Plaintiff v Defendants

BANK GUARANTEE - Whether plaintiff entitled to apply bank guarantee and retention amount towards damages pursuant to side agreement - Whether alternatively claims for damages can be set off against vendor's claims to guarantee/retention amounts pursuant to Corporations Act 2001 (Cth) s 553C - Whether calling on bank guarantee was a void disposition under Corporations Act 2001 (Cth) s 468

1 United Petroleum Pty Ltd (United) operates a network of approximately 350 service station sites throughout Australia. United branded service stations are operated on land that is either owned or leased by United or related companies.

2 Until 2010, the third defendant, Bonnie View Petroleum Pty Ltd (BV) operated wholesale and retail petroleum businesses in Gippsland, including a business located on the corner of Foster and York streets in Sale. BV leased the Sale property from the first and second defendants (the Landlords).

3 In 2010 BV sold the Sale business (together with 18 others) to United. Pursuant to the terms of the sale agreement BV was also to transfer the lease for the Sale site to United. There was evidence that United considered the Sale business to be the most lucrative of the 19 sold.

4 During the due diligence on the sale, contamination was discovered at the Sale site. The parties thereupon entered into a 'Side Agreement' whereby BV agreed to remediate the site and ultimately transfer the lease. In the case of default, the agreement also contained a provision for United to elect to require an assignment. A retention amount of $100,000 was withheld from the purchase price (the Retention Amount) while BV also provided a Bank Guarantee for $400,000 in respect of its obligations under the agreement (the Bank Guarantee). Mr Anthony Craig Van Breugel, the fourth defendant director of BV, also provided a guarantee.

5 BV subsequently went into voluntary administration and, later liquidation. United now alleges that it committed various breaches of the Side Agreement. In particular, by, first, failing to remediate the land and, second, failing to take necessary steps to assign the lease when United required it to do so in March 2015.

6 In relation to the first category of loss, United claims the amount of $470,000 to remediate the site to the standards required in the Side Agreement.

7 In relation to the second category, United has ultimately negotiated a new lease directly with the Landlords in 2016 following the non-assignment of the lease. However, it claims the amounts it incurred in obtaining the leasehold in this way as well as interest on delayed profits at $448,437.88.

8 United claims these amounts against BV and the guarantor, Mr Van Breugel, and further seeks a declaration that it is entitled to apply the Bank Guarantee and Retention Amount in respect of these losses.

9 Mr Van Breugel admits entry into the guarantee. However, both defendants deny United's entitlements on a number of bases, many of which involve a construction of the Side Agreement. BV further counterclaims in respect of the Retention Amount and Bank Guarantee.

10 Broadly, the defendants allege that, by reason of their construction of the Side Agreement and the alleged delay by United, no breach has occurred. They further challenge the damages sought. Finally, they challenge United's claim to be entitled to apply the Bank Guarantee and Retention Amounts against its alleged loss.

11 Although the pleadings remain paramount, the parties helpfully prepared an 'Agreed List of Issues' document which define the issues as follows:[1]

1. Did BV breach the Side Agreement by failing to commence or complete the Remediation Works and/or by refusing or failing to do all things necessary to procure the assignment of the lease?

(a) Whether United's claim for damages for failure to procure the assignment of the lease is limited or excluded by cl 2.3(a) of the Side Agreement;[2]

(b) Whether United's claim for damages for BV's failure to remediate the Sale site is limited or excluded by cl 2.3(d)(A);[3]

(c) Whether the time for preparation, review and approval of a Remediation Action Plan was varied by agreement and, if so, whether the time for commencement of the Remediation Works was thereby postponed;

(d) Whether United was required to serve written notice of default on BV for breaching cl 2.3(d) and, if so, what effect (if any) the failure to serve the notice had;

(e) Whether the 'Remediation Standards' under the Side Agreement are void for uncertainty and, if so, the effect (if any) on United's claim;

(f) Whether there was an implied term under the sale of business agreement that, if the lease for a site was not assigned within a 'reasonable time', BV could terminate the agreement or the agreement would terminate;

(g) Whether United by its conduct from the Settlement Date, including United entering into a lease/agreement to lease on 19 March 2015 with the Landlords and its delay in not making an election for an assignment, has resulted in United either waiving its rights under the Side Agreement to make an assignment [or whether it] has elected to terminate the Side Agreement;

(h) Whether Mr Van Breugel was discharged from his obligations under the Side Agreement and guarantee by reason of the termination;

(i) Whether the election for an assignment made by United on 26 March 2015 to make the assignment was bad having regard to the alleged agreement for a new lease between the Landlords and United made on 19 March 2015 and the election for an assignment not complying with the requirements of the lease;

(j) Whether the Side Agreement was terminated by reason of United entering into the Settlement and new lease with the Landlords on 5 July 2016.

2. If BV breached the Side Agreement, what losses (if any) did those breaches cause to United?

(a) What the correct measure of damages for such breach is;

(b) Whether the costs of remediation fall within that measure. Specifically, whether United is entitled to claim the costs of remediation in the absence of an assignment of the original lease;

(c) Whether United suffered any loss and, if so, the quantum of United's loss and damage;[4]

(d) Whether United failed to mitigate its loss and, if so, what is the effect of such failure.

3. Whether United is entitled (whether under the Side Agreement (cls 2.3(a)(A), 2.3(d)(A) or 7.1) or by a set-off) to apply the 'Retention Amount' and the proceeds of the Bank Guarantee against its loss.

(a) Whether United's conduct in calling on the Bank Guarantee was contrary to the Side Agreement.

(b) Whether United's claims against BV and BV's claims against United can be set off under s 553C of the Corporations Act 2001 (Cth) (Corporations Act) and, if so, what the net effect of that set off is.

4. Whether the calling on the Bank Guarantee on 27 February 2015 was a disposition of BV's property within the meaning of s 468 of the Corporations Act.[5]

12 Accordingly, these Reasons will consider the issues raised pursuant to three topics: breach; damages; and guarantee/retention.[6]

13 United called its national real estate manager, Mr Shmuel (Sam) Carmeli, who gave evidence about the genesis of the transaction and the alleged loss of profit. Mr David Hopwood, an in-house lawyer, gave evidence about the dealings with the liquidator and negotiations for the new lease, including costs associated with the same. Mr Travis Payne, a solicitor from K&L Gates, also gave evidence about negotiations with the Landlords. He was not cross-examined. Finally, an expert witness, Mr Timothy Vass, of Tonkin & Taylor Pty Ltd (Melbourne), gave evidence about what it would cost to remediate the site.

14 BV called the liquidator, Mr Glenn Crisp, as well as an expert witness, Mr Jay Parmansche, of ARC Environmental.

15 Mr Van Breugel also gave evidence, but was not cross-examined.

16 The trial was conducted by way of witness statement and, with the exception of Mr Crisp, there were few, if any credit issues raised. The relevant evidence of Mr Crisp will be dealt with below. The witnesses otherwise generally gave their evidence in a straightforward manner save that there were understandable memory difficulties at times.

17 I have therefore determined the issues on the basis of the objective documentary material wherever possible.

18 Prior to entry into the sale of business agreement, BV (then known as GPG Mobil No. 1 Pty Ltd) leased the Sale site under a deed of lease dated 15 June 2008 from Gippsland Petroleum Group Pty Ltd (a company associated with Mr Van Breugel).

19 The lease had a term of 15 years commencing from 15 June 2008 with a further five terms of five years each (40 years in total). The commencement rent was $220,000 (inclusive of GST) with market reviews at commencement of each renewal and 3.5% annual increase at the second and subsequent years of the lease and of any renewal.

20 The lease included the standard LIV transfer and assignment clause at cl 4 which relevantly provided as follows:

4.1 The tenant must not transfer this lease or sublet the premises without the landlord's written consent, and section 144 of the Property Law Act 1958 (Vic) and clause 9.1 do not apply.

4.2 The landlord-

4.2.1 subject to sub-clause 4.2.2, must not unreasonably withhold consent to a transfer of this lease or a sublease of the premises if the tenant has complied with the requirements of clause 4.3. If the Act applies, the landlord may only withhold consent to a transfer of this lease in accordance with the Act.

4.2.2 may withhold consent at the landlord's discretion if the Act does not apply, and a transfer of this lease would result in the Act applying; or applying if this lease is renewed for a further term.

4.3 To obtain the landlord's consent to a transfer or sublease the tenant must-

4.3.1 ask the landlord in writing to consent to the transfer or sublease,

4.3.2 give the landlord -

(a) in relation to each proposed new tenant or sub-tenant such information as the landlord reasonably requires about its financial resources and business experience and if the Act does not apply, any additional information reasonably required by the landlord to enable it to make a decision, and

(b) a copy of the proposed document of transfer or sublease, and

4.3.3 remedy any breach of the lease which has not been remedied and of which the tenant has been given notice.

4.4 If the Act applies and -

4.4.1 the tenant has asked the landlord to consent to a transfer and complied with clause 4.3, and

4.4.2 the landlord fails to respond by giving or withholding consent to the transfer within 28 days,

then the landlord is to be taken as having consented.

4.5 If the landlord consents to the transfer or sublease, the landlord, tenant and new tenant or sub-tenant and the guarantor must execute the documents submitted under sub-clause 4.3.2(b). The directors of the new tenant (if it is a corporation) must execute a guarantee and indemnity in the terms of clause 15.

21 The Act was the Retail Leases Act 2003 (Vic) which - as was generally accepted by the parties - applied to the lease.[8]

22 The lease was varied on 8 May 2009, to extend the term to 16 years and deal with the ownership of fuel tanks.

23 Then, on 10 June 2009, the Landlords became registered proprietors of the Sale property subject to the lease to BV.

24 By a sale of business agreement dated 14 May 2010, United agreed to purchase 19 retail petroleum businesses conducted by BV including the business conducted at the Sale site. The redacted agreement adduced into evidence shows the 'Settlement Date' was 1 September 2010 or such other date as may be agreed.

25 The agreement provided for United to conduct environmental and other due diligence, including testing, at the premises of each of the businesses. There were provisions for the parties to reach a further agreement in the event that testing revealed remediation costs above a certain amount (cl 24).

26 The agreement also provided that the agreement was conditional upon BV procuring the Landlords' consent for an assignment of the leases by the Settlement Date (cl 21.1). Further, that the parties were to do all that was 'reasonably required' to obtain the Landlords' approval to the assignment (cl 21.2).

27 Clause 21.4 also provided for a refund mechanism if the Landlords' consent was not obtained by the Settlement Date and this was not due to the default of the United as follows:

21.4 In the event that the Landlord's consent is not obtained to the Assignment of a Lease for a particular Premises by the Settlement Date, unless this is due to neglect or default of the Purchaser, then:

(a) The amount attributed to the particular Premises in Annexure 6, is to be paid to the Vendor's Solicitor, to be held in trust; and

(b) The Vendor will enter into a supply agreement, with the Purchaser for a period of 12 months from the Settlement Date; and

(c) Both the Vendor and the Purchaser will continue to seek the Landlord's consent to the Assignment of the Lease in accordance with this clause; and

(d) If the Landlord's consent is not obtained within 12 months from the Settlement Date then this Agreement shall be voidable at the option of the Purchaser to the extent of that particular Premises, and if avoided:

(i) the moneys held in trust by the Vendor's Solicitor, in respect of that particular Premises shall be refunded to the Purchaser; and

(ii) the Vendor must pay to the Purchaser, the Purchaser's cost of Testing for that particular site.

(e) If the Landlord's consent is obtained during the period of the supply agreement referred to in this clause then the moneys held in trust by the Vendor's Solicitor's shall be paid to the Vendor upon the obtaining of the Landlord's consent.

28 During its due diligence, United engaged SMEC Australia Pty Ltd (SMEC) to assess the level of contamination. SMEC provided a 'Due Diligence Contamination Assessment' dated 22 July 2010 that showed groundwater contamination above allowed standards (including in terms of arsenic, copper, zinc, TPH C6-C9 and benzene). It also found that the site was 'a source of offsite groundwater contamination' that did not comply with the 'SEPP' (State Environmental Protection Policy). More particularly, that groundwater wells located at the site contained 'LNAPL' and were also expected to contain high concentrations of dissolved hydrocarbons. LNAPL refers to 'Light Non-Aqueous Phase Liquid' which is the petroleum product floating above the water and not dissolved into the groundwater.

29 SMEC provided a further report dated 27 July 2010, which estimated the cost of remediating the site at between $666,000 and $799,200.

30 United and BV thereafter negotiated to enter a further agreement as contemplated by cl 24 of the sale of business agreement.

31 A formal agreement for remediation of the site, entitled 'Side Agreement', was then made on or about 1 September 2010 (the Side Agreement).

32 The Side Agreement provided for certain steps to be undertaken for the successful conduct of remediation to the site to achieve certain 'Remediation Standards' which were specified in Appendix 3.

33 In the interim, BV was to operate the site as a United brand site pursuant to a Fuel Supply Agreement (cl 3.4).

• The appointment of an environmental consultant (approved by United) to prepare a Remediation Action Plan (RAP) as well as the preparation of the RAP (as approved by an Independent Environmental Auditor) within six months after the Settlement Date (cl 2.3(a));

• The conduct of the 'Remediation Works' to be commenced within 12 months after the Settlement Date and completed within three years after commencement of the works ('Initial Remediation Works Period') (cl 2.3(d));

• A further period of testing to determine whether the RAP was effective of two years (the 'Rebound Period': see definition cl 1.1);[9]

• Once remediated, the delivery of a Retention Amount Payment Notice by BV for approval by United within 30 days after the Rebound Period (cl 2.4);

• Upon approval United was to pay to BV the Retention Amount and agree to take an assignment of the site (cl 2.6(a)). Further, within 120 days after the Notice was accepted, the parties were to assign the lease and end the Fuel Supply Agreement (cl 5.4).

35 The 'Remediation Works' were defined to mean 'the work and steps set out in the Remediation Action Plan that are determined by the Environmental Consultant and which are approved by the Independent Environmental Auditor that are necessary to be taken to Remediate Contamination or an Environmental Problem at the Sale Site to achieve the Remediation Standards within the Initial Remediation Works Period and "Remediate" and "Remediation" both have a corresponding meaning' (cl 1.1).

36 The 'Remediation Standards', contained in Appendix 3 of the Side Agreement, required that groundwater contamination

... must be Remediated by BV in accordance with:

(a) the State Environmental Protection Policy ('SEPP') Groundwater's of Victoria (The Groundwater SEPP) (1997); and

(b) The Clean Up and Management of Polluted Groundwater, Publication 840, April 2002.

As detailed in Part IV section 18 of the SEPP, the Non-Aqueous Phase Liquid (NAPL) must be removed from the Site unless EPA Victoria is satisfied that there is no unacceptable risk posed to any Beneficial Use by the NAPL.

Following removal of NAPL from the Sale Site, the groundwater must be Remediated to such a standard that protection of Beneficial Uses is restored.

In some cases this will not be possible or feasible, however, in all cases Contaminated and polluted groundwater must be Remediated 'to the extent practicable'. Successful Remediation 'to the extent practicable' is to be determined by EPA Victoria.

As detailed in the SMEC Report, the Protected Beneficial Uses of Groundwater at the Sale Site are Groundwater Segment B (referred to in Table 3.2 Protected Beneficial Uses of Groundwater Segments on Page 14 of the SMEC Report) reproduced below.

37 A table then follows which identified the various uses of groundwater that were deemed beneficial to the community (e.g. uses for stock watering or swimming etc). The uses to be protected depended on the particular segment (A1-D) identified with reference to the degree of salinity/total dissolved solids.

38 The reference to 'to the extent practicable' is a reference to CUTEP (clean up to the extent practicable). As explained by Mr Parmansche, this is a well-known process involving the EPA. Thus, where it is impractical to clean up the groundwater to the level needed to restore beneficial uses, the EPA may accept that clean up to the extent practicable has occurred and that, subject to further management, further clean up is not required.

39 The Retention Amount was defined as the amount of $100,000 which had been retained from the purchase price (cl 1.1). Clause 2.2 made further provision for it as follows:

2.2 Retention Amount to be held by United

The Retention Amount will be held and retained by United and only becomes payable to BV if:

(a) United notifies BV after the end of the Rebound Period that it agrees that the Environmental Problems of the Sale Site have been Remediated to achieve the Remediation Standards within the Initial Remediation Works Period: or

(b) United gives BV a notice that United wishes to take an assignment of the Sale Site Lease,

whichever is the sooner.

