Judgment
1 HODGSON JA: I agree with Bryson JA that the appeal should be dismissed, and substantially with his reasons. I would add the following.
2 Prior to the transfer of the subject land to the appellant (South Dowling), the respondent (Cody) was bound by a contract with Pias Settlements Pty. Ltd. (Pias) to pay Pias a licence fee in consideration of a licence from Pias to erect and maintain advertising signs on the land, for a period of 10 years expiring on 1 September 2007.
3 Pias transferred the land to South Dowling, pursuant to a settlement occurring on 30 July 2002. This did not give rise to any contractual relationship between South Dowling and Cody; and although there might possibly have been contractual rights between South Dowling and Pias on the one hand, and between Pias and Cody on the other, such as to make it conceivable that South Dowling might, in proceedings in which both Pias and Cody were also parties, have been able to obtain an order that Cody enter into a contract with it, no such claim was brought.
4 Pias purported to assign to South Dowling its rights under its contract with Cody. However, those rights were essentially the right to receive a licence fee in consideration of a licence from Pias to erect and maintain advertising signs on the land coupled with a promise by Pias to continue that licence to 1 September 2007; and following the settlement of the sale of the property, the licence from Pias was ineffectual to authorise South Dowling to have its signs on the land and the promise by Pias to continue that licence was empty. The consideration under the contract for any future licence fees thus failed.
5 In those circumstances, the purported assignment could not be effectual to assign any viable cause of action for future licence fees, either at law (under s.12 of the Conveyancing Act 1919) or in equity. As Bryson JA has pointed out, what was required was a novation, and that did not occur.
6 For those reasons, in addition to the reasons based on repudiation, South Dowling could not recover from Cody licence fees in respect of any period after 30 July 2002.
7 Bryson JA: By a Signage Rights Deed dated 28 August 1997 Pias Settlements Pty Ltd (hereinafter Pias Settlements) as licensor granted to Claude Neon (Aust) Pty Ltd (hereinafter Claude Neon Aust) as licensee a licence to erect, display, maintain and repair advertising signs on a building known as Research and Development Tower at 877 South Dowling St Waterloo, New South Wales. The rights created were a contractual licence, and no interest in land was created. The Agreement contained elaborate provisions relating to obtaining development approval from the South Sydney City Council for the signage, and either party had a right to terminate if satisfactory development approval was not obtained. The deed was to continue for a term of 10 years from notification of an acceptable development approval. The parties entered into two deeds of variation, dated 30 September 1997 and 25 May 1998. The variations related principally to planning development approval and bringing the Signage Rights Deed into operation; they have no effect on the issues in this litigation. It was established that the period of 10 years expired on 1 September 2007.
8 The Signage Rights Deed established (clause 8.6) that the licensee Claude Neon was not entitled to assign its rights pursuant to the deed, but there is no provision which prevented the licensor from assigning its rights, a textual indication in clause 1.2 dealing with interpretation shows that the parties contemplated the possibility of assignment, and cl.7 dealt expressly with the contingency that the licensor should sell the land in which the building was erected. Clause 7 is in these words:
7. SALE OR HEADLEASE OF BUILDING
If the Licensor sells the land on which the Building is erected, the Licensor shall ensure that the purchaser enters into an agreement with the Licensee in terms reasonably acceptable to the Licensee which preserve the Licensee's rights and obligations under this Deed. The Licensor shall ensure that there is included in any agreement for sale of the land a provision requiring the purchaser to execute such an agreement upon completion of the purchase of the land. In the case of a sale of the land, the Licensor shall cease to be bound by this Deed upon the purchaser entering into such agreement except in respect of any act matter or thing arising prior to the date of such agreement. In the event of the Licensor granting a headlease of the land, the Licensor shall ensure that such headlease expressly preserves in terms reasonably acceptable to the Licensee the rights of the Licensee under this Deed.
9 I make a distinction between transferring title to the land with an arrangement for the new proprietor to be bound by the Signage Rights Deed or to confer a similar contractual licence, and assigning the benefit of some or all of the licensee's contractual obligations, such as the obligation to pay licence fees. In this case we are not concerned with the latter, which could perhaps be achieved by an assignment under s.12 of the Conveyancing Act 1919; whereas the former could not be achieved in that way. To be strict with language, the former is not an assignment at all: a contractual licence granted by someone who used to own the land but no longer does would only nominally be a licence and the licence would be defeated by the transfer, and the most that the licensee can achieve is a novation, a new contractual licence granted by the new proprietor.
