Stadium Australia Management Ltd v Sodexho Venues

• 24 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION commercial LIST

50004/02 STADIUM AUSTRALIA MANAGEMENT LTD V SODEXHO VENUES (AUSTRALIA) PTY LTD JUDGMENT

1 This is an application by the plaintiff pursuant to s 38(4)(b) of the Commercial Arbitration Act 1984 (NSW) (the Act) for leave to appeal from an Award made by the Honourable Gordon Samuels AC CVO QC (the Arbitrator) on 4 January 2002 (the Award). 2 The plaintiff, Stadium Australia Management Ltd (SAM), is the manager of Stadium Australia (the Stadium). The defendant, Sodexho Venues (Australia) Ltd (the Caterer), entered into a Stadium Catering Deed dated 23 September 1996 (the Deed) with SAM for a term of ten years with options to extend for two further 10 year terms. Part 5 of the Deed provides relevantly as follows: Part 5 Caterer's Payment Obligations

In consideration of the grant of rights under clause 4.1 the Caterer must pay to SAM the Catering Rights Fee in respect of Catering Services and External Catering calculated and payable in the manner set out in Schedule 1.

5.2 Guarantee of Minimum Catering Rights Fee The Caterer guarantees to SAM, and undertakes to ensure, that the Catering Rights Fee paid by the Caterer under clause 5.1 in respect of each Guaranteed Year is not less than the Guaranteed Amount for that Guaranteed Year set out in or calculated in accordance with Schedule 4. 5.3 Payments in respect of Minimum Catering Rights Fee

(a) If at the end of any quarter in a Guaranteed Year the cumulative amount of the Catering Rights Fee paid by the Caterer in respect of that year (together with any amounts paid previously by the Caterer under this clause in respect of the Guaranteed Amount for that year) is less than the relevant proportion of the Guaranteed Amount for that year, the Caterer must pay the shortfall to SAM within five Business Days of that date. (b) The relevant proportion referred to in clause 5.3(a) means the proportion of the Catering Rights Fee for that year which according to the Business Plan and Budget for that year should have been received by the end of that quarter. 3 The proper construction of clause 5.4 of the Deed was a principal issue in the proceedings and is pivotal to the application for leave to appeal. It provides as follows: 5.4 Cancellation of the Guaranteed Amount

The Caterer's obligations under clauses 5.2 and 5.3 apply in respect of each Guaranteed Year during the Term unless, in respect of that Guaranteed Year, either:

(a) Of the Premier League matches, all of those played in Sydney are not played at the Stadium; or

(b) Of the Premier Union matches, all of those played in Sydney are not played at the Stadium. The Award 4 The Reasons for Award (the Reasons) include the following:

SAM contends that in 2001 there was a shortfall in the amount of the catering rights fee paid by the Caterer so as to entitle SAM to payment of the guaranteed amount (or a proportion of it) as required by the terms of clause 5.3(a). It is agreed that in that year not all Premier League and not all Premier Union matches played in Sydney were played at the Olympic Stadium. Accordingly, the Caterer contends that the provisions of clause 5.4 apply so as to work a cancellation of the Caterer's obligation to pay the guaranteed amount.

The issue turns upon the true construction of clause 5.4. SAM contends that in order to enliven the exception (as I will call it) contained in clause 5.4(a) and (b) it must be the case that all of the premier matches (in either category) played in Sydney are played other than at the Stadium; so that provided one match in each category is played at the Stadium the exception fails and the guaranteed amount becomes payable. The Caterer, on the other hand, submits that in order to enliven the exception it must not be the case that all are played at the Stadium; hence if one match in either category is not played at the Stadium the exception comes into play and the guaranteed amount is not payable.

There was discussion of whether the language of clause 5.4 should be regarded as presenting an ambiguity so as to authorise the admission of extrinsic evidence to resolve it. In the event that it does, the Caterer cross-claims for rectification. I do not myself regard the clause as ambiguous, or as susceptible of more than one meaning, considered in the context of the deed as a whole, including those documents incorporated in it by reference. Hence I need not consider the cases, or the material tendered as evidence of surrounding circumstances external to the deed itself.

It is always legitimate, and indeed necessary, when construing one part of an agreement, to consider the contractual setting in which it is placed. It appears from that context that the work which the exception has to do is to relieve the Caterer from payment of the guaranteed amount in the case which the exception contemplates. The catering rights fee, and the guaranteed amount, are payable out of gross revenue, a return critically dependant upon patronage, and thus upon the number and character of events and functions held at the Stadium. A significant element in that return must be the playing of Premier League and Union matches which, from the definitions in clause 1.1, are the most important encounters in each code and thus those matches likely to attract the largest crowds. It seems to me therefore, that the exception focuses upon the state of affairs at the Stadium, and the circumstances which might there arise in which the capacity of the Caterer to pay the guaranteed amount might be adversely affected.