40 The Side Agreement also made provision for a Bank Guarantee which was defined as a guarantee from a Bank for an amount of $400,000 (cl 1.1).

7.1 Bank Guarantee

Within fourteen (14) days after the Settlement Date and in consideration of United entering into this Agreement and the payment of the Price (less the Retention Amount), BV must procure in favour of United and deliver to United a Bank Guarantee of BV's obligations under this Agreement. The Bank Guarantee must be unconditional and must be for a sum of at least $400,000. United is entitled to keep and apply the Bank Guarantee as security for BV's performance of its obligations under this Agreement until such time as:

(a) the Sale Site has been Remediated to achieve the Remediation Standards; or

(b) United terminates this Agreement,

whichever is the sooner.

42 In the event that BV had not taken relevant steps (namely to prepare a RAP; commence and complete the Remediation Works; and/or remediate the works to the relevant standards after the Rebound Period) there was provision for United to elect to require BV to assign the lease or to terminate the agreement (e.g. see cls 2.3(a), 2.3(d), 2.7(a)).

43 For example, cl 2.3(a) stated that if BV failed to comply with cl 2.3(a)(i) and (ii) (as to appointment of the consultant and preparation of the RAP), then United may elect 'at any time' after the expiry of six months after the Settlement Date:

(A) to require BV to assign the Sale Site Lease to United entitling United to demand from BV the then Remediation costs and expenses (as determined by an independent environmental consultant appointed jointly by the parties within a reasonable time and failing agreement by the President for the time being of the Law Institute of Victoria) associated with the Remediation of the Sale Site to achieve the Remediation Standards. In so doing, United is entitled to retain so much of the Retention Amount as is needed to set-off any amount owing to United under this clause 2.3(a) as well as apply the Bank Guarantee and the Directors' Guarantee to such debt; or

(B) to terminate this Agreement by giving written notice to BV to that effect in which case BV forfeits the right to payment of the Retention Amount (but is entitled to the return of the Bank Guarantee).

44 Pursuant to cl 7.2, BV was to procure Mr Van Breugel to grant a director's guarantee. Pursuant to cl 7.3, BV indemnified United against all losses that United may suffer from a breach by BV of the provisions of the Side Agreement.

45 Clause 8.1 further dealt with default and termination and provided that there was a default under the agreement if:

(a) a party breached a material provision of the agreement;

(b) it breached any other provision of this agreement and did not remedy the breach within thirty (30) days of written notice to remedy the breach;

(c) either party assigned its property for the benefit of creditors; or

(d) became an externally administered body corporate within the meaning of the Corporations Act.

46 Clause 8.2 provided for termination of the agreement if a party defaults on a 'material obligation' and does not remedy the default within 30 days of the non-defaulting party's written notice, while cl 8.3 provided for the consequences of default as follows:

8.3 Consequences of Default

If a party repudiates this Agreement or breaches a material provision of this Agreement the non-defaulting party may recover all money paid or payable to the defaulting party under this Agreement. However, a non-defaulting party must minimise its loss.

47 On 1 September 2010, United paid the price due under the sale of business agreement (less the Retention Amount). Pursuant to cl 7.1, $400,000 of the purchase price was also left with the vendor's agent and only released to the vendor on receipt of the Bank Guarantee.

48 Pursuant to cl 7.2, Mr Van Breugel also granted a guarantee and indemnity in favour of United in respect of BV's obligations under the Side Agreement.

49 After settlement, BV continued to operate the Sale business as a United-branded service station on a 24-hour trading basis.

50 On 22 September 2010, Bankwest issued a Bank Guarantee for the benefit of United as beneficiary. Clauses 1 and 2 provided as follows:

1. In consideration of the Beneficiary, at the request of the Customer, agreeing to accept this guarantee in connection with the Customer's obligations to the Beneficiary pursuant to the Contract, the Bank, subject to the terms of this guarantee but otherwise unconditionally, undertakes to pay to the Beneficiary on demand any sum or sums from time to time demanded in writing by the Beneficiary to an amount not exceeding $400,000.00, less the aggregate of any amounts paid by the Bank to the Beneficiary under this guarantee ('Guaranteed Sum').
2. If demanded, payment of the Guaranteed Sum will be made by the Bank to the Beneficiary without reference by the Bank to the Customer and not withstanding any notice to the Bank by the Customer not to pay and irrespective of the performance or non-performance by the Customer or the Beneficiary of the terms of the Contract.

To date, United Petroleum has not heard from Bonnie View of whom it has appointed as Environmental Consultant, nor sought approval from United. We would be obliged if your client attends to its obligations outlined in clause 2.3 of the Side Agreement immediately and advises United in the near future of the Remedial Action Plan and Remediation Works required.

52 By correspondence of 7 February 2011, Rennick & Gaynor (solicitors for BV) enclosed a report from JFTA Engineering Services dated 7 February 2011, the nominated Environmental Consultant. It further sought an extension of time for approval of the consultant to 18 March 2011 and for preparation of the RAP until 1 May 2011. The letter nominated Mr David Lam of Coffey Environments Pty Ltd as the Independent Auditor. The letter further suggested that JFTA had advised that there were gaps and discrepancies in the data in the SMEC report.

53 By correspondence of 23 February 2011, Rennick & Gaynor sought the approval of Mr Tony Hill as the Independent Auditor instead of Mr Lam.

54 United gave approval for the appointment of Mr Hill by correspondence of 25 February 2011. The oral evidence of Mr Carmeli was also that he agreed to an extension of time until May 2011 for the RAP. He did not recall more than one extension.

55 By correspondence of 21 April 2011, Rennick & Gaynor then served on United a 'draft remediation plan' by JFTA Engineering Services based on its report dated 8 February 2011. Further, Rennick & Gaynor served a letter/report from Senversa Pty Ltd dated 21 April, which suggested, inter alia, that a risk assessment stage be introduced 'immediately prior to preparation of the RAP'.

56 On 28 June 2011, Alliance Environmental Engineering and Consulting sent a letter to United. The letter stated: 'it should be noted that none of the documents provided to Alliance contains what may be considered a RAP' and 'is therefore not considered suitable for addressing cl 2.3(a)(ii)'.

57 By correspondence from United of 29 June 2011, United advised that the information provided was 'not considered to be a RAP'.

58 Rennick & Gaynor then confirmed in correspondence on 13 July 2011 that the report was 'interim' and that a further report would be provided and was 'already in the process of being drafted'.

59 On 29 July 2011, documents were sent from Alliance EPM (a different Alliance) to BV. The letter stated that the scope of the services for the project included presenting a draft RAP to United which 'aims to deliver commensurate risk mitigation and management options for ongoing service station use rather than the existing and more onerous CUTEP requirements'. The scope of the services contemplated therefore appeared to be inconsistent with the requirements in the Side Agreement.

60 By correspondence of 1 August 2011, United referred to the letter of 13 July 2011 and sought advice as to the provision of the RAP, noting there were 'strict timelines' in the Side Agreement which BV was expected to meet.

61 By August 2011 the extended time given for the preparation of the RAP (May 2011) had passed. Under cross-examination Mr Carmeli also agreed that he did not assert as at 1 August 2011 that the time for the RAP had expired. However, there were discussions that the first stage of preparing the plan should be a delineation of the contamination to understand what needed to be done (which was part of the RAP). He was of the view that they were progressing.

62 In the meantime, on 2 August 2011, Rennick & Gaynor forwarded an email from Mr Ivan Devcic of Alliance EPM to United which suggested that the contract requirements were 'way too conservative'. The tenor of much of Mr Van Breugel's approach thereafter suggested that he wanted to substitute some different approach to that provided in the Side Agreement. As he himself said, he thereafter spent the next two and a half years 'attempting to negotiate a (different) agreement with the plaintiff - without success'.

63 On 12 August 2011, there was a meeting between Mr Devcic of Alliance EPM and Mr Elias Anastasiou of United. Mr Carmeli stated that he suggested that Mr Van Breugel should conduct a tank and line test to determine the source and cause of the contamination.

64 By correspondence from Rennick & Gaynor to Middletons dated 2 September 2011, BV appeared to be attempting to ask the vendor to be liable for any contamination.

65 By correspondence of 18 April 2012,[10] Rennick & Gaynor alleged that United had conceded that the remediation standards in the Side Agreement were impractical and 'an alternative needed to be negotiated'. They also suggested that, on the basis of their Alliance report, the contamination was not new contamination and the Landlords were responsible for it given its age. It proposed that United should take an assignment of the lease and the Side Agreement be cancelled.

66 This was followed up in correspondence of 4 September 2012 wherein Rennick & Gaynor stated that the contents of their previous letter contained a 'common sense approach' to finalising the matter.

67 By email of 11 September 2012, United merely noted that Rennick & Gaynor would send a letter 'outlining your client proposal to complete this matter'. However, there was no acceptance of the proposal to cancel the Side Agreement.

68 By correspondence of 24 July 2013, Rennick & Gaynor wrote to United referring to 'recent discussions' and stated: 'it is generally agreed between United Petroleum Pty Ltd ('United') and our client that it is impracticable for the above named site to be remediated to the standard prescribed in the Sale Side Agreement'. The letter then included a proposal that BV install 'an intervention trench in the south east corner of the site' as well as recovery wells.

69 In a letter from United to Rennick & Gaynor dated 11 September 2013, United noted 'in response to the works proposed in item 7 of your letter we advise that any such works must be documented within the RAP report, which, as per the Side Agreement, are required to be endorsed by the Auditor'. The letter also stated that the 'timeframe for remediation will lapse in August 2014'.

70 Mr Carmeli's evidence was that United was still expecting BV to prepare a RAP and they were working together with BV and were of the view that the matter was progressing.

71 In correspondence to United from Rennick & Gaynor of 18 November 2013, Rennick & Gaynor alleged that the reports identified any off-site contamination as being pre- 2004 and the responsibility of the Landlords. It asked: 'please advise why United thinks that the proposal our client has put forward, combined with the protection given in the Lease is not satisfactory to them'.

72 In oral evidence Mr Carmeli said that United rejected the trench idea verbally and they discussed a groundwater monitoring event to understand the current state of contamination. The parties were still working towards the production of a RAP.

73 In an email to Rennick & Gaynor dated 14 February 2014, Mr Carmeli stated that United would consider its proposal based on the results of the GME (Groundwater Monitoring Report) that was to be undertaken by Kleinfelder, 'however United is not prepared to commit any further action until receipt of the test results'.

74 In an email of 17 February 2014, Rennick & Gaynor stated their 'client agrees to pay the sum of $8918.00 for the ground water monitoring report'. The letter also stated that BV had reports that it had undertaken that showed that 'any contamination at the site is 25 years or more old'; 'that there have been no leaks in the tanks' while BV has been in occupation of the site; and that 'there has been no new contamination at the site'.

75 On 7 April 2014, a report from Kleinfelder Australia Pty Ltd was obtained. It concluded that the groundwater quality beneath the site had declined significantly since groundwater monitoring undertaken in 2004 and 2010 and listed a number of recommendations, including that a remediation action plan be developed.

76 A meeting took place on 26 June 2014. Mr Carmeli, Mr Van Breugel, Ms Sheedy of Rennick & Gaynor, Ms Fiona Garvey, Mr Ronak Katira and Mr Hopwood of United were present at the meeting. It was clear by this stage that Mr Van Breugel was attempting to exit the agreement and hand over the site.

77 According to Mr Carmeli, Mr Van Breugel actually said he wanted to hand the site over. Mr Carmeli responded:

Well, you need to make sure that you have cleaned up the site as required under the Side Agreement. The Kleinfelder report shows an increase in contamination. What I suggest is that you do the steps suggested by Kleinfelder in their report, delineate the site and do a tank and line test and then we can talk further.

78 In oral evidence Mr Carmeli agreed that Mr Van Breugel was seeking to delineate between pre and post-2004 contamination and that United raised Kleinfelder as an option.

79 Similar evidence was given by Mr Hopwood. Thus he said that:

Mr Carmeli said that BV had to remediate the site pursuant to the Side Agreement and that BV should take steps as highlighted in the First Kleinfelder Report by both delineating the site and doing a tank and line test. Mr Van Breugel asked whether United had any issue with BV using Kleinfelder. Mr Carmeli said United did not.

80 The evidence of Mr Van Breugel was simply that it was agreed at the meeting (which he dated in July 2014) that United would employee a consultant to assess the level of contamination on site with such contamination being post-2004 from which a quotation could be prepared for remediation. Those present at the meeting recommended Kleinfelder.

81 In terms of the concept of quotations, the evidence of Mr Carmeli was that the initiative of providing quotes so as to exchange his obligations under the Side Agreement with monetary compensation was coming from Mr Van Breugel. However, when BV presented quotes that were below what United thought the costs would be United said 'please remediate it as per the Side Agreement'.

82 On 30 June 2014, Rennick & Gaynor sent a letter to United referring to a meeting of 26 June 2014 and enclosing an Alliance EPM report dated 29 July 2001. The letter sought to suggest that there was an 'agreement' reached in the meeting (of 26 June 2014) as follows:

1. The remediation standards in the Sale Side Agreement between the parties were not practical;
2. Our client will attend to undertaking the recommendations on page 23 of the Kleinfelder Ground Water Monitoring Event recently undertaken;
3. That United has no objection to our client engaging Kleinfelder to undertake the recommendations, and in fact supports its appointment;
4. United will not enforce its obligations under the Sale Side Agreement between the parties at this stage.

83 There was no support for the making of the suggested agreement on the evidence of Mr Van Breugel above. Both Mr Carmeli and Mr Hopwood also maintained that the letter did not accurately reflect what occurred at the meeting.

84 In any event, by letter of 1 July 2014, United responded. United advised Rennick & Gaynor that at no stage did they 'say or agree that the current remediation standards in the Side Agreement were not practical'. They noted rather that 'recent investigations suggest that there is fresh contamination on and off that property'. United further said it had no objection to BV 'engaging Kleinfelder to make the necessary recommendations' but that 'United reserves all its rights under the Side Agreement'.

85 A letter from Rennick & Gaynor of 3 July 2014, noted that 'tank and line testing would occur on 10 and 11 July 2014'. Kleinfelder was also to present BV with a 'Scope of Works by the end of the week'.

86 In a letter from Rennick & Gaynor of 18 August 2014, BV advised United that their client was of the view 'that any liability for contamination falls on the registered proprietor of the property' and that their client was not obliged to clean up any contamination.

87 By correspondence of 2 September 2014, Mr Hopwood of United wrote:

Dear Trish

I write further to your letter dated 18 August 2014.

In your previous letters (dated 30 June 2014 and 3 July 2014), you indicated that you were proposing to engage Kleinfelder to undertake its recommendations regarding the groundwater monitoring assessment that had originally been undertaken and that Kleinfelder was presenting your client with a Scope of Works by 4 July 2014.

You also indicated that tank and line testing would be undertaken on 10/11 July 2014.

Please confirm the status of the above and provide us with a copy of any report or findings received (if any).

Upon receipt, I will seek my client's instructions on the matters raised in your 18 August letter.

88 By correspondence of 12 September 2014, Rennick & Gaynor advised that Kleinfelder was likely to provide the report in the next two weeks.

89 In September 2014, BV received a further report dated 29 September 2014 from Kleinfelder which concluded (amongst other things) that LNAPL was measured on site in two wells. Diesel contamination of the groundwater was 'relatively new (i.e. less than six years)' and remediation actions should be considered on-site.

90 By correspondence of 1 October 2014, Mr Hopwood wrote that the Kleinfelder report was being reviewed 'to determine the extent of the contamination on site and the scope of the Remediation Works to be undertaken'.

91 In a further letter of 8 October 2014, Mr Hopwood of United wrote:

It is clear from the above that there is contamination on site which has occurred after 2004. In addition, LNAPL is likely to be present in the soil which will continue to act as a secondary source of groundwater contamination and some contamination has migrated off-site (although now successfully delineated). It is also clear that Kleinfelder recommend that active remediation actions be undertaken together with on-going monitoring.

Based on our experience and discussions with experts within the industry, we believe that the costs associated with remediating the Property may exceed $500,000.

We agree to have a meeting to discuss how your client proposes to deal with the findings of the Report. Please advise of availability after 20 October 2014 and I will confirm available dates by return.

92 Mr Carmeli said that he attended a further meeting on 29 October 2014 with Mr Hopwood and Mr Van Breugel (Ms Garvey, Mr Katira and Ms Sheedy were also present).

93 At the meeting, Mr Van Breugel said that he would seek advice from Kleinfelder regarding remediation requirements for the Sale property and costings. He could not recall whether there were discussions about quotes at that time.