10 Although the Signage Rights Deed does not say so in express terms it created an implied contractual obligation of the licensor that the licensor should not transfer title to land on which the building stood to any other person; as the Signage Rights Deed did not create any interest in land, a transfer of title would defeat the object of the Signage Rights Deed and prevent the licensee from having any further effectual right to display signs or otherwise carry on activities under the Signage Rights Deed; an effectual right depends wholly on the licence or permission of the owner of the land from time to time. The Signage Rights Deed is not an agreement for the sale of an interest in land, but is a commercial agreement in which stipulations as to times for performance of obligations operate according to their terms and are taken to have been intended to be of the essence. Equitable remedies for contractual licences are not ordinarily available: see Cowell v The Rosehill Racecourse Co Ltd (1937) 56 CLR 605 and Graham H. Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93. Clause 7 meets the licensee's need for protection against transfer of title to the land. Insofar as cl.7 specifies circumstances in which the licensor may transfer title to someone else without being in breach of the implied contractual obligation it operates as an exception to that implied contractual obligation, which has force except insofar as the licensor acts within cl.7.
11 Clause 7 shows that the obligations of the licensor were to continue unless there was a new arrangement of the kind to which cl.7 refers. There could be no hiatus in the contemplated arrangements for the licensee to have a contractual licence: it was the obligation of the licensor to see that there was not. A hiatus would, for the licensee, be a terminus of rights of occupation.
12 By early 2002 the name of the licensee Claude Neon Aust had been changed to Entity Group Pty Ltd. By a Deed of Consent and Assignment of Licence entered into early in the year 2002 the licensor, the licensee and Cody Outdoor Advertising Pty Ltd (hereinafter Cody Outdoor Advertising) joined in an assignment of the licence to Cody Outdoor Advertising. The Deed of Consent and Assignment produced a novation so that the Signage Rights Deed continued in effect from the date of assignment, 1 February 2002, as if Pias Settlements and Cody Outdoor Advertising were the parties to it. No issue in this litigation arises out of the Deed of Consent and Assignment of Licence; the parties have assumed that it is effectual as it purports to be.
13 By a contract for sale of land, dated 15 May 2002 on the 2000 edition of the standard contract, Pias Settlements, as co-vendor with M & S Knoll Holdings Pty Ltd agreed to sell four parcels of land in South Dowling Street and O'Dea Avenue Waterloo to Tada Investments Pty Ltd for $21 million. The building to which the Signage Rights Deed relates stands on one of these four parcels. There were references in the Contract for Sale to the Signage Rights Deed and to the rights of Cody Outdoor Advertising. The Contract contains an indication that there are tenancies and says that the sale is subject to tenancies disclosed in contract (cll 17, 24).
14 Printed clauses 17 and 24 of the Contract relating to possession and tenancies took effect without modification. A Tenancy Schedule lists 12 tenancies and refers (Blue 241) to Licence of Signage Rights dated 28 August 1997 to Claude Neon Aust; the Tenancy Schedule says that the lease expiry date was 1 September 2007 and that the rental per annum was $253,739.90 and refers to the assignment of the licence to Cody Outdoor Advertising on 1 February 2002. A copy of the Signage Rights Deed, in a conformed version which incorporated the later variations, was Annexure X. Although there are references to the licence as a tenancy, on a whole reading of the Contract for Sale including the annexed document it could be seen that it was a licence agreement and no more. This is reflected in the language of Special Condition 47 of the Contract.
15 Special Condition 47 is in the following terms: (Blue 105)
47. LICENCE AGREEMENT
The purchaser acknowledges that it has read the licence agreement between Pias Settlements Pty Limited and Claude Neon Pty Limited being a Deed of Agreement dated the 28th day of August 1997. Pursuant to that Deed the Purchaser acknowledges that the Vendor will cease to be bound by the Deed and that the purchaser agrees to enter into an agreement in terms reasonable and acceptable to the Licensee preserving the rights and obligations under the said Deed which is annexed and marked with the letter "X".