Hence, in my view, the exception applies and the guaranteed amount is not payable when the class of activities in question, namely, "All matches played in Sydney" satisfies the negative description "are not played at the Stadium". According to the ordinary meaning of words, the truth of the statement "all matches were not played at the Stadium" is established as soon as one match is not played there. The truth does not require that all matches should not be played there. Contrary to Mr Kelly's submission the second of these constructions fails to give adequate emphasis to the negative "not". The statement "all soldiers were not killed" is proved true as soon as it is the case that one soldier was not killed. Its truth does not depend upon proof that none was killed. Indeed, if it was intended to convey that all the soldiers survived then the ordinary mode of expression would be to say "none of the soldiers was killed". Hence, in the present case, "all the matches were not played" does not mean "none of the matches was played". The phrase means that it was not the case that all matches were played.

In my opinion, therefore, in the events which have happened, the exception applies and the guaranteed amount claimed is not payable. I will therefore make an Award dismissing both the claim and the cross - claim. Application for Leave 5 Section 38 of the Act relevantly provides that: (5) The Supreme Court shall not grant leave under sub- section (4)(b) unless it considers that: (a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration; and

(b) there is: (i) a manifest error on the face of the award; or (ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law. 6 There is no issue that s 38(5)(a) is satisfied and there is no reliance by the plaintiff on s 38(5)(b)(ii). The only question on the application for leave is whether there is a manifest error on the face of the Award. 7 In Promenade Investments Pty Ltd v State of New South Wales (1991) 26 NSWLR 203, Sheller JA said at 226: However, as McHugh JA pointed out, "manifest", in the context of the subsection, which contemplates the grant of leave before an appeal can be pursued, connotes an error of law that is more than arguable. There should, in my opinion, before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument that there is on the face of the Award an error of law. 8 In Natoli v Walker, (NSWCA, Kirby P, Mahoney and Meagher JJA, 26 May 1994, unreported), Kirby P returned to the term "manifest" and said:

Obviously, there is difficulty in the word "manifest". What may be "manifest" to one judicial officer may fail to persuade another. The criterion cannot be the swiftness of mind of the sharpest intellect. Nor can it be the perception of one whose whole career has been devoted to examining and reflecting upon building contracts. An objective, not a subjective, test for what is "manifest" is contemplated. But the word will not go away.

Against the background of its history in this context it requires swift and easy persuasion and rapid recognition of the suggested error. 9 Mahoney JA said: In addition, if there was an error of law, I do not think that it was manifest. It was neither plain in the sense of being obvious nor was it manifest in the sense that there was little or no doubt that error it was. 10 The Arbitrator stated that he concluded that clause 5.4 was not ambiguous "considered in the context of the Deed as a whole, including those documents incorporated in it by reference." The Arbitrator also considered the contractual setting in which clause 5.4 of the Deed was placed. He referred to a number of the rights and obligations in respect of the Catering Fee and the Guaranteed Amount. Although the Reasons are very short, approximately six pages, it is appropriate to refer to the structure of the Deed and the context in which clause 5.4 is found. The Deed 11 The definitions in clause 1.1 of the Deed include the following: "Catering Rights Fee" means the fee referred to in clause 5.1 and set out in Schedule 1;

"Catering Services" means the provision (including Vending of food, beverages, tobacco products and any other goods or services included in the Catering Services under clause 4.2(b) or (c) to patrons at the Stadium and all necessary storage, preparation, serving and supporting and ancillary services;

"Contra" means goods or services or other non-monetary consideration provided to or on account of or at the direction of the Caterer for or in any way connected with the provision of Catering Services at the Stadium or otherwise under this deed;

"Event" means a use of the Stadium for a sporting, cultural or entertainment activity such as a football match, concert or theatrical production, recital, performance, ceremony or any similar activity;

"Event Day" means a day on which the Stadium is used for an Event;

"External Catering" means preparation of food and beverages at the Stadium by the Caterer for supply to premises external to the Stadium Precincts and unrelated to the Stadium;

"Function" means a use of the Stadium infrastructure for a conference, exhibition, trade show, seminar, banquet, private party, meeting, convention, assembly or similar activity, but does not include an Event;

"Function Day" means a day on which the Stadium is used for a Function;

"Gross Revenue" means all amounts paid or payable to or on account of or at the direction of the Caterer for food, beverages, tobacco products and any goods or services included in the Catering Services under clause 4.2(b) or (c), sold or provided by the Caterer or in any way connected with the provision of Catering Services, External Catering or otherwise under this deed and includes the value of any Contra received by the Caterer, valued by reference to what would otherwise be the actual purchase cost to the Caterer of the Contra, but excludes any goods and services tax or similar retail turnover tax or government impost which may be imposed on retail sales and also excludes Non - assessable Revenue;

"Guaranteed Amount" means the minimum amount payable by the Caterer to SAM during any year pursuant to clause 5.2;

"Guaranteed Year" means a year in which a Guaranteed Amount must be paid under clause 5.2;

(a) amounts received by the Caterer from Function clients for goods or services provided by a third party and merely coordinated by the Caterer including, but not limited to, flowers, wedding cakes and similar ancillary items; and