94 Mr Hopwood's evidence was that he said to Mr Van Breugel that United's position in respect of remediating to the Side Agreement standard was 'reserved' but it would also be helpful to get an indication of the cost of remediating to the 2004 level. However, in answer to a question under cross-examination he agreed that he could not actually recall using the words 'reserve our rights' but at no stage did he say that they did not reserve their rights.

95 He believed there was reference to obtaining a quotation as to costs for remedying the land. The issue came up because Ms Sheedy asked whether United was prepared to take on the lease to the 2004 level. He did say it would be helpful for getting instructions in response if they could give an indication as to what the cost would be to remediate to the 2004 level, but at no stage did he say that they would agree to a different standard.

96 The evidence of Mr Van Breugel was that at the meeting Mr Carmeli said that they would not want to take on a site that had contamination that they might have to clean up at the end of the lease. It was agreed at the meeting that the next step for the parties was that BV would obtain a quotation for Remediation Works based on the recommendations of the Kleinfelder Australia Report. At that meeting he also suggested he would write to the Landlords to see if he could negotiate an arrangement whereby they assumed all responsibility for contamination on the site, given that the majority of it was historical.

97 On 24 November 2014, Mr Hopwood further wrote an email saying:

I note that at the meeting, you agreed to seek further advice from Kleinfelder as to what remediation is required at the premises and the approximate costs for undertaking the remediation work.

Please advise on the current status.

98 Then by correspondence of 26 November 2014, Rennick & Gaynor wrote:

We refer to your email to our office dated 24 November 2014.

We are instructed by our client as follows:

1. Kleinfelder are refusing act in in this matter, it claiming it is conflicted;

2. Our client has engaged another consultant to continue and we understand that our client is meeting with this new consultant later this week;

Once that meeting has occurred, we will likely be in a better position to give you a time frame for when further works may be conducted.

We will keep you appraised.

99 By correspondence of 12 January 2015, Rennick & Gaynor enclosed a report dated 18 December 2014 from ARC Environmental estimating the cost to remediate the Sale site. This was based on an assumption of ARC's understanding of the future on-going site use 'as a service station'. This report puts the costs at $183,700 with a '80% confidence limit'. Rennick & Gaynor alleged that it had complied with the Side Agreement since the Kleinfelder report indicated that the contamination on site did not represent unacceptable risk to the beneficial use. Nevertheless, it also made a further proposal, to finalise the matter and on a without prejudice basis, that BV pay $80,000 for United to return the guarantee and take an assignment of the lease.

100 The evidence of Mr Carmeli was that the probabilistic report was referred to their environmentalist who suggested it was based on many unknown assumptions and he believed the legal department responded - though there is no response in evidence. In any event, there was no acceptance by United of the proposal.

101 In late February 2015, United engaged consultants (Tonkin & Taylor) to provide a strategy and cost estimate for remediating the site to the standard required under the Side Agreement. Tonkin & Taylor provided a report in March 2015. The estimate provided was between $433,000 to $555,000.

102 It was accepted by the defendants that BV had not obtained a RAP by February 2015.[11]

103 On 23 February 2015, voluntary administrators were appointed to BV.

104 On 27 February 2015, United wrote to the administrators, giving notice that it intended to call on the Bank Guarantee which been given under the Side Agreement. Further, that this was not be taken as an election as at that time so the monies would be retained and not applied to remediate until an election was made. 'For the avoidance of doubt, United reserves all its rights under the Side Agreement - including its right to make an election'.

105 United called on the Bank Guarantee later that day.

106 By correspondence of 2 March 2015, Mr Crisp wrote to United saying it had no right to cash the Bank Guarantee.

107 Meanwhile Mr Carmeli gave evidence that he and Mr Hopwood had met with Mr Coad (one of the Landlords) to negotiate the terms of a lease following assignment. Following a conversation that took place on 19 March 2015, Mr Carmeli advised Mr Hopwood that he had reached a verbal agreement with the Landlords as follows:

1. A new 15 year term commencing as soon as possible;

2. Commencement Rent is $195,000 per annum;

3. The Tenant is exempt from Land Tax even if the Act does not apply;

4. Annual increases during the first 5 years are 3% per annum;

5. Annual increases from Year 6 to Year 15 are 3.5% per annum;

6. 4 x 5 years options with Market Review before each options.

In the discussion, I was advised that yesterday the LL has disclosed to the Administrator our offer to lease it for less rent.

The Administrator has advised the LL that this is not acceptable and the only way it could proceed is by assignment of the Lease.

They again spoke this morning and the LL has advised the Administrator that we are considering the Assignment of the Lease on the same terms and conditions

108 Mr Carmeli's evidence was that he thereafter instructed a Mr Manolitsa, a property lawyer, to prepare a Variation of Lease document which made clear that the terms agreed upon would take effect immediately upon assignment of the lease from the Administrators.

109 On 26 March 2015, Mr Carmeli called Mr Coad to chase up the return of the Variation of Lease. According to the evidence of Mr Carmeli, Mr Coad called him on 26 March 2015, and left a message which said 'I have decided to accept Caltex's offer, I'm sorry but we can't do the deal' (there had been reference during the negotiations to a major oil company being one of the other interested parties).

110 On 26 March 2015, United wrote to the administrators. It is accepted by BV that this constituted an election under the Side Agreement. The letter alleged that BV had failed to comply with its remediation obligations (specifically to prepare a RAP and to commence Remediation Works). It further stated:

Pursuant to clause 2.3(a)(A) of the Side Agreement, United requires you to assign the lease to it with immediate effect. In so doing, United is entitled to (and will) retain the full amount of the Bank Guarantee in order to remediate the Property to the Remediation Standards.

Please confirm by 4pm Friday 27 March 2015 that you agree to the assignment on the above terms and will otherwise comply with your obligation pursuant to clause 5.2 of the Side Agreement.

111 The letter also enclosed the report dated 18 March 2015 from Tonkin & Taylor estimating the cost of remediating the site to the Side Agreement standard as between $455,000 to $555,000.

112 By further correspondence of 26 March 2015 addressed to Mr Coad, Mr Hopwood alleged that he was instructed that on or about 19 March he had verbally agreed with United to grant to United a lease on the following terms, 'such terms to vary (where relevant)', the existing lease with BV:

(a) the property the subject of the lease will be the property currently leased to Bonnie View Pty Ltd (in administration);

(d) there will be annual increases during the first 5 years of 3% per annum, and annual increases from years 6 to 15 at 3.5% per annum;

(e) United is exempt from land tax even if the Act does not apply;

(f) there will be 5 x 5 year options, with a market review before each options; and

(g) United will take on the responsibility and clean up (remediate) the Property.

113 Further, that he had subsequently advised Mr Carmeli by phone that:

(a) you have now reached an agreement with Caltex regarding a new lease;

(b) you have signed a letter of offer from Caltex;

(c) this agreement with Caltex was reached because they offered you more rent; and

(d) you have no intention of complying with your agreement.

114 The letter further sought confirmation by 27 March 2015 that he would not enter into a new lease with Caltex and that he would honour the 'agreement', otherwise he had instructions to issue proceedings on the basis that there was a concluded lease/ agreement to lease.

115 Consistent with the reference to 'vary', the evidence of Mr Carmeli was that the discussion was that there had to be an assignment of the lease and then this (varied) lease came into play. Mr Hopwood also maintained that his instructions were that the arrangement was going to be an assignment of the lease and then a variation.

116 Also on 26 March 2015, the Landlords purported to terminate the lease. The letter read:

We wish to advise you that we are terminating the lease immediately due to unpaid rent due on 15/02/2015.

117 The clause cited was cl 7.1 which included sub-cl 7.1.1, namely, that the rent was unpaid for 14 days. However, as will be seen below, a termination on this basis was unlawful absent prior notice under s 146(1) of the Property Law Act 1958 (Vic) (PLA).

118 On 27 March 2015, United further lodged a caveat. The ground cited was a lease with the registered proprietor and BV and the date of the claim was 19 March 2015.

119 On 27 March 2015, the administrators' solicitors, Partners Legal, responded to United's letters of 27 February and 26 March, stating (amongst other things) that, given the termination, the company was not in a position to assign the lease.

120 At a meeting on 30 March 2015, BV's creditors resolved that it go into liquidation. Mr Crisp is recorded as stating that given the costs of adhering to the agreement and United's assessment of remediation costs of over $500,000 he did not see the benefit of assigning the site. He was further of the view that if the lease was unable to be assigned that the $400,000 Bank Guarantee should be returned to the company.

121 On 31 March 2015, the Landlords' solicitors, Still & Co, denied that there was any lease or agreement to lease the property. They also advised that the proprietors had now entered into an agreement with another party to lease the property. The letter also said:

At no time did Mr Carmeli inform Mr Coad that United Petroleum had taken an assignment of the Bonnie View lease nor has any consent to such an assignment or transfer been sought or obtained from the proprietors.

122 On 31 March 2015, United commenced this proceeding against BV and the Landlords. United sought an injunction against the Landlords alleging that the Landlords had breached the lease 'agreement' by purporting to terminate the lease with BV and purportedly signing a letter of offer with Caltex. United also sought an order that BV do all things necessary to assign the lease.

123 Following issue of a summons, on 2 April 2015, Zammit J made orders giving United leave to proceed against BV and granted an interim injunction restraining the Landlords from taking any steps to terminate the lease or from entering into any lease with a third party.

124 On 17 April 2015, Bell J continued the injunction until trial.

125 On 9 April 2015, solicitors for United again requested the administrator to do all acts and things necessary to assist United to successfully take an assignment of the lease.

126 By correspondence from solicitors for BV of 15 April 2015 it was suggested that it was 'inappropriate' to demand that BV do all thing necessary to arrange an assignment of the lease.

127 By correspondence of 2 July 2015, United's solicitors again requested that BV do all things necessary to procure the assignment of the lease.

128 On 15 July 2015, the liquidators served a disclaimer notice in respect of the Side Agreement. On 9 October 2015, they served a disclaimer notice in respect of the lease. However, it was not suggested that the disclaimer notices raised any defence to United's claims in this proceeding.

129 United has applied to this Court to set aside the disclaimer notices. The applications were heard by Randall AsJ in December 2015, with further hearings in November 2016. His Honour's decision is reserved.

130 On 24 November 2015, United again requested BV to call for an assignment; it also offered to pay all the liquidators' costs and expenses of calling for the assignment of the lease.

131 Then on 5 July 2016, following two court ordered mediations, United entered terms of settlement with the Landlords on 5 July 2016 for entry into a new lease. United says this was done so as to mitigate its ongoing loses and so as to obtain a leasehold interest which it was not able to achieve by way of assignment. The rent was $254,457 per annum plus GST with a term of 15 years with four further terms of five years each.[12] The commencement date was the later of the execution of the new lease or date on which the injunction was dissolved.

132 Subsequently, by an Order of Riordan J made on 15 July 2017, the injunction was dissolved and the proceedings against the Landlords were dismissed.

133 Given the case raises questions of contractual construction, it is necessary to outline relevant principles before turning to the issues.

134 In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.[13] This enquiry requires consideration of the language used by the parties in the contract, the circumstances addressed by the contact and the commercial purpose or objects to be secured by the contract.[14]

135 The objective approach requires reference to the text, context and purpose.[15]

136 In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[16] the High Court considered, without unanimously deciding, the circumstances in which recourse might be had to matters external to the text, context and purpose of a contract as revealed by the contract itself; in particular, as to whether ambiguity in the relevant contractual provision must be shown. However, French CJ, Nettle and Gordon JJ stated that:

[o]rdinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.[17]

137 In giving contracts a businesslike interpretation, the Court approaches the task on the assumption that the parties intended to produce a commercial result and, accordingly, a commercial contract is to be construed so as to avoid 'making commercial nonsense or working commercial inconvenience.'[18] Accordingly, if there are reasonably open competing constructions, the preferred construction is the one that avoids capricious, unreasonable, inconvenient or unjust consequences.[19]

138 The task of interpreting a contractual term begins with the words. If they are unambiguous and do not give rise to commercial nonsense or commercial inconvenience, the Court must give effect to them, notwithstanding that it may be guessed or suspected that the parties intended something different. As to whether a proffered construction of a term produces commercial nonsense or inconvenience, the Court must, in accordance with the objective approach to interpretation of contracts, assess those matters by reference to what persons in the position of the parties would have reasonably understood at the time the contract was made.[20]

Issue 1 - Did BV breach the Side Agreement by failing to commence or complete the Remediation Works and/or by refusing or failing to do all things necessary to procure the assignment of the lease?

139 Before considering the two breaches above, two breaches of the Side Agreement are clearly established.

140 First, it was common ground that BV did not prepare a RAP which was a breach of cl 2.3(a)(ii). This also triggered a right to make an election to call for an assignment of the lease pursuant to cl 2.3(a)(A).

141 There was also a breach of cl 8.1(d) of the agreement given BV went into voluntary administration and liquidation and thereby became an externally-administered body corporate within the meaning of the Corporations Act.

143 As the above chronology makes clear, BV did not commence any 'reviewed and approved' Remediation Works within 12 months after the Settlement Date for the purposes of cl 2.3(d)(i). Nor did it complete any such works within the Initial Remediation Works Period under cl 2.3(d)(ii). Nor could it: given no RAP was prepared, no Remediation Works had even been identified.

144 BV also admitted that it did not commence or complete the Remediation Works subject to the positive defences below.[21] Accordingly, there was, prima facie a breach of cl 2.3(d)(i) and (ii).

145 I also do not consider that there is any merit in the suggestion that this breach was not pleaded.[22] Rather, the breach is pleaded in paragraphs 12 and 30A of the Amended Statement of Claim with consequential loss and damage pleaded in paragraphs 30 and 30B. The case was also run on the basis that this breach was alleged such that no prejudice would arise out of any ambiguity in any event.

146 Pursuant to cl 2.3(a), United was entitled to require BV to assign the lease following the failure to prepare the RAP within six months after the Settlement Date.

147 Although this may appear to impose an absolute obligation, the parties generally accepted that this would be too onerous and that the obligation should be contained by the provisions of cl 5. Thus, cl 5.2 provides that at the time that United wishes to take an assignment of the lease, BV must do 'all acts and things necessary' to assist United to successfully take an assignment and to give effect to cl 5.1 (although the latter obligation would not apply in the case of an election). Even if cl 5.2 did not apply, it would also be reasonable and equitable; necessary; and obvious for such a term to be implied.[23]

148 What was necessary included requesting the Landlords' consent (under sub-paragraph (a)). However, it should also be informed by reason of the provisions in the lease itself. As indicated above, cl 4.3.1 required the tenant to ask the Landlords in writing for such a consent. It would also be necessary for BV to do the relevant acts within a reasonable time of the request being made.

149 There was no evidence adduced that BV asked the Landlords in writing for consent to a transfer within a reasonable time of the election, or at all. This was consistent with the position taken in the pleadings wherein BV did 'not admit' that it breached the Side Agreement by refusing and failing to do all things necessary to procure an assignment of the lease.[24] In opening, Counsel for BV also conceded that 'we didn't procure the assignment'.[25] This was despite the fact that BV was asked to assign the lease on at least three separate occasions (26 March 2015, 9 April 2015, and 2 July 2015).

150 This is sufficient to, prima facie, establish the breach alleged. However, for the sake of completeness, it is necessary to refer to some oral evidence from Mr Crisp which emerged under cross-examination.

151 Thus, under cross-examination, Mr Crisp gave the following evidence:

Did you, Mr Crisp, as one of the administrators make any attempt to assign the lease to United?---I did request the Landlord on numerous occasions whether he had entered into a lease with United, yes.

Where is your request for assignment?---It was verbal. On numerous occasions.

152 However, he agreed that any such request was not in writing.

153 Under re-examination he also alleged that he had 'discussions' throughout the course of March 2015. Specifically, after receipt of the letter of 26 March 2015 he called Mr Coad and asked him 'what he wished to do' in relation to the request for an assignment of the lease. Mr Coad said that he had a deal with Caltex and did not want to deal with United. He thereafter sent a termination notice.

154 He also claimed he had a final meeting with Mr Coad on 9 September 'in terms of the subject matter of obtaining the lease, assignment of existing lease or a new lease'. At the conclusion of the meeting Mr Coad advised that at no cost would he deal with United and shortly thereafter Mr Crisp disclaimed the lease.