16 On 30 July 2002 Pias Settlements transferred the parcels of land which it owned and were subject to the Contract for Sale to South Dowling Pty Ltd (hereinafter South Dowling) as part of completion overall of the sale of the four lots by M & S Knoll Holdings Pty Ltd and Pias Settlements. However the transferee South Dowling, which is the appellant in this appeal, is a different corporation to Tada Investments and was not a party to the Contract for Sale or the contractual obligations undertaken in it. The circumstances were explained, insofar as they were explained, in an affidavit of Mr O. Tachaubol, a director of both South Dowling and Tada Investments, to the effect that South Dowling is a company wholly owned by Tada Investments and a related body corporate, and that transfers to effect the sale of the land pursuant to the Contract were executed in the name of South Dowling. Other material annexed to Mr Tachaubol's affidavit shows that South Dowling is a related person so that the transfer fell within section 18 (3)(d) of the Duties Act 1997 (NSW). This affidavit does not fully explain how it came about that South Dowling was the transferee, or show any means by which South Dowling came under obligations accepted by Tada Investments in the Contract for Sale. Senior Counsel for the appellant pointed to Printed Clause 4.3 of the Contract as authorising transfer to nominees; I do not think that clause 4.3 contains such authorisation or imposes contractual obligations on the transferee.
17 Neither Tada Investments nor South Dowling entered into an agreement with Cody Outdoor Advertising on or before completion preserving Cody Outdoor Advertising's rights and obligations as a licensee, there was no agreement of the kind contemplated by cl.7 of the Signage Rights Deed, and no agreement to assign the Signage Rights Deed at all. There has been no such agreement later either, although that statement needs some further explanation. The Memorandum of Transfer was registered on 16 August 2002, and since its registration Cody Outdoor Advertising has had no contractual relationship with the registered proprietor of the land.
18 By a letter dated 1 August 2002 Country State Property Services Pty Ltd (hereinafter Country State), a corporation related to South Dowling in some way, wrote a letter to Cody Outdoor Advertising which said:
Country State Property Services Pty Ltd act as Property Managers on behalf of Healthconnectiv Holdings Pty Ltd (ACN 095 091 160) whom have purchased the above property from Pias Settlements Pty Ltd as of 30th July 2002.
Country State Property Services hereby direct all rental instalments due from the 1st August 2002 to be paid to this office via BPay facility on the first day of each month as per your current Lease terms. Our Biller Code No is 68627 and your BPay customer number is 0000001461.
Should you require further information or assistance regarding the content of this letter, please do not hesitate to contact the undersigned at your convenience.
Thank you in anticipation for your ongoing patronage of our premises and Country State Property Services welcome the opportunity to develop a mutually satisfactory relationship that will benefit both parties.
19 This letter made a claim for payment of "all rental instalments" (so described), looked forward to "ongoing patronage of our premises" and spoke of "the opportunity to develop a mutually satisfactory relationship that will benefit both parties". These words do not confirm or refer to any existing relationship which was treated by Country State as continuing.
20 On or before 1 August 2002 Cody Outdoor Advertising paid Pias Settlements a monthly instalment of the licence fee, which the Signage Rights Deed makes payable in advance on the first day of each month. Pias Settlements wrote to Cody Outdoor Advertising on 2 August 2002 returning the cheque; the letter said as follows:
We refer to the sale of the above property and confirm that settlement took place on Tuesday, 30 July 2002.
Please find enclosed your cheque for rent for the month of August 2002, which is now payable to the new owners.
Effective immediately, could you please cancel any future payments to our account with regard to your regular monthly rental payments. The new lessor will advise their account details directly to you.
We would like to take this opportunity to thank you for your support and co-operation and wish you every success for the future.
21 The terms of the letter were appropriate to indicate the end of the relationship between Pias Settlements and Cody Outdoor Advertising.
22 On 7 August 2002 South Dowling sent Cody Outdoor Advertising an invoice for an amount which was one-twelfth of the annual licence fee, referred to as "rental", and called for payment by 15 August 2002. Cody Outdoor Advertising did not pay this claim.
23 On 16 August 2002 Cody Outdoor Advertising wrote a letter to Pias Setlements in answer to Pias Settlements' letter of 2 August 2002. That letter contained various assertions but those presently significant were to the effect that Pias Settlements had repudiated its obligations in the Deed and that Cody Outdoor Advertising accepted the repudiation and terminated the Deed. These passages of the letter were as follows:
... on the assumption that the legal relation between Cody and Pias is governed by the Deed, we make the following points:
(a) By reason of the completion of the sale of Healthconnectiv, Pias is in breach of cl.7 of the Deed, as it has failed to ensure that the purchaser, upon sale of the property, enters into an agreement with Cody in terms reasonably acceptable to Cody which preserve Cody's rights and obligations under the Deed. It also appears that Pias has failed to ensure that there is included in any agreement for the sale of the property a provision requiring the purchaser to execute such an agreement upon completion of the purchase of the property.
