur after Practical Completion (clause 42.1). Roche having committed itself to pay $18.5 million would be unlikely to take a lease of premises if it could not use them for the very purpose for which they were constructed. Roche's risk was paying for the fitout. The defendants' risk was constructing the base building. 183 Metro's submission that the POPE Licence could not have been required because it could not have been granted before the fitout is not of substance. If Metro did not get it they would not be paid (clause 42.1(e)(vii)). 184 The Development Contract operates according to its tenor and without the POPE Licence no Certificate of Practical Completion could be issued. 185 A critical matter is that the failure to obtain the POPE Licence does not bring the contract to an end. Failure to obtain the POPE Licence means that Practical Completion is not reached either by the Sunset Date or at all and Roche then has the election to bring the contract to an end without having to pay. It however will have borne the risk of doing the fitout and it ultimately transpiring there is no POPE Licence. It would then be put to an election whether to live with that or not, that is whether to rescind under clause 35.2. 186 Roche would have a cause of action against the Developer if the Developer did not work together to obtain the POPE Licence under clause 6.2 of the Fitout Deed. Conclusion 187 It follows that Metro did not achieve Practical Completion by the Sunset Date as required by clause 35.2 because the conditions precedent to doing so were not satisfied. Roche had no obligation to enter into the Waterfront Brasserie Sublease and no obligation to complete the Roche Fitout. The repudiation case 188 It follows from the findings given that even had Metro been in a position to establish both its estoppel and election cases, Roche would not have been shown to have repudiated its obligations under the Development Contract in the manner contended for by Metro. Appropriate remedy if there is only one overarching doctrine of estoppel 189 Having dealt with the miscellany of matters sought to be raised by the parties [both in terms of the remitter issues as well as the other issues], it seems to me that there remains only one remitter issue for determination. Even here one is dealing with matters which may well be entirely academic. In any event the parties are entitled to have the benefit of this Court complying to the letter with the dictate of the Court in terms of the entirety of the matters said to require attention on the remitter. 190 I refer here to the judgment of Hodgson JA (at [76]) where, against the event that the proceedings proceed to the High Court of Australia, it was said that it would be appropriate for a view to now be given as to what would be the appropriate remedy if there is now just one over-arching doctrine of estoppel [under which the appropriate relief is the minimum required to prevent injustice]. 191 Upon the assumption that there is now just one over-arching doctrine of estoppel, under which the appropriate relief is the minimum required to prevent injustice from unconscionable conduct, the underlying parameter concerns Metro seeking to hold Roche to an $18.5 million contract involving a forty year lease, on the basis of an unquantified reliance over a short period of time. In my view the appropriate remedy would be an inquiry as to the damage suffered by Metro, which matter could be referred to a registrar or to an Associate Justice of the Court. Short minutes of order 192 The parties are to bring in short minutes of order on which occasion costs may be argued.

MK & JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor

At a glance

Court

Decision date

Before

Source

Judgment (154 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (21)

Cited By (1)