155 The evidence was unsatisfactory. It was conclusory in nature and did not detail with any precision the conversations which allegedly took place with Mr Coad. It had also never been the subject of any pleaded case. This evidence and the suggestion of Mr Crisp that he was now trying to say that he had attempted to procure the assignment also appeared to be contrary to a statement in Mr Crisp's earlier affidavit of 10 April 2015 that the Landlords had not provided any written consent 'and BV has not requested any such consent'.[26] As is indicated above, there was also evidence that Mr Crisp did not see any benefit in an assignment at the time.

156 In any event, even at its highest, it did not evidence a clear request by Mr Crisp to assign the lease. This was consistent with the closing submissions of Counsel for BV, who could only suggest that Mr Crisp 'did make inquiries of them [the Landlords] as to their attitude to an assignment of the lease'.[27] This is clearly inadequate.

157 I am not satisfied that BV did all 'acts and things necessary' to assist United to take an assignment. There was certainly some distraction caused by the attempted termination of the lease as well as the attempts made by United to negotiate a varied lease following any assignment. However, it was not pleaded that this absolved BV from its obligations to do all things necessary to assist United to take an assignment under the Side Agreement within a reasonable time (which would be no more than two to three weeks) of the request. This was clearly not done in circumstances where BV failed to even attempt to request an assignment - in writing or otherwise - at any time after the election of 26 March 2015.

158 It follows that there was a prima facie breach of the obligation to do all things necessary to assist United to take an assignment of the lease.

Issue 1(a) Whether United's claim for damages for failure to procure the assignment of the lease is limited or excluded by cl 2.3(a) of the Side Agreement

159 The above issue is mischaracterised since the pleading makes it clear that the defence is directed to the claim for damages for failure to conduct the Remediation Works.

160 Thus, the pleaded defence cited was that the Remediation Works were not to be commenced until a RAP had been prepared and reviewed and approved by an Independent Environmental Auditor under cl 2.3(a)(ii) of the Side Agreement.[28]

161 In closing submissions it was emphasised that the three provisions: cl 2.3(a), 2.3(d), and 2.7(a) were 'cascading' so that the parties' rights and obligations under cl 2.3(d) would not be enlivened until BV's obligations under cl 2.3(a) (as to preparation, review and approval of a RAP) were first satisfied. Further, that if, upon BV's failure to prepare a RAP under cl 2.3(a) United was to exercise its right of election under cl 2.3(a), then it would necessarily follow that BV would be discharged from its obligations under cls 2.3(d) and 2.7 given the intention at that point was that United was to complete the Remediation Works for itself.

162 However, United was entitled to performance of the contract which was intended to include performance of the Remediation Works. Although it was true that there were not yet any 'reviewed and approved' Remediation Works, this was wholly the fault of BV. A state of facts brought about by the act of a party cannot be used as an excuse for failure to perform a contractual obligation.[29]

163 There is also no 'discharge' of BV's obligations in circumstances where no assignment actually took place such that the quantification procedure in cl 2.3(a)(A) could not operate. Put another way, there can be no discharge by performance where performance has not taken place.

164 I am therefore not satisfied that United's claim for damages is limited or excluded by cl 2.3(a)(A) as alleged.

Issue 1(b) Whether United's claim for damages for BV's failure to remediate the Sale site is limited or excluded by cl 2.3(d)(A)

165 The precise defence alleged was as follows:[30]

Further and more particularly as to subparagraph 13(b) of the statement of claim, any entitlement which United might have, or might have had, under clause 2.3(a)(A) of the Side Agreement to retain and set-off any part of the Retention Amount and to apply the Bank Guarantee against Remediation costs and expenses (which entitlement is not admitted) was conditional and contingent upon the determination of the amount of such Remediation costs and expenses by an Independent Environmental Consultant appointed jointly by the parties within a reasonable time or, failing agreement, by the President for the Law Institute of Victoria, which conditions have not been satisfied.

166 This matter was otherwise not pursued in closing submissions - written or otherwise - and appears more directed to the entitlement to the Bank Guarantee and Retention Amounts.

167 In any event, for reasons given above, BV cannot complain that the calculation mechanism has not been utilised in circumstances where that failure is due to the default of BV itself (in failing to effect the assignment).

168 Further, United is entitled to its ordinary common law remedies for breach of contract. This is supported by the general presumption that a contracting party does not intend to abandon its common law remedies for breach of contract.[31] There was nothing to suggest that the quantification mechanism was intended to provide the sole remedy in this case.

169 Cl 12.6 also made this clear beyond doubt. Given its general significance it is set out in full as follows:

(a) A party may exercise a right, power or remedy at its discretion, and separately or concurrently with another right, power or remedy. A single or partial exercise of a right, power or remedy by a party does not prevent a further exercise of that or of any other right, power or remedy. Failure by a party to exercise or delay in exercising a right, power or remedy does not prevent its exercise.

(b) A party is not liable for any loss caused by the exercise or attempted exercise of, failure to exercise, or delay in exercising the right, power or remedy.

170 United's claim for damages is therefore not excluded by cl 2.3(d)(A) as alleged.

Issue 1(c) Whether the time for preparation, review and approval of a Remediation Action Plan was varied by agreement and, if so, whether the time for commencement of the Remediation Works was thereby postponed

171 Pursuant to paragraph 12(b) of its Defence BV alleged that the time for preparation of a Remediation Action Plan under the Side Agreement was extended from time to time by the agreement of United and BV.

172 BV further submitted that on the basis of the correspondence; the absence of complaint or insistence by United on strict compliance; and the oral evidence of Mr Carmeli, the Court should find that the time for preparing, reviewing and approving the RAP was extended by agreement. This was said to be consistent with authority where a contract for service had expired but the parties are deemed to have agreed to the continuance of the contract by tacit consent.[32] The effect of the parties' conduct was to extend the time for the preparation of the RAP at large such that BV would not be in breach unless United refixed the time.[33]

173 It is true that the initial time period for preparation of the RAP had passed (even on the extension granted which was until May 2011). However, I can discern no concluded arrangement to give up rights for any particular time or 'at large' as BV now contends. This is made clear by a number of items of correspondence which present a cumulative picture that United generally continued to reserve its rights under the Side Agreement. For example:

• The evidence of Mr Carmeli that only one extension was granted;

• On 29 June 2011, United advised that the JFTA document was not a RAP and did not satisfy BV's obligations under the Side Agreement;

• On 1 August 2011, United drew attention to the 'strict timelines' in the agreement;

• On 11 September 2013, United cited the Side Agreement and noted that the timeframe for remediation would lapse in August 2014;

• In June 2014, Mr Carmeli advised that BV needed to make sure that the site was cleaned up as required under the Side Agreement;

• On 1 July 2014, United explicitly reserved its rights under the Side Agreement; and

• Although specific words such as United 'reserves its rights' may not have been used in the meeting of 29 October 2014, the unchallenged evidence of Mr Carmeli was that whenever quotes were presented BV was continually asked to remediate 'as per the Side Agreement'. Mr Hopwood also said that at no stage did they say they would agree to a different standard.

174 I also do not accept that there was an 'absence of complaint' by United. Thus, the correspondence already cited suggests that United generally urged BV to perform its obligations under the Side Agreement.

175 In terms of the cases cited, Bullock concerned a contract of service of one year. In circumstances where the engagement continued after the year the court found that there was 'tacit consent' to a continuance of an engagement for another year on the same terms. This does not assist BV in relation to the circumstances of this case. First, the case is not concerned with circumstances where (as here) a contract clearly continued to subsist although relevant timelines had expired. Second, there were no explicit terms (as here) which gave clear rights to United to exercise rights at any time.

176 The reference to Carbon Black also appears to be misconceived. That case was concerned with an application to remove a caveat lodged by the applicant purchaser under a contract for the sale of land where time was of the essence. The respondent alleged that the contract was at an end by reason of the service of a notice of default and rescission. An issue was whether, having granted an indulgence such that time was no longer of the essence, the respondent had restored the position so that time was again of the essence. The case provides no assistance to BV. As Counsel conceded, this case was not concerned with a contract where time was of the essence at all.[34]

177 A proper characterisation of the conduct of the parties in this case was that, given the lengthy time periods allowed for (e.g. at least five years was allowed to undertake and assess the works) United was content, for the time being, to allow the process to continue to allow BV to delineate the extent of contamination on the site which was necessary for the RAP. Mr Van Breugel also sought to obtain an alternative commercial resolution to avoid what he considered to be the onerous obligations of the Side Agreement.

178 This does not amount to an agreement to give up rights. This is particularly so given the relevant election was able to be exercised 'at any time' after the relevant expiry. Indeed, the evidence went no higher than the fact that there was a delay in the exercise of a right. However, cl 12.6 specifically provided that a delay in exercise 'does not prevent its exercise'.

179 No agreement is sustained as alleged. Rather, as highlighted above, Mr Van Breugel spent two and a half years 'attempting to negotiate an (alternative) agreement with the plaintiff - without success'.

180 It would also be necessary to demonstrate that consideration was provided for any varied agreement if it was to be established. Given my finding above, however, it is unnecessary to consider this further.

181 I am therefore not satisfied that the Side Agreement was varied as alleged.

Issue 1(d) Whether United was required to serve written notice of default on BV for breaching cl 2.3(d) and, if so, what effect (if any) the failure to serve the notice had

182 In closing, this issue was abandoned.[35] This was appropriate given this submission relied on cl 8.2 which dealt with termination and did not exclude a common law claim for damages in any event.

Issue 1(e) Whether the 'Remediation Standards' under the Side Agreement are void for uncertainty and, if so, the effect (if any) on United's claim

183 In his defence, Mr Van Breugel alleged that the Remediation Standards did not specify a proper or meaningful standard and are uncertain. It followed that cls 2.3-2.7 are void for uncertainty and are of no effect.[36]

184 In submission, Mr Van Breugel emphasised the standard required assessment by the EPA: first, as to whether NAPL needed to be removed (there would be removal unless the EPA was satisfied there was no 'unacceptable risk' posed to any beneficial use); second, as to the extent contaminated and polluted groundwater was to be remediated ('to the extent practicable').

185 He highlighted the evidence of Mr Vass that the scope of the works ultimately necessary would be dependent on determination by the EPA and also highlighted criticisms made by some of the consultants of the standards adopted.

186 A contract will not be binding where the 'language used is so obscure and incapable of any precise or definite meaning that the Court is unable to attribute to the parties any particular contractual intention'.[37]

187 There is no uncertainty, however, simply because a standard is made referable to the satisfaction of a third party nor was any authority cited in support of such a proposition. A contract is also not uncertain simply because the ultimate outcome of the application of such a standard might be unknown.

188 The standards themselves were drawn by reference to two documents published by the Victorian government - the State Environmental Protection Policy concerning groundwater (the 'Groundwater SEPP') and a guideline published by the EPA - 'Publication 840'.

189 United's expert, Mr Vass, was also able to estimate the costs of remediation to those standards and it was not suggested to him that the standards were uncertain. To the contrary, he explicitly stated (after referring to EPA involvement) that 'the technical standard to be achieved is clear, and reflects an approach commonly undertaken and understood by an experienced contaminated land consultant'.

190 BV's expert, Mr Parmansche, also did not say anything to suggest that the standards were uncertain. To the contrary, he gave evidence that the EPA's role as identified in the Side Agreement was well known and understood. Further, that the Side Agreement contemplated a 'well-known process' which was a 'familiar process' to an environmental consultant.

191 In the result, I do not accept that the Remediation Standards are so uncertain as to be void for uncertainty.

Issue 1(f) Whether there was an implied term under the sale of business agreement that, if the lease was not assigned with a 'reasonable time', BV could terminate the agreement or the agreement would terminate

192 Mr Van Breugel submitted that there was an 'implied expiration term' in the sale of business agreement that: [38]

in the event that the Landlord's consent to the Assignment of a Lease for a particular Premises was not obtained:-

1. within a reasonable period of time being three years of the Settlement Date; or

ii. alternatively prior to the termination of the lease

whichever is sooner, then the SBA shall be at end or alternatively void to the extent of that particular Premises and the monies held in trust by the Vendor's Solicitor in respect of that particular Premises shall be refunded to the Purchaser (Expiration Term).

193 He emphasised that the contract was silent as to what would occur if an assignment was not obtained within 12 months and the purchaser did not exercise its option under cl 21.4. Further, that the term was necessary as the interim arrangements could not operate 'in perpetuity' if consent was not obtained.[39]

194 The allegation appears to misconceive the inter-relationship between the sale of business agreement and the Side Agreement; the latter of which prevailed to the extent of any inconsistency (cl 10). Thus, although cl 21 of the sale of business agreement provided that consent was required by the Settlement Date, this was clearly altered by the Side Agreement under which there was, ordinarily, to be no assignment until several years after that Settlement Date (following completion of the rebound period). As at that time cl 5 then made provision for the assignment of the lease.

195 Even if this was incorrect (and cl 21 somehow continued in operation), cl 21.4(d) made specific provision for the agreement to be voidable only at the option of the purchaser. The clause proposed thereby appears to be in direct conflict with this provision.

196 In any event, the conditions required to be satisfied for the term to be implied were summarised in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council:[40]

(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.

197 First, the term is not reasonable and equitable. In particular, it is unclear why BV should be given a right to terminate within three years of the Settlement Date. This is particularly so given the extended periods allowed for remediation and assignment under the Side Agreement (of more than five years).

198 Next, the term is not 'necessary' nor so obvious 'it goes without saying'. If there was a failure to respond to a request, cl 4.4 of the lease made adequate provision. If on the other hand, consent was wrongly withheld the parties would also be entitled to the usual remedies pursuant to the provisions of the Retail Leases Act 2003 (Vic) (RLA).[41]

199 The term is also not clear. In particular, it is not clear whether, if the preconditions apply, the contract is at an end automatically or whether BV must exercise a right.

200 Finally, for reasons given already, the term appears to contradict the provisions of the Side Agreement which permitted lengthy periods of time for compliance with remedies extending beyond five years post settlement. Even if cl 21 of the sale of business agreement continues the proposed term also contradicts cl 21.4(d).

Issue 1(g) Whether United by its conduct from the Settlement Date, including United entering into a lease/agreement to lease on 19 March 2015 with the Landlord and its delay in not making an election for an assignment, has resulted in United either waiving its rights under the Side Agreement to make an assignment [or whether it] ... has elected to terminate the Side Agreement

202 Pursuant to paragraph 13(d) of his Defence, Mr Van Breugel relies on the delay in taking an assignment between 1 September 2010 and 25 March 2015,[42] as well as the entry into negotiations towards the new lease in March 2015.

203 He alleges that by reason of these two matters, United has terminated the Side Agreement and/or waived its rights and/or elected not to take an assignment 'thereby terminating the agreement'.[43]

204 In written submissions, Mr Van Breugel emphasised the delay of four years, including that United did not correspond with BV from 2 August 2011 to 12 June 2012 and from 11 September 2012 to 24 July 2013. Further, that United explored resolutions outside of the Side agreement, including quotations for Remediation Works.[44]

205 He further highlighted the entry into the 2015 agreement and said that this terminated the Side Agreement given it was inconsistent with the Side Agreement.[45]

206 In terms of waiver he cited some remarks of Kirby J in Agricultural and Rural Finance Pty Ltd v Gardiner as follows:[46]

In light of the foregoing analysis, I am inclined to accept that a party may unilaterally release or abandon a right and be held to such 'waiver' beyond instances of contractual variation, estoppel and election. In my view, 'waiver' certainly extends beyond the very particular circumstances of an indication of non-reliance on a statute of limitations.

However, for the doctrine of 'waiver' to find a sure footing amongst the categories of legal relief, the circumstances of the 'waiver' must be clear in the first place. To be binding, the parties must be subject to no relevant disability or disadvantage. Further, as to the parties to, and the circumstances of, the 'waiver', the facts must be such that it would be manifestly unfair for the party which had earlier waived its legal rights later to adopt an inconsistent position and to seek to enforce them. Cases of estoppel and binding election are the clearest examples of such a manifest unfairness. However, I would accept a residual category of manifest unfairness at common law that is distinct from estoppel and election. The law will provide relief by upholding a 'waiver' in circumstances where not to do so would be manifestly unfair to the beneficiary of the 'waiver'.

(a) United by its conduct especially in not making an election for over four years and then entering into a new agreement for lease or new lease with the Landlord, had unilaterally waived its rights to seek an assignment of the Lease under the Side Agreement;

(b) It would be manifestly unfair to allow United - which waived its rights under the Side Agreement by its delay and seeking to adopt an inconsistent position with the Side Agreement by entering the 2015 Agreement - to now seek to enforce its rights to an assignment.

