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Redevelopments Pty Limited v Enima Pty Limited [2010] ACTCA 13 | Case summary | Zoe

ACTACTCA

Redevelopments Pty Limited v Enima Pty Limited [2010] ACTCA 13

[2010] ACTCA 13

Court of Appeal (ACT)|2010-06-25

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Court of Appeal (ACT)

Decision date

2010-06-25

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Original judgment source is linked above.

Judgment

Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.

REDEVELOPMENTS PTY LIMITED v ENIMA PTY LIMITED [2010]

ACTCA 13 (25 June 2010)

APPEAL – appeal from orders of a single judge of the Supreme Court.

CONTRACTS – options and contract provisions – failure of contractual terms to reflect objective intention of parties – implied terms – implied duty to co-operate to do acts necessary for contract performance – not essential to performance of obligations by either party – objective theory of contract - terms of option and contract should not be subordinated to common assumption.

REMEDIES – equitable remedies – rectification of a contract – estoppel.

Land (Planning and Environment) Act 1991 (ACT), s 184A

Enima Pty Limited v Redevelopments Pty Limited [2009] ACTSC 95

Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596

Himbleton Pty Ltd v Kumagai (NSW) Pty Ltd (1991) 29 NSWLR 44

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Toll (FGC) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151

B P Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1978) 52 ALJR 20

Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348

Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507

Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54

Slee v Warke (1949) 86 CLR 271

Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336

Pukallus v Cameron (1982) 180 CLR 447

Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Waltons Stores (Interstate) Ltd v Maher and Anor (1988) 164 CLR 387

Con-Stan Industries of Australia Pty Ltd v NorwichWinterthur Insurance (Australia) Ltd (1986) 160 CLR 226

Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

The terms of the contract of sale for the interest in the Crown lease (“the contract”) were to be determined in accordance with the provisions of a call option deed (“the option”) made between the respondent and another company, Mbark Pty Ltd (“Mbark”), on 11 May 2005. The option was for an initial period of two years with provision for an extension for a further 12 months. The option required payment by Mbark of $100,000 at the time the option was granted and a further $100,000 if it was extended. Those payments would be deemed to form part of the deposit required by the contract if the option was exercised.
The option provided that Mbark might nominate a nominee to replace it. On 26 March 2007 Mbark nominated the appellant to be its nominee under the option. The appellant paid Mbark $100,000 in return. In effect, therefore, Mbark recovered its initial outlay and had no further legal interest in the option or any subsequent contract. At the expiry of the initial period, the appellant extended the option. The appellant paid the respondent a further $100,000 as required by the option. On 9 May 2008, shortly before expiry of the extended option period, the appellant exercised the option. Under the terms of the option that became the date of the contract.
Mbark had made known to the respondent, before the option was granted, its interest in the possible redevelopment of the site as a retirement housing project. The respondent and Mbark each assumed that, if Mbark wished to exercise the option, Mbark would make an application to the ACT Planning and Land Authority (“ACTPLA”) under the Land (Planning and Environment) Act 1991 (ACT) (“the Act”) for a change in the use permitted for the property and that it would do so before the option was exercised.
When it granted the option to Mbark, the respondent wished to obtain $10 million upon the sale of its interest in the Crown lease if the option was exercised. It accepted, however, that if a development application was lodged and a charge was made for a change in the permitted use of the land, Mbark should not be required to pay that charge in addition to any purchase price. Accordingly, the respondent was prepared to accept terms, the substance of which was that a deduction of up to $2 million (to reflect any change of use charge which might be determined by ACTPLA) could be made from the $10 million purchase price. Its preparedness to agree to this arrangement was founded upon its assumption that a development application would be made before the option was exercised.
For the purpose of the present appeal the appellant accepted that there was a common assumption (between the respondent and Mbark) that a development application would be lodged by Mbark if it decided to exercise the option.
The option and the contract of sale each contained provisions which would operate if no change of use charge had been determined prior to the exercise of the option. In those circumstances, the purchase price to be inserted in the contract was $8 million. Various other provisions of the contract required an adjustment of the purchase price (and/or the deposit) in the event that a change of use charge was determined after the date of the contract. Completion of the contract
Mbark had made no application for redevelopment prior to the date upon which it nominated the appellant as its nominee. The appellant did not make any application for redevelopment after it was nominated by Mbark and before it exercised the option, or at any time thereafter. In accordance with the provisions of the option and of the contract referred to above (which it will be necessary to discuss in greater detail) the purchase price inserted in the contract was $8 million. The provisions requiring an adjustment of the purchase price (and possibly the deposit) were not engaged prior to completion because no change of use charge was determined, there having been no development application lodged. A total purchase price of $8 million (excluding GST) was paid on completion and the property was transferred. The dispute
After completion and transfer the respondent claimed that the appellant was obliged to pay an additional amount to take the total purchase price from $8 million to $10 million. The appellant resisted. Proceedings were commenced. Relief sought
The relief which the respondent (as plaintiff at the trial) sought was: a declaration in substance to the effect that the purchase price for the sale was $10 million (less a change of use charge limited to a deduction of $2 million) and that the appellant was obliged to make a development application so that a charge, if any, could be calculated; rectification to correct the contract so that it had that effect; alternatively, a declaration that the appellant was estopped from denying that the contract had that meaning; alternatively, a declaration that the contract contained implied terms to that effect; other relief which it is not necessary to discuss.