(b) By reason of the completion of the sale of the property, Pias has placed itself in a position where it cannot comply with its obligations under the Deed.
(c) the conduct of Pias referred to in (a) and (b) above constitutes a wrongful repudiation of Pias's obligations under the Deed.
(d) Cody accepts that wrongful repudiation and hereby terminates the Deed.
24 There was further correspondence in which the parties did not change their positions. At some time in August, later than 16 August, the solicitor who acted for South Dowling on the sale prepared a form of Deed of Assignment, which according to its terms was to have effect from 30 July 2002 and was to be made between Cody Outdoor Advertising as licensee, Pias Settlements as assignor and South Dowling (referred to by its earlier name Healthconnectiv Holdings) as assignee. The form of Deed does not refer to any consideration for the assignment, and does not refer to any pre-existing contractual right to an assignment which the Deed was to fulfil. The recitals referred to the licence commencing 28 August 1997, a provision of the licence "that the assignor will ensure that any assignee of the premises entered into an agreement with a licensee in terms reasonably acceptable to the licensee which preserves the licensee's rights and obligations under the licence" and to the desire of the assignor and assignee and the agreement of the licensee to have the licence transferred to the assignee. In the operative parts there was to be an assignment of all estate and interest in the licence, consent of the licensee to the assignment, a covenant by South Dowling to be bound by the covenants of the licensor on and from 30 July 2002 as if originally a party thereto, and provision as to costs. The form of deed was executed successively by South Dowling and Pias Settlements, and in September it was sent to Cody Outdoor Advertising for execution; but Cody Outdoor Advertising declined to execute this document. It appears to me that if a deed in these terms and executed by those parties had put before Cody Outdoor Advertising for execution by it on or before 30 July 2002, cl.7 of the Signage Rights Deed would have been complied with.
25 The proceedings under appeal were brought in the Equity Division by South Dowling against Cody Outdoor Advertising as the only parties, and after amendments the claims made were a claim for a declaration that in the events that had happened Cody Outdoor Advertising remained bound to South Dowling as assignee of Pias Settlements, a declaration that Cody Outdoor Advertising's purported termination of the Signage Rights Deed was of no effect, and a declaration that the Deed came to an end on 18 March 2005 in circumstances which I have not set out but which would have the effect, if Cody's acceptance of repudiation was ineffective, that Cody Outdoor Advertising then repudiated the Signage Rights Deed. There were also claims for payment of licence fee until repudiation, and for damages; and for interest and costs.
26 A number of issues were debated before McDougall J. in the Equity Division, and also on appeal. It does not appear to me to be necessary to deal with all of them, although some were quite important and difficult, particularly issues raised in the Notice of Contention relating to whether South Dowling has any contractual or other relevant relationship with Cody Outdoor Advertising so as to be in a position to claim licence fees, damages or any other remedy for breach of the Signage Rights Deed. McDougall J. disposed of the proceedings on consideration of the meaning and effect of cl.7, whether it was a condition of which strict performance was required, and if it was not a condition but a warranty, whether it was breached, and if it was whether it was breached in circumstances which constituted repudiation and entitled Cody Outdoor Advertising to accept the repudiation and terminate the agreement.
27 The learned Trial Judge's approach was to consider whether cl.7 was a warranty or a condition and to determine what are the precise rights and obligations which cl.7 on its proper construction creates. His Honour identified two obligations of the licensor which were regarded as relevant:-
43. … The first is to ensure that the purchaser enters into an agreement with the licensee, and prescribes the content of that agreement. The second imposes on the licensor an obligation to ensure that any contract for sale of the land that it makes includes a provision requiring the purchaser to execute "such an agreement" on completion. Clearly, the reference to "such an agreement" is a reference back to the agreement that, by the first sentence of cl.7, the licensor is required to ensure that the purchaser makes with the licensee.
28 His Honour then said:
44 The first sentence - imposing the obligation on the licensor to ensure that the purchaser makes an agreement with the licensee, and prescribing the substance of that agreement - does not in terms specify when that agreement is to be made. However, the second sentence provides that the contract for sale is to require that agreement to be made on completion. The second sentence makes it quite clear that the agreement which, by the first sentence, the licensor is required to procure the purchaser to make with the licensee, is to be made on - ie no later than - completion.