208 It is therefore necessary to consider both the fact of 'delay' as well as the negotiations with the Landlords in about March 2015 to resolve these claims.

209 It should also be noted that it was not completely clear which type of waiver was said to be engaged. It appeared, however, that it was said to be a species of 'election' or, more particularly, a species of residual waiver where to not do so would be 'manifestly unfair' to the beneficiary of the waiver.

210 In terms of election, an intentional act, done with knowledge, whereby a person abandons a right by acting in a manner inconsistent with that right has been described as the waiver of that right.[48]

211 However, no such election is established in the present case. The simple act of omission (in failing to take an assignment earlier) does not amount to action inconsistent with the right to take an assignment when the right to take an assignment is properly understood. Thus, the right itself was expressed to be exercisable 'at any time' six months after the Settlement date (cl 2.3(a)(A)). Clause 12.8 also expressly provided that delay in exercising a right 'does not prevent its exercise'.

212 When properly understood, United has therefore acted consistently with the rights given to it under the Side Agreement.

213 This is confirmed by the factual context already cited wherein United continued to seek performance by BV. The fact that United was prepared to explore some commercial resolution of the matter also does not amount to any relevant election.

214 Insofar as a residual right is concerned, the extract from the judgment of Kirby J, above, suggests a test of 'manifest unfairness'. However, whatever its precise ambit, there is no basis for the application of such a principle here where a party is exercising a right in accordance with the bargain the parties themselves struck.

215 Such a difficulty is averted to by the majority (Gummow, Hayne and Kiefel JJ) who state that it is unnecessary to determine whether such a residual category exists in the common law of Australia though silence 'should not be taken as an encouragement to further speculation'.[49] The majority also make two further observations. First, that waiver is sometimes used in contexts that are far removed from the contractual context. Second, that there is a need for coherence of legal principles and that the effects of overly broad interpretations of waiver and estoppel upon other doctrines must be borne in mind.[50]

216 The application of some 'unfair' doctrine of waiver has the potential in this case to interfere with rights which have been expressly given by contract. There is no justification for such an extension of the 'waiver' concept in this case.

217 I am unable to be satisfied as to whether an agreement was actually finalised with the Landlords.

218 I accept that United was attempting to enter negotiations with the Landlords. I further accept, however, that what was envisaged was an assignment of the existing lease followed by a variation of terms as negotiated with the Landlords. Whether this would have been achieved would have ultimately depended on a construction of any variation of lease document.[51] However, the oral evidence of both Mr Carmeli and Mr Hopwood was that a variation was contemplated. This also finds objective support in the terms of the contemporaneous correspondence of 26 March 2015 which refers to terms to 'vary' the existing lease.

219 Seen in this light this conduct was not inconsistent with, or repudiatory to, the Side Agreement. To the contrary, the Side Agreement actually contemplated that there might be amendments to the lease following an assignment (see e.g. cl 5.2 (c)). More significantly, the correspondence of 26 March 2015 was sent contemporaneously with the letter to the administrators which expressly made an election to assign the lease pursuant to the Side Agreement.

220 It follows that the negotiations do not sustain any waiver and/or termination and/or election to terminate the Side Agreement as alleged.

221 There is an additional issue here which is whether there was any communication of any repudiatory conduct in any event. There was some hearsay reference to the Landlords disclosing the offer to lease to the administrator in the email of 19 March 2015. However, Mr Crisp was not asked about this such that I am unable to be satisfied about what was precisely communicated to the administrator.

222 For reasons given already, however, there was no termination/election to terminate.

Issue 1(h) Whether Van Breugel was discharged from his obligations under the Side Agreement and Guarantee by reason of the termination

223 Given I have found that there was no termination as alleged, it follows that Mr Van Breugel was not discharged from his obligations as at that date. The guarantee was also cashed in February 2015 which was before any such termination in any event.

Issue 1(i) Whether the election for an assignment made by United on 26 March 2015 to make the assignment was bad having regard to the alleged agreement for a new lease between the Landlords and United made on 19 March 2015 and the election for an assignment not complying with the requirements of the lease

224 Notwithstanding that BV admitted that the election was valid,[52] Mr Van Breugel alleged that the election was bad by reason that:[53]

1. the request did not comply with the Assignment Requirements Term or the Lease;
2. the terms of the assignment proposed by the Plaintiff were not contained within the request;
3. the terms of the assignment had not been agreed to by the Third Defendant as tenant or the Fourth Defendant as guarantor;
4. the obligation to assign the Lease lapsed by the operation of the Expiration Term; and
5. the First Defendant and Second Defendant had served notice on the Third Defendant, thereby terminating the Lease on 26 March 2015.

225 However, the 'Assignment Requirements Term' is defined in Mr Van Breugel's Defence by reference to the requirements contained in cl 4.3.1 of the lease.[54] These are generally concerned with the requirements imposed on the tenant rather than United and cannot invalidate the election of United.

226 The election is also clear and there is no obligation identified in the Side Agreement whereby the 'terms of the assignment' needed to be included. In fact, the Side Agreement did not stipulate any condition as to form or content for the requirement to assign.

227 There was no requirement for the defendants to agree with the assignment.

228 There is also no expiration term for reasons already given.

229 Finally, it is true that the Landlords purported to terminate the lease. However, although cl 7.1.1 of the lease provided that the Landlords may terminate if the rent is unpaid for 14 days, cl 7.4 provided that the Landlords must, before terminating for non-payment of rent, give the same notice they would be required to give under s 146 of the PLA for a breach other than the non-payment of rent.

230 Section 146(1) of the PLA requires a landlord to serve a notice (a) specifying the particular breach complained of, (b) if the breach is capable of remedy, requiring the lessee to remedy the breach and (c) in any case, requiring the lessee to pay compensation for the breach. The landlord is only then entitled to exercise a right of re-entry or forfeiture if, having served such a notice, the lessee fails, within a reasonable time fixed by the lease, being not less than 14 days, to remedy the breach. Here, the lease provided that the period of 14 days was fixed for the purposes of s 146 (cl 7.3).

231 As at the time of the election of 26 March, there had been no notice complying with those requirements.

232 I also do not accept the characterisation that the giving of the notice constituted an acceptance of a repudiation such that compliance with s 146 was unnecessary (as Mr Van Breugel contended). The non-payment of one month's rent (as cited) is not repudiatory.[55] Clause 7.6 further provides that before terminating for repudiation (including repudiation for non-payment of rent) the landlord must give the tenant written notice of the breach and a period of 14 days in which to remedy it.

233 The purported termination was also invalid by reason of s 440B of the Corporations Act, which prohibits an owner of property (including a landlord) from taking possession of property used or occupied by the company during an administration except with leave of the Court or the administrator. The act of terminating the lease purported to take away the corporate tenant's rights to possession. However, no such leave was obtained.

234 Accordingly, I am satisfied that United was entitled to, and did, validly elect to require BV to assign the lease.

Issue 1(j) Whether the Side Agreement was terminated by reason of United entering into the settlement and new lease with the Landlords on 5 July 2016

235 BV alleged that by entry into the new lease and settlement on 5 July 2016, United repudiated the Side Agreement given the terms of those agreements were inconsistent with the Side Agreement.[56]

236 Mr Van Breugel alleged that by entering the new lease and settlement agreement in July 2016, United thereby 'elected to terminate' the Side Agreement and/or repudiated it such that the obligations to undertake the Remediation Works and to assign the lease were discharged as were the liabilities of the guarantor.[57]

237 In written submissions, Mr Van Breugel highlighted that given the 'election' (to terminate) it was not possible for BV to provide a further assignment of the lease.[58]

238 It should be recalled that the entry into the new lease (in July 2016) was taken well after United had already elected to take an assignment of the lease pursuant to the terms of the Side Agreement (in March 2015). The subsequent actions cannot thereby amount to an election as alleged.

239 I also do not consider that the actions of United amount to a repudiation of the Side Agreement. The correct characterisation is that United, well after the breaches, acted to mitigate its losses in respect of the breaches of BV by attempting to 'purchase' the unperformed promise (by obtaining a lease directly when BV failed to assign the lease). To this extent I accept the characterisation of United that the situation was analogous to a case of non-delivery where a purchaser, in mitigation of its loss, acquires replacement goods. Such conduct is not in my view repudiatory. Nor was it ever said how or when any such repudiation was accepted.

240 By the time the new lease was entered into, the two relevant breaches had also already occurred. Given a cause of action arises in contract as at the date of breach,[59] United's entitlements had already accrued prior to entry into the new lease in 2016.

241 In any event, I am not satisfied that the Side Agreement was terminated by the subsequent actions in 2016.

243 United has established two relevant breaches of the Side Agreement which allegedly sound in loss: a breach of the obligation to commence and complete the Remediation Works; and a breach of the obligation to do all things necessary to assist United to take an assignment of the lease.

244 United alleges four categories of losses.[60]

245 Flowing from the failure to procure the assignment of the lease was said to be a total of $448,437.88 as follows:

(a) interest on lost profits at $28,199.62 on the basis that the lease should have been assigned in April 2015 but that the site was not secured until July 2016;

(b) the costs of remedying BV's breaches of the lease at $404,821.76 associated with obtaining the new lease in mitigation of loss. This included $325,031.24 in respect of unpaid rent from 15 February 2015 until 14 June 2016;

(c) the 'settlement costs' (i.e. the costs of negotiating and documenting the settlement with the Landlords) at $15,416.50.

246 Further, flowing from the failure to commence and complete the Remediation Works, United claimed the remediation costs (i.e. the costs of remediating the site to the Side Agreement standard) at $470,000.

Issue 2 - If BV breached the Side Agreement, what losses (if any) did those breaches cause to United?

Issue 2(a) What is the correct measure of damages for breach?

247 The 'ruling principle' of damages in contract law is as stated in Robinson v Harman. That is:[61]

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

248 In Commonwealth v Amann Aviation Pty Ltd, Mason CJ and Dawson J explained:[62]

The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as 'expectation damages'. The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.

249 The injured party is entitled 'to recover such damages as arise naturally, that is, according to the usual course of things, from the breach of contract, or such damages as may reasonably be supposed to have been in the contemplation of both parties concerned at the time they made the contract as the probable result of the breach'.[63]

250 During opening submissions the Court raised an issue of causation in terms of whether or not the Landlords would have consented to a transfer of lease if BV had actually made a request for an assignment.

251 The defendants never pleaded a positive case that the Landlords would have withheld consent. However, in closing submissions, BV submitted that the Landlords were entitled to withhold consent on the grounds that BV was in default by failing to pay the rent (citing cl 4) and, further, that BV was not in a position to remedy that default by reason of its insolvency. It further cited the oral testimony of Mr Crisp as well as the 'documentary evidence' to suggest that the Landlords were 'not willing to deal with United, and intended to deal with Caltex'.[64]

252 In oral submissions, Counsel for Mr Van Breugel also submitted that the Landlords would not have accepted an assignment of the lease, highlighting the termination letter and the statement in the correspondence of 31 March that the Landlords had entered into an agreement to lease the property with a third party.

253 United in turn submitted that if BV had called for the Landlords to assign the lease then it would have been assigned given they were obliged to 'not unreasonably withhold consent to a transfer of the lease' (citing cl 4.21). Further, that if the defendants wanted to say that the Landlords would have been entitled to withhold consent, they would have to prove why the Landlords' refusal of consent would be reasonable, citing the principle in Vines v Djordjevitch (Vines) (which has been applied to contracts).[65]

254 The principle from Vines is as follows: [66]

... where conditions of general application giving rise to a right are laid down, additional facts of a special nature may be made a ground for defeating or excluding the right. For such a purpose the use of a proviso is natural. But in whatever form the enactment is cast, if it expresses an exculpation, justification, excuse ground of defeasance or exclusion which assumes the existence of the general or primary grounds from which the liability or right arises but denies the right or liability in a particular case by reason of additional or special facts, then it is evident that such an enactment supplies considerations of substance for placing the burden of proof on the party seeking to rely upon the additional or special matter.

255 The case of Vines concerned a statutory procedure whereby a victim of a car accident could proceed to judgment against a nominal defendant where the identity of the driver could not be established. The statutory provision contained a proviso that no such judgment could be obtained unless a relevant notice had been given.

256 In circumstances where no such notice had been given the Court cited the above principle in relation to the burden of proof question. However, it found that the 'substance' of the proviso showed that it meant to impose a condition precedent to the cause of action. As such the burden of proof remained with the plaintiff.[67]

257 The principle has been applied by the NSW Court of Appeal in a contractual setting.[68] Thus, the case of Wardle concerned a failed investment scheme relating to a tree plantation wherein ARF provided finance to certain investors.[69] At the same time OAL agreed to indemnify each borrower in the event the scheme was terminated provided that the borrower had made repayments to ARF 'punctually'. There was a further term of each of the loans that the borrower had no liability if the indemnity granted was effective (in cl 7).

258 In considering the question of onus the New South Wales Court of Appeal applied the principle in Vines and said that an analogous principle applied in deciding where the onus of proof lay concerning matters relevant to liability under contract.[70] It further held that cl 7 was an exception which stated a basis upon which a liability that would otherwise arise does not apply. Accordingly, it was the borrower who bore the onus when sued by ARF, to prove the applicability of the indemnity agreement.

259 The issue that arises in the present case is very different to Vines. Thus, this Court is not concerned with conditions of general application giving rise to a right or liability (under statute or contract) which are made subject to a proviso. Rather, it is concerned with whether a plaintiff has proved a claim to damages.

260 I therefore do not consider the Vines principles to be of application in the present case.

261 I do accept, however, that, BV was effectively the 'proponent' of the issue that the Landlords were entitled to, and would have, withheld consent. In such circumstances I consider that it bore, at least, the evidential burden of persuading the court to decide that issue in its favour.[71]

262 It will be recalled that, pursuant to cl 4.2, the Landlords must not 'unreasonably withhold consent'. Further, if the RLA applies, the Landlords may only withhold consent in accordance with that Act.

263 Section 60 of the RLA provides for the circumstances in which the Landlords were entitled to withhold consent as follows:

(a) the proposed assignee proposes to use the retail premises in a way that is not permitted under the lease;

(b) the Landlord considers that the proposed assignee does not have sufficient financial resources or business experience to meet the obligations under the lease;

(c) the proposed assignor has not complied with reasonable assignment provisions of the lease;

(d) the assignment is in connection with a lease of retail premises that will continue to be used for the carrying on of an ongoing business and the proposed assignor has not provided the proposed assignee with business records for the previous three years or such shorter period as the proposed assignor has carried on business at the retail premises.

264 It was not suggested that any of the above grounds applied. Rather, as mentioned above, the only ground suggested was non-payment of rent. However, this is not one of the grounds at all. In fact, it only comes into play where a notice had been served under cl 4.3.3 (whereupon the tenant must remedy a breach). However, as at the time the election was requested, BV had not been given any such notice of default in relation to non-payment of rent.

265 The Landlords were only able to withhold consent on the basis of restricted grounds. Given that there was nothing raised to suggest that there was such a ground I am not satisfied that the Landlords could have refused consent.

266 As to whether the Landlords would have refused consent in any event, the Landlords could have been compelled to act lawfully had the issue actually arisen.[72]

267 In any event, although the termination may evince a desire to terminate the lease and disable an assignment, the termination itself was invalid. The reason given (which was solely non-payment of rent) was also likely to be of less concern given the proposed assignee (United) did not suffer from the same liquidity issues as BV.

268 In relation to the other evidence, BV cited the evidence of Mr Crisp as well as 'documentary evidence' that the Landlords were not prepared to deal with United and intended to deal with Caltex. The relevant evidence of Mr Crisp has been summarised already and was unsatisfactory. Insofar as it purported to adduce the truth of statements made by Mr Coad it was also hearsay, as were statements recorded in some of the correspondence which suggested that the Landlords had reached an arrangement with another party.[73] Even if probative, any such statements also appear to have been made in the context of a request by United for a varied lease. They say nothing about what the Landlords' response would have been if a proper request for assignment had actually been made. Indeed, in the correspondence from the Landlords' solicitors of 31 March, they actually highlight that no consent had actually been sought.

269 In all the circumstances, then, it is pure speculation to suggest that the Landlords would have refused consent in circumstances where they were never actually asked.

270 Overall, I am satisfied that, but for the actions of BV, United would have been entitled to regain possession of the premises by assignment. There is no proper evidentiary basis to suggest that the Landlords were entitled to, and would actually have, withheld consent, if a proper request had been made.