In response to the respondent’s claims for relief, the trial judge came to the conclusion (Enima Pty Limited v Redevelopments Pty Limited [2009] ACTSC 95 (14 August 2009)) that: (1) (at [176]) a term should be implied in the contract as follows: “The Purchaser shall have made an application under the Land (Planning and Environment) Act 1991 (ACT) for a change in the permitted use of the land and, if not, the purchase price shall be $10 million” (2) (at [178] and [205]) had it been required, the contract and the option would have been rectified to the same effect. (3) (at [207] – [210]) it was unconscionable of the appellant (the defendant below) not to lodge a development application and then refuse to pay the true purchase price.
The conclusions incorporated, and were based on, prior findings by the trial judge (at [169]) that the respondent and Mbark shared a common assumption that a development application would be made before the contract of sale came into effect, (at [198]) that the appellant should not be regarded as a bona fide purchaser of rights under the option for value but only as a substitute for Mbark and liable to all the equities to which Mbark was liable and (at [199] – [204]) that, in any event, the appellant had constructive notice of the common intentions of the respondent and Mbark and would have been advised by Mbark, if it had enquired, of the following common intentions of those parties (at [179]): (a) the purchase price was always to be $10m; (b) the purchaser was to make an application for a change of use to permit a retirement home/hotel to be constructed on the Jamison Inn; (c) the vendor would bear the risk of the Charge for change of use up to a maximum of $2m, but which the parties were aware was likely to be much less or nil; and (d) this amount would be dealt with through the payment of the purchase price less a deduction for the Charge. Considerations on appeal
Despite the extensive discussion of these matters in the judgment, in our respectful view the findings from which the reasoning of the trial judge proceeded were an insufficient foundation for his conclusions. In particular, we differ from the trial judge’s conclusion that the shared assumption he identified was an adequate foundation from which to proceed to imply a term into the contract or rectify the option or the contract. We also do not accept that the appellant could be regarded merely as a substitute for Mbark or that it had an obligation to enquire about the content of negotiations between Mbark and the respondent. Problems with respondent’s case
Two major difficulties for the respondent’s case are: first, that the assumption which the respondent shared with Mbark at the time the option was granted left open a variety of circumstances and possibilities which make it unsuitable either as an implied term or as a basis for rectification or estoppel; and, secondly, that the terms of the option itself left open to Mbark, and later the appellant, discretions and courses of action inconsistent with the rights which the respondent later claimed. Those asserted rights were matters which the respondent should have addressed in the option, particularly as Mbark had the right to give the benefit of the option to another party having no connection with any earlier discussions, which nominee might not share Mbark’s initial plans.
The option contained provisions, consistent with the common assumption referred to earlier, authorising Mbark (or its nominee) to enter the property prior to the exercise of the option to survey, measure or inspect the property for the purpose of a development application. It required the respondent to consent to the lodging of a development application and to sign any necessary documents if requested to do so. However the option did not impose any obligation upon Mbark (or its nominee) to make a development application or otherwise to take specific steps to give effect to the common assumption to which reference was earlier made. Although Mbark had the possibility of redevelopment of the site clearly in mind, the fact that it took an option, rather than immediately entering into a contract to purchase the respondent’s interest in the Crown lease, is a tangible and sufficient indication that its intentions, as revealed to the respondent, were tentative only.
Under s 184A of the Act ACTPLA was required, if a development application was made, to determine a change of use charge at 75% of the difference in the value of the land under the previous and proposed uses. Both the option and the contract made provision for reduction of the purchase price of $10 million by as much as $2 million to reflect such a charge. The trial judge found that the respondent believed that, at a purchase price of $10 million, any change of use charge would be very small or nil if the change of use sought was to permit the construction of an aged persons’ facility/retirement village. There was, however, no provision in either the option or the contract which specified, or limited, the use which might be sought, if a development application was made, to one concerning retirement housing. Whatever its own estimate might have been, based on its understanding of Mbark’s initial tentative intentions, the respondent necessarily accepted the risk of a substantial charge, reducing the purchase price to well below $10 million. Any expectation which the respondent might have had about the final purchase price was, in the circumstances, unilateral.
There was, moreover, nothing to stop Mbark changing its mind about its development plans, even if it wished to exercise the option itself. There was no requirement that it impose its intentions upon a nominee, whether with respect to some proposed plan for retirement housing or otherwise. Had a development application been made by Mbark, or its nominee, there was nothing to stop such an application being withdrawn, whether by Mbark or the nominee. It was also possible that ACTPLA might have sought further information or imposed conditions in connection with any development application which was lodged by either of them. There was no requirement upon Mbark or its nominee to pursue such an application to effective completion.
In the ordinary course of events, before any question arose about implying terms into a contract as a matter of fact (rather than as a matter of law) or of rectifying a contract, or whether there was an estoppel concerning the meaning of a contract, it would be necessary first to come to a view about what obligations appeared to arise from the terms of the contract itself, upon the proper construction of those terms. It is only upon such an initial foundation that proper consideration might be given to whether the tests for the implication of a term as a matter of fact could be met, or whether the terms failed to reflect a proven agreed matter, or whether in conscience a particular construction could not be denied by a party. In the present case, the absence of any stated requirement in the option or the contract that Mbark or its nominee should actually make a development application, or pursue one to completion if made, was in our view highly significant.
We shall in due course discuss the particular forms of relief which the trial judge found to be available and justified. First, it is convenient to dispose of any suggestion that the appellant was under some duty implied by law to assist the respondent to realise any particular level of purchase price and then to identify the provisions of the option and the contract which, in terms, governed the price to be paid. Effect of contract Did appellant have an implied duty?
In Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596 (“Secured Income”), Mason J referred (at 607) to the distinction between an implied “duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract” and circumstances “when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract.” His Honour said of the second possibility (at 607-608): In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.
In Himbleton Pty Ltd v Kumagai (NSW) Pty Ltd (1991) 29 NSWLR 44, Giles J pointed out (at 60-61) that the principle suggesting an implied duty to co-operate of the kind referred to in the first category mentioned by Mason J in Secured Income could not be used to construe as absolute obligations matters which were neither express obligations under a contract or essential for its performance. The present case falls into the second, rather than the first, of the categories referred to by Mason J. In our view there was no implied duty on the appellant to co-operate in securing the highest price for the respondent. It was not necessary for the performance of obligations under the contract by either party that a development application be made. As will be seen, the contract satisfactorily accommodated circumstances where no such application had been made. The proper enquiry, therefore, in accordance with the observations of Mason J in Secured Income, is what should be concluded from the actual terms of the contract about the presumed intention of the parties.
Under the objective theory of contract, the meaning of a contract is to be decided in accordance with what, having regard to the purpose and nature of the transaction, the terms of the contract would convey to a reasonable person in the position of the parties, rather than by reference to the subjective intentions of one, or even both, parties to the contract (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 (“Codelfa”), Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22], Toll (FGC) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40], International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at [53]). This is particularly relevant where the party now challenging a particular interpretation of the contract was not a party to the initial agreement about the terms of the contract.
The purpose of the option and the contract was to facilitate and enable the transfer of the interest in the Crown lease at a price to be determined in accordance with the provisions of those instruments. It was the terms of the option and the contract which governed any further transaction between Mbark or the appellant and the respondent. Neither Mbark nor the appellant was committed to a purchase on any terms. If the option was exercised neither was obliged by the terms of either instrument to make a development application. The respondent’s desire to achieve a particular purchase price, and its own assessment that a particular change of use charge would not substantially reduce the purchase price below $10 million, cannot in our view, even if endorsed by Mbark when the option was granted, substitute for or override the terms of the instruments themselves. The appellant was not bound contractually or in conscience by assumptions neither endorsed by it or reflected in the contractual terms by which it became bound. It was entitled, in our view, to take those terms as it found them. Determination of contract price
Despite the assumption shared by the respondent and Mbark (that Mbark intended to make a development application before it exercised the option if it chose to do so) the provisions in the option and the contract for the determination of the purchase price did not depend for their operation on a development application having been made at any particular time, or at any time at all.
Clause 3.2 of the option required the purchaser (whether Mbark or its nominee) to take certain specified steps in order to validly exercise the option. One of those steps was to deliver an executed contract which included the purchase price. Under the option, “Purchase Price” meant a sum of money calculated in accordance with a formula in annexure PP. Annexure PP was in the following terms: The Purchase Price to be inserted into the Contract on the exercise of the Call Option will be the amount determined by subtracting from the sum of Ten Million dollars ($10,000,000.00) the amount of any change of use charge that has been determined by ACTPLA under section 184A of the Land (Planning and Environmental) Act 1991 [sic] in respect of the Property (“the Charge”) subject to a maximum amount of Two Million Dollars ($2,000,000.00) being subtracted from the Ten Million Dollars.