271 Turning then to the categories of loss, it is useful to divide consideration between the remediation costs and the costs allegedly flowing from the failure to assign the lease.

Issue 2(c) Whether United suffered any loss and, if so, the quantum of United's loss and damage

Issue 2(b) whether the costs of remediation fall within that measure. Specifically, whether United is entitled to claim the costs of remediation in the absence of an assignment of the original lease

272 The amount claimed is $470,000. This was supported by the evidence of a Mr Vass of Tonkin & Taylor.

273 Mr Vass was an environmental engineer with a Bachelor of Engineering (Environmental) (Honours) from RMIT University. He was a member of the Australian Land and Groundwater Association (ALGA). He also had 20 years environmental consulting experience including extensive work in the assessment and remediation of a wide range of contaminated sites for development and regulatory purposes including petrol stations.

274 He was asked to provide his opinion as to the estimated costs for remediating the site to the standard specified in the Side Agreement.

275 In a report from Tonkin & Taylor of 12 July 2016 he determined that a cost estimate for remediation was $355,000 for Remediation Works. He also added a nominal allowance of $50,000 for auditor involvement and a further allowance of $65,000 for soil investigation and accelerated remediation.

276 Mr Parmansche, of ARC environmental was also an environmental engineer with a Bachelor of Engineering (Environmental) from RMIT University, and a member of the ALGA. For the past 16 years he has been involved in the assessment, remediation and management of contaminated sites primarily in the petroleum industry.

277 He was asked to address three particular questions:

(a) Has the Tonkin & Taylor report (of Mr Vass) dated 12 July 2016 been prepared in accordance with the Side Agreement Standard?

(b) Is the Property fit for use as a petrol station in accordance with the EPA Standards?

(c) If the property is not fit for use as a petrol station, what would the cost be of remediating the Property to the EPA Standards?

278 His answer to the first question was yes with two minor 'notes'. These were, first, that the remediation approach detailed quarterly monitoring which was greater than the six-monthly monitoring specified in the agreement. Second, that the allowance for waste disposal appeared to be overstated given the capacity of the skimmers.

279 Mr Parmansche was of the opinion that the property was fit for use as a petrol station within EPA standards.

280 Finally, although he found that the property was already fit, he proposed a remediation approach to remove NAPL which he costed at $172,320 plus a contingency allowance of $40,000. However, under cross-examination, Mr Parmansche accepted that - contrary to the specific terms of the Side Agreement - his approach had not allowed for EPA engagement or auditor involvement.

281 In a supplementary report of 26 September 2016 Mr Vass also referred to the 'note' made by Mr Parmansche. He noted that the agreement contemplated a RAP which might nominate higher frequencies which would allow for a better evaluation of the efficacy of remediation. Second, that he had only allocated $100 for costs including waste disposal. Across the nominated visits this was a similar allowance to that of ARC.

282 Mr Vass was not challenged in relation to either of these responses.

283 In fact, the opinions given by Mr Vass were not really challenged at all. Thus, BV accepted that the two experts were not really 'in disagreement' but were 'passing like ships in the night'.[74] This was because, while Mr Vass approached the matter on the basis that the standards in the Side Agreement should be met, Mr Parmansche focused on the fact that the site was capable of use as a petrol station without being remediated to the standards of the Side Agreement.

284 The defendants instead emphasised that by entering the new lease United varied its remediation obligations as tenant to be significantly less than that imposed under the Side Agreement. Thus, pursuant to special condition 2(b) of the new lease, the obligations upon United were limited to removing contaminants that precluded the ongoing use as a petrol station.

285 BV submitted that, whilst Robinson v Harman was the ruling principle, courts have adopted a wide variety of approaches. Further, that in this case, the relevant measure of damages was the difference between the economic value to United of the leasehold estate with the site remediated to the standards required under the Side Agreement and the value of the estate without the site being so remediated.[75] Further, that there was no evidence to suggest that there was any difference between these values given that United only needed to operate as a petrol station under the terms of the lease it entered. It followed that the value of the works to the standard imposed by the Side Agreement was of no value whatsoever.

286 In oral submissions it was suggested that a group of 'building cases' should be followed in this respect (reference was made to Ruxley Electronics & Construction v Forsyth (Ruxley), Bellgrove v Eldridge (Belgrove),[76] and British Westinghouse Electric v Underground Electric Railways (British Westinghouse))[77] given this was not truly a 'landlord tenant' case. In saying this BV urged the Court not to apply the principles in the leading landlord/tenant case of Joyner v Weeks.[78]

287 Reference was also made to the use of the diminution in value methods in the cases of Hewitt v Rowlands (Hewitt)[79] and Clark v Macourt (Clark)[80] (with particular reference to the judgment of Hayne J).

288 Accordingly, given no real loss was suffered by United, only nominal damages should be awarded. Alternatively, 'at best' it was appropriate to award the amount Mr Parmansche assessed as being required for running the petrol station.

289 Mr Van Breugel submitted that there was no obligation upon United to remediate the loss to the remediation standards contained in the Side Agreement where there had been no assignment and it would not suffer any actual loss as alleged. Further, that given United had taken action arising out of the transaction which had diminished its loss, the actual diminution of the loss suffered may be taken into account.[81]

290 By way of contrast, United emphasised that United's remediation obligations under the new lease were irrelevant (as were BV's obligations under the former lease) pursuant to the leading High Court case of Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (Tabcorp).[82] The focus instead was on the consequences of breach and restoration to the position United would have been if BV had performed its obligations.

291 In Tabcorp, the tenant covenanted that it would not make any substantial alteration to the premises without the written approval of the landlord. The tenant breached that obligation early in the lease by destroying the foyer of the building and substituting a completely new foyer. The lease had many years to run.

292 The landlord did not terminate the lease. Rather, it sued the tenant claiming damages for breach of the lease. The trial judge awarded damages of only $34,820, representing the difference between the value of the property with the old foyer and the value of the property with the new foyer. The Full Federal Court determined that the landlord was entitled to recover much more: the full cost of restoring the foyer to its original condition ($580,000), and $800,000 for loss of rent while that restoration was taking place, even though the works would not be performed until the lease expired many years in the future. The tenant appealed to the High Court, seeking to restore the trial judge's decision.

293 In a unanimous decision (French CJ, Gummow, Heydon, Crennan and Kiefel JJ) the High Court dismissed the appeal.[83] In doing so, the High Court forcefully reconfirmed the 'ruling principle' of damages as stated in Robinson v Harman, above.[84]

294 The High Court also enunciated a number of principles. They have been conveniently summarised by Hargrave J in Fenridge Pty Ltd v Retirement Care Australia as follows:[85]

(1) The entitlement to be placed in the same situation with respect to damages as if the contract had been performed means just that. It does not mean 'as good a financial position as if the contract had been performed'.

(2) It is prima facie no answer to a claim for damages on this basis that, viewed objectively, it is not to a plaintiff's financial advantage to be placed in the same situation as if the contract had been performed. It is for the plaintiff to judge whether he wants damages on that basis 'subject to the proviso, of course, that he is seeking compensation for a genuine loss and not merely using a technical breach to secure an uncovenanted profit'.

(4) There is another qualification to the ruling principle, that the work to be undertaken must be necessary to produce conformity with the contractual obligation and must also 'be a reasonable course to adopt'. The test of 'unreasonableness' is, however, 'only to be satisfied by fairly exceptional circumstances'. For example, where a building contract required a house to be built with cement rendered external walls of second-hand bricks, but the builder used new bricks of first quality underneath the cement render. The cost of demolition and re-construction with second-hand bricks would not be a reasonable course to adopt.

295 In Fenridge, Hargrave J applied these principles[86] in determining that the plaintiff was entitled to recover the costs of performing the precise works which were necessary to bring the premises up to the state they would have been in if there was compliance with the 'make good obligations' in the relevant contract. This was despite the fact that these works were not ultimately carried out, but instead the plaintiff elected to pursue an apartment development.

296 As indicated already, however, BV submitted that instead of looking to Tabcorp and Fenridge, the Court should consider three key 'building cases': Bellgrove,[87] Ruxley,[88] and British Westinghouse.[89] These were generally contrasted with 'landlord and tenant cases', since it was submitted that they were more applicable to the facts of this case.

297 Bellgrove concerned the construction of a house where there had been substantial departures from the specifications which resulted in grave instability in the building as erected. The trial judge ordered damages for rectification, being the cost of demolishing and rebuilding the house. On appeal it was argued that damages should have been the difference in value of the house as built and the house as contracted. However, consistent with the principles above, the High Court held that the rectification damages were appropriate.

298 BV, however, appear to cite the case by reason of the qualification the High Court included. This was that 'not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt'.[90] It then gave an example of 'unreasonableness' concerning the reconstruction with second-hand bricks cited in Tabcorp above. As also noted, however, the High Court in Tabcorp suggested that that the 'unreasonableness' qualification would only be satisfied by 'fairly exceptional circumstances'.[91]

299 The case of Ruxley Electronics concerned the construction of a swimming pool which was built to be some 18 inches shallower than contracted. The slightly shallower depth of the pool was safe and had not decreased the value, while the cost of rebuilding the pool was some £21,560. The issue then was whether the plaintiff should be awarded £21,560 for reinstatement or only nominal damages reflecting the lack of difference in value.

300 At first instance nominal damages for loss of amenity were awarded. The Court of Appeal overturned this, ordering the cost of reinstatement. However, the House of Lords citing, inter alia, Bellgrove v Eldridge, found that the cost of reinstatement was unreasonable and the trial judge was correct in not ordering reinstatement damages.

301 In Tabcorp, the High Court noted the application of Bellgrove in Ruxley and questioned the consistency of Ruxley with the principles of Bellgrove.[92] In any event, the Court remarked that their Lordships 'evidently saw [these circumstances] as quite exceptional'.[93]

302 The case of British Westinghouse concerned the sale of deficient power turbines and the respondent's mitigation of their losses through the purchase of superior replacement turbines. In their closing submissions, BV cited the following passage from that case:[94]

The quantum of damage is a question of fact, and the only guidance the law can give is to lay down general principle which afford at times but scanty assistance in dealing with particular cases ... Subject to these observations I think that there are certain broad principles which are quite well settled. The first is that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed. The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach.

303 BV appears to be relying on the statement that '[t]he fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach'. However, such a statement, taken in isolation, is not necessarily useful. Significantly, the reference to 'pecuniary loss' cannot be utilised to overturn the clear stance taken by the High Court in Tabcorp that 'the same situation, with respect to damages' does not simply mean 'as good a financial position'.

304 Insofar as Mr Van Breugel is concerned he alleged that by entering the new lease the plaintiff had avoided the losses for remediation costs. In so doing he also cited a passage from British Westinghouse dealing with the mitigation principle which stated that when a plaintiff has taken action arising out of a transaction which has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account.[95]

305 However, the fact that United's obligations to the Landlord under the new lease may be contained does not constitute the actual diminution of loss suffered. It may have been different if United had achieved a remediated site according to higher standards than those stipulated. However, United has not obtained a remediated site in accordance with the standards in the Side Agreement at all. The principle cited is not engaged in such circumstances.

306 The decision of Hewitt v Rowlands[96] was an English decision of 1924 wherein the Court described the ordinary or prima facie measure of damages for breach of a repairing covenant as the 'difference in value to the tenant' between the premises in the condition in which they are in and the condition they would have been in if the landlord had observed the repairing covenant. However, as the High Court in Tabcorp observed, in some cases placing the innocent party into the same situation as if the contract had been performed will coincide with placing the party into the same financial situation. Hewitt also predates the other decisions cited above (including Joyner and Tabcorp) which constitute clear authority on the modern principles to be applied. It does not assist the defendants.

307 The case of Clark v Macourt concerned the measure of damages in circumstances where the purchase of a quantity of frozen sperm by a medical practitioner turned out to be unusable.[97] The purchaser ultimately purchased replacement sperm and the trial judge ordered damages quantified as at the amount she had to pay to purchase the sperm. This was overturned by the Court of Appeal which determined that the doctor had avoided any loss by charging each patient a fee which covered the costs of the purchase.

308 However, on appeal to the High Court, the Court reversed the decision of the Court of Appeal. In doing so, the Court affirmed the principles of Tabcorp and the 'ruling principle' of Robinson v Harman.[98]

309 Turning to the reasons of Hayne J, His Honour first clearly highlighted that no modification of principle was called for. Therefore, applying Tabcorp, when a contract is breached the plaintiff is to be put in the position which the plaintiff would have been if the contract had been performed.[99] Further, that damages were generally to be measured by reference to the loss of the value of what the promisee would have received if the promise had been performed.[100]

310 Hayne J went on to identify that the relevant question in that particular case was what was the value of what the purchaser did not receive. The answer depended upon determining the content of the unperformed promise. This in turn equated to the value of what should have been, but was not, delivered under the contract.[101] His Honour went on to note that the purchaser's subsequent dealings were irrelevant given she was not shown to have obtained any advantage from the later transactions.[102] Accordingly, the findings of the trial judge were upheld, i.e. the plaintiff's loss was what it cost to acquire the sperm (which should have been delivered).

311 There is nothing in this approach which supports the approach of the defendants. To the contrary, the decision lends further support for the well-recognised principles endorsed by Tabcorp.

312 The principles in Tabcorp are applicable. It follows that United is entitled to be placed in the same situation with respect to damages as if the contract had been performed.

313 The principle does not mean as good a 'financial' or 'economic' position as if the contract had been performed. There is therefore no warrant to examine the economic value to United instead of enforcing the contractual bargain. In particular, it is not relevant to consider United's rights and obligations under the new lease.

314 I also do not consider that the present circumstances come within any of the recognised qualifications. The breach is not merely technical. The present situation is also not one which could be said to be 'exceptional' in the same way as the examples of Bellgrove or Ruxley. United's desire to have the site remediated to the standard specified in the Side Agreement is simply not comparable to the 'unreasonableness' of demolishing a new house to rebuild it with second hand bricks or demolishing a pool to make it slightly deeper.

315 In Tabcorp, the High Court also stated that 'the requirement of reasonableness did not mean that any excess over the amount recoverable on a diminution in value was unreasonable'.[103] The Court stated that such submissions 'rested on a loose principle of "reasonableness" which would radically undercut the bargain which the innocent party had contracted for and make it very difficult to determine in any particular case on what basis damages would be assessed'.[104]

316 In any event, I consider that it is reasonable for United to seek rectification damages. The evidence of Mr Carmeli was that although the site was likely still 'fit for purpose' to operate as a petrol station and convenience store, United nevertheless 'has an interest in the risk associated with the contamination of the groundwater'. Pursuant to s 62A of the Environment Protection Act 1970 (Vic), United, as an occupier, is also liable to a receipt of clean up notices in the event of land or water being polluted.

317 Thus, in regard to the remediation of the site, United is entitled to (unchallenged) rectification damages pursuant to the evidence of Mr Vass at $470,000. There is also no basis for the alternative basis suggested by Mr Parmansche given his estimate was inconsistent with the obligations under the Side Agreement.

318 Accordingly, the amount of $470,000 is to be awarded in respect of the remediation costs.

319 United claims loss and damage by way of interest on delayed profits from 13 April 2015 up to 6 March 2017 at $28,199.62 on the basis of the evidence of Mr Carmeli who estimated profit foregone starting at $14,233.11 per calendar month.[105] The interest is calculated at the current rate from the Penalty Interest Rates Act 1983 from 13 April 2015 to 6 March 2016.

320 The claim is based on a number of assumptions as follows:

(a) that following United's call for the assignment of the lease on 26 March 2015, and if BV had actioned the call for the assignment, United would have commenced operating at the Sale site by approximately Monday 13 April 2015;

(b) commencement rent of $237, 537 per annum (including GST);

(c) on 15 June 2015 a rental increase to $245,851 per annum (excluding GST);

(d) on 15 June 2016 a rental increase to $254, 457 per annum (excluding GST);

(e) the Sale Site would operate 24 hours a day;

(h) United would have incurred other expenses of approximately $13,866.67 per month.

321 Mr Carmeli was a qualified property valuer though he had no qualifications as a valuer of businesses. Nevertheless, in his role as National Real Estate Manager of United, he had experience in conducting business valuations for proposed acquisitions of services stations sites and businesses. Whilst not working at United during 2011 and 2012, he had also valued service stations for banks, petroleum companies and investors. However, given his current role he was not an independent witness.