Clause 1 of Annexure PP2 applied because the contract was completed without any change of use charge being determined. An argument was advanced by the respondent to the appeal that the change of use charge referred to in annexure PP2 should be regarded as nil (yielding no deduction from $10 million) in accordance with clause 2 of annexure PP2. The argument gave no acknowledgement to the requirement that there needed to be a determination by ACTPLA of any charge, even one assessed at nil.
As clause 1 of annexure PP2 applied, additional condition 38 applied also. This arrangement was not completely circular because it emphasised that a charge might be determined after the date of completion, in which case the respondent would be entitled to claim an adjustment of the purchase price under clause 38.4, which did not merge on completion.
Accordingly, the provisions of the option, and of the contract, directed that $8 million be inserted in the first instance as the purchase price. No further adjustment was required by the terms of the contract although it remains open, we think, that an adjustment in the future might be called for in the event that the appellant makes an application for change of use of the land. We see no relevant ambiguity in the terms of the contract and little scope for debate about its meaning. In particular, no inference arises from its terms that the arrangements for determination of the final purchase price were incomplete or that some intended term was omitted.
Apart from the difficulties to which we have already referred there are other reasons also why it should not be concluded that the terms of the option and the contract should be subordinated to the common assumption on which the respondent relied. There were courses of action clearly open to the purchaser which do not match the common assumption upon which the respondent relied and which is at the heart of the reasoning of the trial judge. Relationship between common assumption and terms of option and contract
Despite the common assumption by the parties that Mbark would make a development application before the date of exercise of the option (the date of contract), there is no feature of the requirements of the option or of the contract which would have prevented such an application being made after the date of contract and before completion. That was accepted by the respondent in argument on the appeal. Such a circumstance is substantially destructive of reliance upon the common assumption, an essential element of which was that an application would be made before the option was exercised. We can see no reason either why clause 38.4 of the contract would not apply to a future application made by the appellant, who had agreed to be bound by that provision. Whether that is so does not require final determination on the present appeal. Counsel for the appellant did say that, if the appeal succeeded and the proceedings were dismissed, the respondent would have no further rights under the contract. We doubt that is so but it is not necessary to address that issue further.
Another matter which is substantially destructive of reliance upon the common assumption for the purpose of any of the relief sought in the present proceedings is that it was accepted, correctly in our view, that the common assumption could not sustain a conclusion that the development application to be made was necessarily one concerning an aged persons’ facility/retirement village. Without reference to its content, any assumption that a development application would be made loses sufficient certainty to be enforceable or to serve as a foundation for any of the relief which was sought.
If, as we would conclude, the respondent is unable to rely, for the purpose of relief against the appellant, upon the common assumption shared with Mbark as found by the trial judge, then all the relief which it sought in the proceedings was unavailable to it and the proceedings should have been dismissed. Circumstances in which contractual term can be implied
There are further reasons also why none of the causes of action upon which the respondent relied in the present appeal could provide relief to it.
The parties were agreed (and the trial judge accepted) that the relevant tests for the implication of a term are stated in B P Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1978) 52 ALJR 20 (at [26]) (see also Codelfa at 347). Three of the tests appear to us to be particularly relevant in the present matter. They are that any implied term: · must be necessary to give business efficacy to the contract (so that no term will be implied if the contract is effective without it); · must be so obvious that ‘it goes without saying’; and · must not contradict any express term of the contract.
In the present case the trial judge implied a term to the effect that the purchaser (which was, by the time of the exercise of the option, the appellant) should have made an application for redevelopment (i.e. before the date of the contract) and, if not, the purchase price would be $10 million. In our view such a term would not be necessary to give the contract business efficacy. The contract was effective without it, even though it did not match the assumptions of the respondent. The term was not so obvious that it went without saying, particularly so far as it concerned a third party in the position of the appellant, which was entitled to make judgments based upon the language of the option and the contract in accordance with the meaning which that language would convey to a reasonable person in the position of the appellant. Finally, the implied term would not be consistent with the express written terms of the contract to which we have already referred.
The common assumption, even insofar as it might have concerned Mbark, was insufficient in our view to sustain the implied term. The fact that Mbark, or its nominee, was unrestrained by the option in the respects we have mentioned suggests that the assumptions made by the respondent and by Mbark were not mutually intended to be the subject of legal obligations. Such an approach is also supported by authority.
In Codelfa an arbitrator had found that there was a common understanding between Codelfa and the State Rail Authority of New South Wales that to carry out the task under a contract for which Codelfa proposed to tender, work would need to be undertaken three shifts a day for six days a week. Mason J, in a passage which is very similar to the findings of the trial judge in the present matter said (at 354): … the evidence revealed a matter which was in the common contemplation of the parties yet was not a contractual provision actually agreed upon for the simple reason that it was a matter of common assumption.
Similarly, in the present case, the trial judge found (at [169]): In the first place, it seems to me that the parties had as a common assumption, though not as a contractual provision actually agreed upon (because of the common assumption), that a development application would be made for a change of use of the Jamison Inn. The purpose of the transaction was to allow that to occur before the Contract of Sale was signed.
Mason J, however, went on in Codelfa (at 354): To say that the maintenance of three eight hour shifts a day for six days a week was a matter of common contemplation between the parties is not enough in itself to justify the implication of a term … It must appear that the matter of common contemplation was necessary to give the contract business efficacy and that the term sought to be implied is so obvious that it goes without saying.
We have already pointed out that there was no necessity for any change of use application to be made before the contract was executed in order for its provisions to operate satisfactorily. So much, as we earlier indicated, was accepted by the respondent on the appeal. In the circumstances, in our view it was not open to imply into the contract the term found by the trial judge.
Implication of such a term would also contradict the express written terms of the contract. Clause 45.2 of the additional conditions to the contract (which was also a term and condition incorporated in the option) provided: This Agreement contains the entire understanding between the parties in relation to its subject matter. There are no express or implied conditions, warranties, promises, representations or obligations, written or oral, in relation to this Agreement other than those expressly stated in it or necessarily implied by law.
It was a matter for the parties at the relevant time to fashion their own bargain. The respondent and Mbark chose to confine their legal rights and obligations within the limits expressed by the written terms of the option and the contract (subject to any implications required by law). Such a provision does not exclude equitable relief but it was effective, in our view, to defeat the construction and implication arguments advanced by the respondent (see e.g. Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 per Latham CJ at 357-358, Dixon J (with whom Rich J agreed) at 363, Evatt J at 365, McTiernan J at 368; see also Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 at 517). Equitable remedies
In the light of his conclusion that an implied term should be identified, it was not necessary for the trial judge to make orders concerning rectification or estoppel although the trial judge indicated that he would, if necessary, have made orders in favour of the respondent in each respect. In our view no such orders were open for the reasons which follow. Rectification of contract