322 In terms of the profit figure cited, he claimed to have derived the revenue figure using confidential margins on fuel sales (at 300,000 litres per month) and confidential percentage payment received by commission agents based on shop sales (at $73,749 per month). He then subtracted various expense items at approximately $13,866.67 per month to give an estimate for profit of $14,233.11 per month.

323 A key component of his analysis, then, was the fuel sales he estimated at 300,000 litres per month and shop sales of $73,749 per month.

324 In terms of fuel sales, Mr Carmeli referred to spreadsheets that were attached to an email of Mr Newton dated 12 March 2010. The spreadsheets suggested that in January and February 2010 the Sale Business was selling on average 533, 388 litres of fuel per month while from 2002 to 2010 the Sale Business sold a total of 514,740 litres per month.

325 Mr Carmeli was of the view that the Sale site could conservatively sell at least 300,000 litres of fuel per month but that fuel sales could be higher. His reasons were that United already had an established presence in Sale at the Maffra site; that the Maffra site sold on average more than that amount per month; and that fuel could be delivered quickly and efficiently to the Sale site given it was proximate to United's Hastings fuel terminal. In oral evidence he elaborated on this last point highlighting that a major component in petrol station volumes was pricing and that there was a major advantage in having the terminal close by.

326 Under cross-examination, however, he agreed that the 300,000 figure was not achieved during 2010 to 2015. He agreed that by 2013 it was consistently below 300,000; by 2014 it was consistently below 250,000; and by February 2015 it was down to 133,000 (when administrators were appointed).

327 However, his explanation was that existing volumes supported his position that 300,000 was appropriate. Thus having started to trade in September last year, and notwithstanding the business had suffered major damage, he alleged that United had achieved 300,000 in December and 298,000 in January with the average for six months of 250,000 which would 'go up'. Despite this, he did not produce the source documentation for these alleged figures. The alleged 'average' of 250,000 was also well below the 300,000 estimate.

328 In terms of shop sales, Mr Carmeli gave evidence that there was a correlation between shop and fuel sales. Based on the Newtons figures this was $165.27 for every 1000 litres sold. However, he believed that the Maffra site provided a more recent and up to date basis for comparison which showed $245.83 per 1000 litres sold which produced a figure of $73,749 per month for the Sale site.

329 In oral evidence he stated - for the first time under re-examination - that United was already averaging $40,000 to $50,000 per month after only six months. Again, however, no documentation was produced. The figure was also well below the $73,749 estimate.

330 I am unable to be satisfied that that this claim is substantiated.

331 The historical sales figures used to support the fuel sales were too old. The recent figures were also not the subject of any appropriate objective source material. Even at its highest the oral estimates given by Mr Carmeli (being an average of 250,000) also did not substantiate the figure of 300,000. His estimates also made no allowance for the fact that (as he himself suggested) there would have needed to be time to grow the business even if United had been assigned the lease in April 2015.

332 The fuel sales estimate was also not supported by any recent objective data. The oral estimate given (of $40,000-$50,000) did not support the figure of $73,749 alleged.

333 I have given consideration to whether the Court can provide any other different figure. However, in the absence of appropriate objective data, including the relevant undisclosed 'margins' I am unable to be satisfied that some other different figure is appropriate.

334 The claim for deferred interest is therefore rejected.

335 In its particulars United claims the amount of $404,821.76. This amount is supported by the evidence of Mr Hopwood. In his witness statement he stated that, following two court ordered mediations and so as to mitigate its losses and obtain a leasehold interest which it had been unable to obtain through BV, United entered into direct negotiations with the Landlords which resulted in the terms of settlement and new lease. Further, that, as a necessary requirement of the Landlords, United agreed to pay the following amounts totalling $404,821.76 pursuant to the terms of settlement:

(a) $325,031.24 in respect to unpaid rent on the Property for the period 15 February 2015 to 14 June 2016;

(b) GST in respect to the amount in sub-paragraph (a) of $32,503.12;

(c) $697.14 per day plus GST from 15 June 2016 until commencement of the new lease between United and first and second defendants, such quantified amount being $23,005.62 inclusive of GST;

(d) $2,467.04 in respect to water and sewage rates;

(e) $12, 702.58 in respect to municipal council rates;

(i) $350.00 in respect to lawn mowing and edging.

336 Pursuant to cl 3(a) of the terms of settlement payment of the above sums was made 'as a necessary condition' to the owner's agreement to enter the lease.

337 In Mr Hopwood's further witness statement (also dated 7 March 2017), he states that United has paid the total amount of $404,821.76 to the Landlords .

338 The claim appears to be justifiable on the basis of the principles in Tabcorp above in compensating United for the loss of the value of what it would have received if the lease had been assigned. Here, United was promised an assignment of a lease. As a result of the breach of that promise it had to obtain a lease via an alternative route on new terms dictated by the Landlords. It should obtain the costs associated with obtaining the benefit of the contract.[106]

339 There was an initial challenge made to this claim on the basis that the calculations of United take no account of the fact that United obtained an alleged benefit from the new lease of an additional eight year term.[107] However, this was later abandoned. There was otherwise no challenge to this claim at all. More particularly, it was not suggested that the amount actually paid was not an appropriate measure of what United had to pay for obtaining the unperformed promise (the assignment).

340 It follows that the claim of $404,821.76 will be allowed.

341 The final amount claimed is the amount United says it has incurred in legal costs in negotiating the settlement and new lease.

342 The amount claimed is $15,416.50 which is supported by the evidence of Mr Payne. He provides a calculation by reference to the Supreme Court Scale of Costs which he attaches as schedule 'A'.

343 There was no challenge to this claim and Mr Payne was not cross-examined.

Issue 2(d) Whether United failed to mitigate its loss and, if so, what is the effect of such failure.

345 BV alleges that, even if it had failed to do all things necessary to procure an assignment, then United failed and/or refused to mitigate such loss and damage:

(a) by refusing to accept an offer by BV in January 2015 of assignment of the original lease;

(b) further or alternatively, by failing to enforce the agreement pleaded in paragraph 17 of the statement of claim;

(c) further or alternatively, by refusing to accept an offer by the Landlords in May 2015 of a new lease of the Site;

(d) further or alternatively, by refusing to accept offers by the Landlords in June 2016 of a new lease of the Site.

346 Mr Van Breugel also alleged that United failed to mitigate its loss in (a) not accepting BV's offer of 13 January 2015; (b) not electing to take an assignment on the terms of the Lease prior to 26 March 2015; and (c) not accepting the Landlords offer to lease the Property on 22 May 2015.[108]

347 First, where it is contended that the plaintiff should have taken steps to mitigate its loss, the onus of proof is on the defendant to prove the contention. A plaintiff is also only required to take such steps in mitigation as are reasonable. [109]

348 The defendants have not demonstrated that United has failed to mitigate its loss by reason of the following.

349 The offer in January 2015 was made prior to the breach in failing to assign. It is accordingly irrelevant. In any event, the offer was that BV pay $80,000 for United to return the guarantee and take an assignment of the lease. It appears that United would not be entitled keep the Retention Amount. If United had accepted the offer, it would have assumed responsibility for remediating the site. Further, by the offer, United would have only $180,000 towards meeting a remediation (then estimated at $500,000). It was not unreasonable, therefore, for United to not have accepted the offer.

350 In relation to the alleged failure to enforce the agreement with the Landlords, United took steps to attempt to enforce it by suing in this Court. Any prior delay has already been dealt with above and is not relevant to mitigation.

351 In relation to the 'offer' of May 2015, the letter cited is not an offer at all, but rather a request for clarification of an offer made by United. It is also inappropriate to consider this letter in isolation particularly in circumstances where BV elected not to ask any questions at all of Mr Payne. This was despite the fact that he produced a bundle of documents evidencing the relevant written and oral exchanges in relation to negotiations on behalf of United to achieve the new lease and the settlement with the Landlords. Some of this bundle also includes handwritten memoranda that is difficult to read.

352 In any event, it appears that by correspondence of 21 May 2015 United had offered a nine year lease with 5x5 options at a commencing rent of $237,500 plus GST and rent increases at 3.5%. United further offered to remediate the site to the Side Agreement standards. The Landlords' solicitors then sought clarification of this offer in the correspondence of 22 May 2015.

353 By correspondence of 28 May 2015, United then offered further improved terms: slightly higher rent ($245,812.50 plus GST if commencement was 15 June),[110] with market review at the exercise of each option and rent increases of 3.5% for the balance of the term of each option rental. However, by correspondence of 1 June 2015 the Landlords reject this offer outright. The only explanation offered is that 'our client is not prepared to depart from his requirement that annual rental increase of 3.5% per annum must apply during the 5x5 year options'. The explanation offered is unclear given the offer clearly contemplated 3.5% increases during the options and Mr Payne was not given opportunity to provide the Court with any explanation. It does appear however that no offer at all was made by the Landlords. Rather, negotiations appear to have stalled until they are resurrected in mid-2016.

354 I am unable to be satisfied in such circumstances that United acted unreasonably, particularly in circumstances where it has made what appear to be two reasonable offers.

355 In relation to the offers of June 2016, as best as can be determined (absent cross-examination), the parties appear to have been engaging in reasonable efforts to reach a resolution which they did within a relatively short time over the course of June/ July. As the defendants also highlighted, United ultimately managed to secure a lease with very contained obligations in terms of remediation.

356 I am unable to be satisfied in such circumstances that United acted unreasonably.

357 Accordingly, I am unable to be satisfied that United failed to mitigate its loss.

358 The total award of damages is $890,238.26 (being the amount of $470,000; $404,821.76; and $15,416.50).

Issue 3 - Whether United is entitled (whether under the Side Agreement (cls 2.3(a)(A), 2.3(d)(A) or 7.1) or by a set-off) to apply the Retention Amount and the proceeds of the Bank Guarantee against its loss.

Issue 3(a) Whether United's conduct in calling on the Bank Guarantee was contrary to the Side Agreement

359 United seeks declaratory relief that it was entitled to retain the Bank Guarantee and Retention Amount towards the damages owing by BV for breach of the Side Agreement.

360 In its Counterclaim, BV also seeks the Bank Guarantee and Retention Amounts. It alleges that United was not entitled to present the guarantee on 27 February without first having exercised the election under cl 2.3 (26 March).[111]

361 BV claimed that the Bank Guarantee and Retention Amount were earmarked for the purposes stipulated in cls 2.3(a)(A), 2.3(d)A, and 2.7(a). In oral submissions it was further submitted that cl 7.1 did not expand the circumstances in which the Bank Guarantee was available beyond the circumstances set out in 2.3(a)(A), 2.3(d)A, 2.7(a). In particular, that cl 7 did not provide an entitlement to retain the Bank Guarantee as security for a damages claim for breach of the agreement. Rather, that cl 7 was 'consistent' with these provisions (cls 2.3(a)(A), 2.3(d)A, 2.7(a)) and 'affirms the same thing' in providing that the Bank Guarantee was to be retained pending performance of the obligations (the achievement of the remediation standards) or termination.[112]

362 BV further alleged that by reason of termination of the agreement (by entry into the July 2016 lease) United was not entitled to keep the Bank Guarantee or the Retention Amount.[113] Finally, it alleged that the Bank Guarantee was a void disposition of property.

363 United submitted (in its Defence to Counterclaim) that it was entitled to apply the Bank Guarantee pursuant to the provisions of cl 7.1. It further denies the termination and the void disposition allegation and says its rights had accrued in any event. Finally, it claimed that if any amount was payable to BV it would seek to set off its loss and damage against that amount under, inter alia, s 553C of the Corporations Act.

364 For reasons given already I do not accept that the Side Agreement was terminated between the parties in 2016. The Bank Guarantee was also cashed well before any such termination in any event. The issue of the void disposition will also be dealt with below.

365 However, the fundamental issue was the construction of the Side Agreement insofar as it concerns the Bank Guarantee and the Retention Amount. The resolution of this issue follows.

366 In Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd (Fletcher),[114] Charles and Callaway JJA addressed the commercial purposes of contractual provisions of the type in issue here. Callaway JA observed: [115]

There are broadly two reasons why the beneficiary may have stipulated for a guarantee. One is to provide security. If it has a valid claim and there are difficulties about recovering from the party in default, it has recourse against the bank. The second reason, which is additional to the first, is to allocate the risk as to who shall be out of pocket pending resolution of a dispute. The beneficiary is then able to call upon the guarantee even if it turns out, in the end, that the other party was not in default. It is a question of construction of the underlying contract whether the guarantee is provided solely by way of security or also as a risk allocation device. Remembering that we are speaking of guarantees in the sense of standby letters of credit, performance bonds, guarantees in lieu of retention moneys and the like, the latter purpose is often present and commercial practice plays a large part in construing the contract.

367 Fletcher has been considered and applied by the Full Court of the Federal Court in Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd (Clough Engineering),[116] and by the Victorian Court of Appeal in Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd (Sugar).[117]

368 In Sugar, Kaye JA cited Clough Engineering and helpfully summarised the relevant principles of construction:[118]

(1) Subject to three principal exceptions, a court will not enjoin a party from recourse to a performance guarantee. Those exceptions are:

(a) The court will enjoin a party in whose favour the guarantee has been given from acting fraudulently.

(b) The court will enjoin such a party from acting unconscionably in contravention of the Competition and Consumer Act 2010 (Cth).

(c) The court will restrain such a party from acting in breach of a contractual promise made by it not to call on the guarantee in particular circumstances.

(2) A recourse provision [and whether there is a qualification on the rights to call on the security] should be construed in light of all the other relevant provisions of the contract, including the terms of the security which formed part of the contract.

(3) In construing any contractual limitation on the exercise by a party to have recourse to its rights to the security, the court should take into account the commercial purposes served by security clauses in construction contracts, and to which I have referred.

(4) In particular, the commercial background for the contract informs the construction of a security clause, so that the court should not too readily favour a construction, which is inconsistent with an agreed allocation of risk as to who is to be out of pocket pending resolution of the dispute about breach.

(5) Accordingly, clear words are required to support a construction that inhibits a beneficiary of a security clause from calling on a performance guarantee where a breach is alleged in good faith (that is, non-fraudulently).

369 Clause 7.1 provides that the guarantee was to be 'unconditional'. Further, that United was entitled to both keep and apply the guarantee as security for BV's performance of 'its obligations' under the Agreement. The reference to the guarantee being 'unconditional' suggest that cl 7.1 was intended to serve both purposes described by Callaway JA in Fletcher, namely to provide security and to allocate the risk to BV as the party which should be out of pocket pending resolution of any dispute. This is confirmed by reference to the form of the guarantee itself in this case which provided for an unconditional undertaking to pay on demand without reference to BV and irrespective of the performance or non-performance of BV.

370 I also do not accept that cls 2.3(a)(A), 2.3(d)A, and 2.7(a) limit the circumstances in which United is entitled to keep and apply the Bank Guarantee.

371 As highlighted already, the words of cl 7.1 are unconditional and unlimited such that United was explicitly given the right to keep and apply the guarantee as security for BV's performance of its 'obligations' under the agreement. There is no limitation such that United was intended to be restricted to only some of those obligations. Rather, the obvious commercial purpose was to provide for security over all of the obligations of BV until it was no longer necessary. This would include the obligations to remediate and also the obligation to assign the lease.

372 There is also nothing to suggest that the quantification procedure provided in cls 2.3(a)(A), 2.3(d)A, 2.7 is intended to be a codification of the circumstances in which the Bank Guarantee was to be utilised. If they were intended to be a code there would be no reason for the inclusion of cl 7.1.

373 Accordingly, I consider that United was entitled to apply the guarantee as security for BV's (non) performance of its remediation obligations under the Agreement on 27 February 2015. I am further satisfied that United is entitled to use the proceeds thereof towards the damages sustained for breaches of BV's obligations under the Side Agreement.

374 BV similarly suggests that the Retention Amount was covered exhaustively by cls 2.3(a)(A), 2.3(d)A, and 2.7.

The Retention Amount will be held and retained by United and only becomes payable to BV if:

(a) United notifies BV after the end of the Rebound Period that it agrees that the Environmental Problems of the Sale Site have been Remediated to achieve the Remediation Standards within the Initial Remediation Works Period; or

(b) United gives BV a notice that United wishes to take an assignment of the Sale Site Lease,

whichever is sooner.

376 Part (a) clearly does not apply. Moreover, I do not consider that this was a case where United gave a notice that it 'wished to take an assignment of the lease' pursuant to part (b). On its ordinary terms, this provision appears to be directed to a 'wish' to take an assignment following successful completion of the works (consistent with the language in cl 5.2) rather than an election to 'require' an assignment (consistent with language in cls 2.3(a)(A), 2.3(d)A, 2.7). This construction is also confirmed by the substance of the provisions of cls 2.3(a)(A), 2.3(d)A, 2.7 which provide and intend that United retain the Retention Amount in the event of default.