The remedy sought by the respondent was rectification of the contract. It is a pre-condition for rectification of a contract that a term has been omitted which was actually agreed upon and should have been included (see Codelfa at 346). The terms of the contract were agreed in anticipation between the respondent and Mbark. When the appellant became Mbark’s nominee it necessarily accepted the terms of the contract in the form annexed to the option. However, the appellant was not a party to the negotiations which gave rise to the terms of the option or of the contract itself. In our view, it was not open to the trial judge to find, as between the respondent and the appellant, that those parties had actually agreed upon something which was not in the contract or in the option.
It is also necessary that the requisite common intention be continued until, and is therefore in existence at, the time of execution of the instrument in question. This requirement is often illustrated by a reference to the statements of Lord Chelmsford in Fowler v Fowler (1859) 4 DeG&J 250 at 265; 45 ER 97 at 103 (see Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 at 64; Slee v Warke (1949) 86 CLR 271 at 280-281; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349; Pukallus v Cameron (1982) 180 CLR 447 at 457; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 (“Franklins”) at [511]). It is also frequently observed that convincing proof of the common intention justifying the grant of rectification is required (Franklins at [451]). The intention of Mbark at the time of execution of the option was no longer relevant once it ceased to be a party to the option, unless there was some basis upon which it should be concluded that Mbark’s intention at the time of execution of the option was adopted, to the knowledge of the respondent, at the time of the appellant’s nomination by Mbark so that it became, and remained, the common intention of the respondent and the appellant from that time forward. In the circumstances, there was no relevant common intention shared by the appellant and respondent at the time the contract was executed.
The trial judge also referred to the principle (at [134]): that rectification will not normally be awarded where it would prejudice any bona fide purchaser for value who has acquired an interest which would be damaged or otherwise adversely affected if the relevant document were to be rectified.
In our view that was the position in the present case. The principle referred to by the trial judge was also sufficient to defeat any claim for rectification, whether of the contract or of the option.
His Honour came to the view however that, as a “substitute” for Mbark, the appellant was “liable to all the equities, including the equity of rectification, to which Mbark was liable” (at [198]). Alternatively, he found, the appellant had constructive notice because it was insufficiently diligent in its pursuit of inquiries which would have alerted it to the intentions which Mbark shared with the respondent. In our respectful view, the analysis breaks down at the outset in accordance with the observations of Mason J in Codelfa at 354 (set out at [43] above). The common assumption shared by the respondent and Mbark (which was accepted by the appellant for the purposes of the appeal) was not intended as a contractual provision. Rectification will not be granted to redress an omission which is simply found, in the light of unfolding events, to have been imprudent. Nor, in our view, should the appellant be treated, in any event, as “a substitute for Mbark” if by this characterisation was meant that its interests and liabilities were identical with or indistinguishable from those of Mbark. It was, on the evidence, a purchaser of Mbark’s interests under the option at arm’s length. In our view it was not bound in conscience to any position taken by Mbark, even if the respondent had relied upon it. Nor are we able, with respect, to agree with the conclusion that the appellant was to be fixed with constructive notice of Mbark’s earlier intentions, although it would make no difference, in our view, if there was such constructive notice because the earlier conditions for rectification to which we have referred are not established.
Although the respondent’s claim was for rectification of the contract, the trial judge made it apparent that he would, if required, have rectified both the contract and the option. For the reasons we have explained, we disagree that such relief was available to the respondent. Estoppel
The views of the trial judge concerning estoppel were ones which, he said, flowed from his views about rectification. It is clear from the discussion in his judgment that the form of estoppel which he would have upheld is that commonly known as equitable estoppel or promissory estoppel (see Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130; Waltons Stores (Interstate) Ltd v Maher and Anor (1988) 164 CLR 387 (“Waltons Stores”). In accordance with Waltons Stores it would be necessary for the respondent to have established:

With respect, none of those elements may be attributed to the appellant, and we doubt that they could be attributed to Mbark either. A shared assumption of the kind identified in the present case (which could readily have been, but was not, reflected in the terms of the option or the contract) falls short of an inducement upon which the respondent could ultimately rely to excuse or explain its failure to address the issue in the option or in the terms of the contract.
On the appeal, the respondent did not devote its efforts to sustaining the trial judge’s conclusion on this issue. It argued, rather, that the relevant estoppel in the present case was estoppel by convention. An estoppel of that kind requires it to be established that the parties have adopted, as the conventional basis of their relationship, an agreed or assumed state of facts (see Con-Stan Industries of Australia Pty Ltd v NorwichWinterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244-245). The relevant parties (here the appellant and the respondent) would need to have adopted the same assumption about the legal basis of their relationship, have conducted their relationship on the basis of that assumption and each know, or have intended, that the other would act on that basis (Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at [200]; Franklins at [573]). As between the appellant and the respondent those elements were not established. There was a further element also required. The respondent needed to show that it acted to its detriment by proceeding on the common assumption with the relevant other party. No act by the respondent, committing itself to the contract of sale with the appellant, proceeded from reliance on any assumption. The respondent was bound by the terms of the contract, whether or not it actually exchanged contracts (clause 5.3 of the option). It acted, in its dealings with the appellant, under a legal compulsion put in place before the appellant arrived on the scene. It did not act on the basis of some assumption it shared with the appellant. If it suffered a detriment, the detriment was not occasioned by departure from a common assumption shared with the appellant. In our view the respondent did not make out a cause of action based upon any form of estoppel. Conclusions and orders
No attempt was made on the appeal to support the orders of the trial judge except by reference to issues of construction, implication of terms, rectification or estoppel. As none of those areas provides a foundation for relief in favour of the respondent and as we respectfully disagree with the approach which the trial judge took to each of those issues, there is no foundation for orders to be made in the respondent’s favour.
The Court makes the following orders: 1. The appeal be allowed with costs. 2. The orders made by Justice Refshauge on 28 July 2009 in this matter be discharged. 3. The orders made by Justice Refshauge on 1 October 2009 at the conclusion of the trial of this matter be set aside. 4. The originating claim and statement of claim be dismissed with costs. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.