377 It would follow that United is entitled to retain the Retention Amount pursuant to the Side Agreement.

378 Moreover, even if this construction was incorrect, cl 8.3 provides that if a party breaches a material provision of the Agreement, the non-defaulting party may recover all money paid or 'payable to the defaulting party' subject to minimising its loss.

379 The two obligations to perform the works and assign the lease would clearly be 'material' provisions. Accordingly, even if the Retention Amount was otherwise 'payable' to BV, United may recover it.

380 United was entitled to apply the Retention Amount and the proceeds of the Bank Guarantee against its losses pursuant to the terms of the Side Agreement.

381 In such circumstances (subject to the defence of a void disposition) it is unnecessary to consider the issue of set off under the Corporations Act since the Counterclaim should be dismissed. However, for the sake of completeness I will provide my views below.

Issue 3(b) Whether United's claims against BV and BV's claims against United are set off under s 553C of the Corporations Act and, if so, what the net effect of that set off is

382 Section 553C of the Corporations Act provides as follows:

(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company:

(a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and

(b) the sum due from the one party is to be set off against any sum due from the other party; and

(c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be.

(2) A person is not entitled under this section to claim the benefit of a setoff if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent.

383 The credits, debts and mutual dealings must have existed as at the time of the commencement of the winding up. Both parties further accepted that this was the date the administrator was appointed on 23 February 2015.[119]

384 The section is given a wide scope to achieve substantial justice to the parties.[120] Consistent with this, claims need not have been vested, liquidated or enforceable as at that date. It will suffice if they were contingent.[121]

385 United thereby submitted that its claims for damages had vested prior to 23 February 2015 given the breaches had either occurred or were contingent. Further, that BV's claim to a return of the Bank Guarantee and Retention Amounts also existed as at the relevant time given they arose pursuant to the Side Agreement executed in 2010.

386 The claims would, otherwise, prima facie, appear to satisfy the requirement of mutuality. Thus they arise between the same parties and out of a dealing to which both were parties, namely, the Side Agreement. An earlier submission that the proceeds of the Bank Guarantee were held on trust was also abandoned in closing.[122]

387 However, BV alleged that these provisions were not applicable. First, there was no mutuality given BV's claim arose only after the winding up commenced (on 23 February 2015) on the date United cashed and appropriated the proceeds of the guarantee.[123] Further, that United is precluded from any set off by operation of s 553C(2) by reason of the fact that United had notice of BV's insolvency as at the time when BV's claims to recover the Bank Guarantee and Retention Amounts arose.[124]

388 However, if BV was to be successful in its Counterclaim it would be because it had an entitlement to the Bank Guarantee prior to the time of appointment of the administrator. Thus the submission of BV was that the only time at which United was entitled to use the Bank Guarantee was if the conditions in cls 2.3(a)(A), 2.3(d)A, and 2.7 were met. Unless and until they were met (i.e. by assignment and quantification of the remediation costs) BV was entitled to them. Given, then those conditions were not met as at the time of appointment BV had a claim existing at that time which was capable of being set off.

389 For the sake of completeness (although it was not argued), the claim by BV for the Retention Amount also existed as a contingent claim under the Side Agreement prior to 23 February 2015. Thus although the calling of the assignment took place subsequently, it was not a 'fresh dealing'. Rather, it occurred in the ordinary course of business following from, and contemplated by, the Side Agreement.[125]

390 In relation to the notice question under s 553C(2), the time of notice is to be determined - not when the debt became payable - but when the obligation which arose from it was incurred. For reasons given already, this is the date of the Side Agreement in 2010.[126]

391 Given it is not suggested that BV was insolvent as at 2010, s 553(2) therefore does not apply.

392 Accordingly, if it was necessary to decide, I would be satisfied that United was entitled to set off its claim for damages against the claims to the Bank Guarantee and Retention Amounts.

Issue 4 - Whether the calling on the Bank Guarantee on 27 February 2015 was a disposition of BV's property within the meaning of s 468 of the Corporations Act

393 Section 468(1) of the Corporations Act provides that any disposition of property of the company other than an exempt disposition made after the commencement of the winding up by the court is, unless the court otherwise orders, void.

394 First, however, there was no disposition of property of the company after the commencement of the winding up. Rather the act of cashing the Bank Guarantee constituted a demand on the unconditional guarantee given by Bankwest. BV was not even a party to this Guarantee.

395 Second the provision only applies after a commencement of winding up 'by a court'.

396 BV alleged that s 513 applies which was entitled 'Application of Part' and provided that, except so far as the contrary intention appears, the provisions of the Act about winding up apply in relation to the winding up of a company whether in insolvency, by the Court or voluntarily.

397 However, this provision appears in Part 5.6 (concerning winding up generally) - a different part to that containing s 468 (Part 5.4B) The context and heading also suggest that s 513 was intended to apply the succeeding provisions concerning winding up generally rather than s 468. In any event, even if s 513 applied, s 468 clearly evinces a contrary intention given the express reference to a winding up 'by the Court'. There is also authority that s 468 does not apply where a company has moved from an administration to a voluntary winding up (as here without a winding up order).[127]

398 Accordingly, the calling on the Bank Guarantee on 27 February 2015 was not a disposition of BV's property within the meaning of s 468 of the Corporations Act.

399 Given United was entitled to utilise the Bank Guarantee and retain the Retention Amount pursuant to the provisions of the Side Agreement the Counterclaim should be dismissed.

400 United is also entitled to the declaration as sought.

401 There will be judgment for United in the amount of $890,238.26 (being the total of the amounts of $470,000; $404,821.76; and $15,416.50) against BV.

403 United is also entitled to a declaration as follows:

(i) demand the payment of the Bank Guarantee in the sum of $400,000 from Bank West on 27 February 2015; and

(ii) retain the proceeds of the said Guarantee which may be applied towards the damages of $890,238.26 as found to be owing by BV for breach of the Side Agreement ('the relevant damage');

(b) that it is entitled to retain and apply the Retention Amount of $100,000 under the Side Agreement towards the relevant damage.

404 There should be an appropriate declaration that United is not entitled to enforce its judgment against BV without further leave of the Court otherwise than by lodging a proof of debt for its claims in excess of the Bank Guarantee and the Retention Amount.

405 United is entitled to an order against Mr Van Breugel for the difference between the damages awarded ($890,238.26) and the total of the Bank Guarantee and the Retention Amount ($500,000) at $390,238.26.

406 I will hear from the parties on the question of costs and interest.

BONNIE VIEW PETROLEUM PTY LTD (IN LIQUIDATION) (ACN 110 006 052)

[1] Parties' Agreed List of Issues, 8 March 2017.

[2] See Third Defendant's Amended Defence and Counterclaim, 27 February 2017, [12(a)] (Third Defendant's Defence).

[6] An earlier claim in respect of plant and equipment was abandoned in opening: Transcript of Proceedings (6 March 2017) 25-6.

[7] This narrative is reasonably detailed given the issues raised which included an allegation that the agreement was varied: see particulars at Third Defendant's Defence, [12(b)].

[8] See, in particular, item 15 to the Schedule to the Lease.

[9] Following the Initial Remediation Works Period or following the date United agrees to the Remediation Amount Payment Notice (whichever is sooner).

[10] But marked with the wrong dates of 19 April and 12 June 2012.

[11] Transcript of Proceedings (6 March 2017) 55.

[12] This appeared to be the same rent that United would have been expected to pay after 15 June 2016, taking into account annual rent increases of 3.5%, had the lease been assigned following the call for the assignment on 26 March 2015.

[13] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [47].

[15] Ibid [46]; Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95, [45].

[16] (2015) 256 CLR 104.

[17] Ibid [48] (French CJ, Nettle and Gordon JJ).

[18] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656-7[35], adopting the observations of Arden LJ in Re Golden Key Ltd [2009] EWCA Civ 636 [28] and citing Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530, 559 [82] recently cited in Knowledge Pathways Pty Ltd v TBM Training Pty Ltd [2016] VSC 434, [33].

[19] Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109; Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183, [70] recently cited in Knowledge Pathways Pty Ltd v TBM Training Pty Ltd [2016] VSC 434, [33].

[20] Knowledge Pathways Pty Ltd v TBM Training Pty Ltd [2016] VSC 434, [34].

[21] Third Defendant's Defence, [12].

[22] Closing Submissions of the Third Defendant, 10 March 2017, [4]-[6] (Third Defendant's Closing Submissions).

[23] Pursuant to the principles in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283.

[24] Third Defendant's Defence, [28].

[25] Transcript of Proceedings (6 March 2017) 90.

[26] Affidavit of Glenn Anthony Crisp, 10 April 2015, [27].

[27] Transcript of Proceedings (14 March 2017) 326.

[28] Third Defendant's Defence, [12(a)].

[29] Scanlan's New Neon Ltd v Tooheys Ltd [1943] HCA 43; (1943) 67 CLR 169, 186 citing Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] UKPC 1; [1935] AC 524, 530.

[30] Third Defendant's Defence, [13A].

[31] MLW Technology Pty Ltd v Roger Thomas May [2005] VSCA 29, [58]-[61].

[32] Citing Bullock v Wimmera Fellmongery and Woolscouring Co Ltd (1879) 5 VLR (L) 362 (Bullock).

[33] Citing Carbon Black v Launer [2015] VSCA 126 (Carbon Black).

[34] Transcript of Proceedings (14 March 2017) 322.

[36] Amended Defence of Fourth Defendant, 27 February 2017, [13(b)]-[13(c)] (Fourth Defendant's Defence).

[37] Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597, 607.

[38] Fourth Defendant's Defence, [10(b)].

[39] Outline of Closing Submissions of the Fourth Defendant, 9 March 2017, [33] (Fourth Defendant's Closing Submissions).

[41] Adrian J Bradbrook et al, Commercial Tenancy Law (LexisNexis Butterworths, 3rd ed, 2009) 453 [15.9].

[42] The fourth defendant also alleged there was a failure to jointly engage an expert under cl 2.23(a) though this was not pursued in submission; nor could it be given both an environmental consultant (JFTA) and an independent auditor, Mr Hill, were appointed and approved.

[43] It is also pleaded that United is barred by its own laches from asserting rights. However, this was not further pursued in oral or written submissions by the Fourth Defendant. Nor was it explained how 'laches' could amount to a defence to a common law claim for damages.

[44] Fourth Defendant's Closing Submissions, [69].

[46] (2008) 238 CLR 570, 620 [144]-[145].

[47] Fourth Defendant's Closing Submissions, [72].

[48] Ibid 588 [56] citing Craine v Colonial Mutual Fire Insurance Co Ltd (192) 28 CLR 305, 326; Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 658.

[51] Balanced Securities Limited v Dumayne Property Group Pty Ltd [2017] VSCA 61, [78].

[52] Third Defendant's Defence, [20(c)].

[53] Fourth Defendant's Defence, [23(c)].

[55] See generally Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 and the principles summarised in R & A Cab Pty Ltd v Lindsay Kotzman [2008] VSCA 68, [45]-[49].

[56] Third Defendant's Defence, [39].

[57] Fourth Defendant's Defence, [14B]-[14G].

[58] Fourth Defendant's Closing Submissions, [89].

[59] J W Carter, LexisNexis, Carter on Contract (as at March 2017) [41-140].

[60] Plaintiff's Updated Particulars of Loss and Damage, 27 February 2017; Plaintiff's Closing Submissions, 10 March 2017, [8]-[11].

[61] [1848] EngR 135; (1848) 1 Exch 850, 855.

[62] [1991] HCA 54; (1991) 174 CLR 64, 80.

[63] European Bank Limited v Evans [2010] HCA 6; (2010) 240 CLR 432, 438.

[64] Third Defendant's Closing Submissions, [55]-[56].

[65] [1955] HCA 19; (1955) 91 CLR 512.

[68] See also Australian Special Opportunity Fund LP v Equity Trustees Wealth Services Ltd (formerly ANZ Trustees Ltd) [2015] NSWCA 225; (2015) 323 ALR 570 where the principle was applied in the context of a claim that a trustee acted in breach of obligations under a trust deed.

[69] Wardle v Agricultural and Rural Finance Pty Ltd (No 4) [2014] NSWCA 206.

[71] See St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245; (2009) 25 VR 666, [22].

[72] Adrian J Bradbrook et al, Commercial Tenancy Law (LexisNexis Butterworths, 3rd ed, 2009) 453 [15.9].

[73] See, for example, Letter of 31 March 2015 from Still & Co. See also Letter of 26 March 2015 from United.

[74] Transcript of Proceedings (14 March 2017) 336.

[75] Third Defendant's Closing Submissions, [64].

[76] [1954] HCA 36; (1954) 90 CLR 613.

[77] [1912] AC 673.

[78] [1891] 2 QB 31. In Joyner v Weeks the premises were left in a state of disrepair by the (first) tenant. Before the end of the lease the landlord re-let the premises to a new tenant, who agreed to alter part of the premises. Despite this, the Court of Appeal found that the ordinary rule applied and damages were awarded for 'such a sum as will put the premises into the state of repair in which the tenant was bound to leave them'. Further, that the second lease was irrelevant to the tenant's obligations under the first lease.

[79] [1924] All ER 344.

[80] [2013] HCA 56; (2013) 253 CLR 1.

[81] Fourth Defendant's Closing Submissions, [101]-[102] citing British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, 689.

[82] [2009] HCA 8; (2009) 236 CLR 272.

[84] Tabcorp [2009] HCA 8; (2009) 236 CLR 272, 286.

[85] [2013] VSC 464, [352].

[86] As well as Joyner v Weeks [1891] 2 QB 31 and another decision of the NSW Court of Appeal in Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413.

[87] [1954] HCA 36; (1954) 90 CLR 613.

[89] [1912] AC 673.

[90] Bellgrove [1954] HCA 36; (1954) 90 CLR 613, 618.

[91] Tabcorp [2009] HCA 8; (2009) 236 CLR 272, 288 [17]; see also at 289 [19].

[94] British Westinghouse [1912] AC 673, 688-9.

[95] British Westinghouse [1912] AC 673, 689.

[96] [1924] All ER 344.

[97] [2013] HCA 56; (2013) 253 CLR 1.

[98] Ibid 6-7 (Hayne J), 11 (Crennan and Bell JJ), 19 (Gageler J), 30-1 (Keane J).

[103] Tabcorp [2009] HCA 8; (2009) 236 CLR 272, 290 [19].

[105] This decreases to $13,515 on 15 June 2016 because it takes into consideration the rental increase to $254,457 per annum (excluding GST) which occurred on 15 June 2016.

[106] And see generally Watson v Gray (1900) 16 TLR 308; Sacca v Adam and R Stuart Nominees Pty Ltd [1983] 33 SASR 429; SS Ardennes (Cargo Owners) v SS Ardennes (Owners) [1950] 2 All ER 517.

[107] In fact, if the options are included, the difference between the terms of the leases is only approximately three years.

[108] Fourth Defendant's Closing Submissions, [104].

[109] N C Seddon et al, Cheshire and Fifoot Law of Contract (LexisNexis Butterworths, 10th ed, 2012) 1170-1.

[110] This appears to be approximately equal to the original amount provided in the lease with 3.5% increases.

[111] Third Defendant's Defence, [38].

[112] Transcript of Proceedings (6 March 2017) 110.

[113] Third Defendant's Defence, [40].

[114] [1998] 3 VR 812.

[118] Ibid [138] (citations omitted).

[119] Corporations Act 2001 (Cth) ss 513B, 513C.

[120] Gye v McIntyre [1991] HCA 60; (1991) 171 CLR 609, 619.

[121] Grapecorp Management Pty Ltd (in liq) v Grape Exchange Management Esuton Pty Ltd [2012] VSC 112; (2012) 265 FLR 33, 44 [52] (Grapecorp); Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd (2016) 337 ALR 452, 515 [226]-[227] (Façade).

[122] Transcript of Proceedings (14 March 2017) 346.

[123] Third Defendant's Reply to Defence to Counterclaim, 2 March 2017, [7].

[125] Façade (2016) 337 ALR 452, 515 [226].

[126] Grapecourt [2012] VSC 112; (2012) 265 FLR 33, 50 [74].

[127] Carter v New Tel Ltd (in liq) [2003] NSWSC 128; (2003) 44 ACSR 661, 665 [16]-[17].