(b) revenue generated as a result of the provision of Catering Services at Cost pursuant to clauses 8.5 and 8.8;

"Peak Event" means an Event, such as sporting grand final, where attendances at the Stadium are expected to approach full capacity;

"Peak Function" means a Function where attendances at the Stadium are expected to approach full capacity;

(a) matches in the New South Wales Rugby League Premiership Finals Series;

and includes any equivalent matches that replace or succeed those matches;

(a) matches played by the New South Wales Rugby Union Senior Representative Team against the other National or Provincial Senior Representative Teams; and

and includes any equivalent matches that replace or succeed those matches. 12 Part 3, Objectives, provides as follows: 3.1 Mission Statement

The parties agree that the common objective in relation to Catering Services at the Stadium is to provide patrons of the Stadium, whether they be in public areas, corporate suites, corporate boxes or any other areas, with menus and services which exceed the highest standard of other equivalent sporting venues within Australia (whether international or interstate) at prices which are designed to encourage return patronage to the Stadium and its outlets and to maximise financial returns and economic viability of the Stadium for all stakeholders. 13 The plaintiff granted to the defendant the sole and exclusive licence to provide Catering Services at the Stadium during certain periods outlined in the Deed, and in the Stadium Precinct on Event Days during certain periods where attendance at the relevant Event was expected to exceed 5,000 people (cl 4.1). The defendant is prohibited from providing any goods or services, other than the provision of Catering Services, to patrons at the Stadium without the plaintiff's prior approval in writing. 14 The plaintiff agreed that it must take all reasonable steps to maximise usage of the Stadium for Events that will attract the maximum number of patrons (cl 4.4). It is responsible for and entitled to control the Function Bookings Register in order to avoid double booking of Functions and interference with Events. The defendant is entitled to have access to the Function Bookings Register but is not permitted to make any changes to or insert any entries in the Register (cl 4.5). 15 There are certain designated areas within the Stadium in which the defendant provides Catering Services. It is also able to offer catering to the plaintiff where the plaintiff is permitted to carry on a food or drink business in the Stadium Precinct. When the defendant did provide such services it was required, in addition to paying the Catering Rights Fee to the plaintiff, to pay to OCA a fee equal to 5 per cent of the gross revenue derived (cl 4.7). 16 Part 7 of the Deed, Fundamental Obligations, provides an acknowledgement and agreement that the obligations referred to in clause 7.2 are fundamental obligations of the defendant going to the root of the contract. It also provides an acknowledgment and agreement that the failure by the defendant to comply strictly with the fundamental obligations entitles the plaintiff to terminate the Deed and cancel the options (cl 7.1 and 7.2). 17 The defendant agreed to provide the Catering Services throughout all Events and Functions and at any other times reasonably required by the plaintiff (cl 8.3). The plaintiff is entitled to require the defendant to provide certain catering services at cost, but acknowledged and agreed that the defendant would not be required to operate an at cost service at any time at a loss (cl 8.5). 18 The plaintiff agreed that it would not alter the Stadium layout without prior consultation with the defendant to assess the potential for adverse impact on the defendant (cl 10.1). Clause 10.4 provides as follows: 10. 4 Reduction in Guaranteed Minimum

If, during any calendar year, there is a material reduction in annual Gross Revenue which is directly attributable to major and continuing construction works resulting from additions or further development of the Stadium and, as a result, the Catering Rights payable in that year are less than the Guaranteed Minimum, then the Guaranteed Minimum for that year must be reduced by a percentage equivalent to the percentage reduction in Gross Revenue which is attributable to the construction works. 19 Part 15 of the Deed, External Catering and Franchises, provides that the defendant may use the designated areas to prepare food and beverages to be provided to External Catering outlets. Those outlets include, but are not limited to, hotels, industry, hospitals, nursing homes and vending contracts. The defendant is precluded from providing External Catering within the Stadium Precinct and agreed to ensure that the provision of any External Catering would not have an adverse impact upon the standard of Catering Services at any Event or Function (cl 15.1 and 15.2). 20 The defendant undertook to ensure that the marketing of External Catering did not compete with, reduce or cause confusion with the marketing directly related to the Stadium and the Events and Functions held at the Stadium (cl 15.3). The defendant is entitled to enter into franchise agreements provided that no conflict is caused with the supply of the Catering Services to the plaintiff. Clause 15.4 (b) provides:

(b) If the Caterer enters into any franchise agreements pursuant to this clause 15.4, the calculation of the Catering Rights Fee will not be affected by any obligation which the Caterer may incur in relation to the franchise including any royalty, franchise fee, contribution to marketing or advertising or any other expense. 21 The defendant also agreed separately, in Part 11 of the Deed, Catering in Other Facilities, that, subject to the provisions of clause 15.1, it would not without the prior written approval of the plaintiff directly or indirectly provide or be engaged or involved in the provision of Catering Services "at any other sporting, entertainment or cultural facility in the Homebush Bay area." Excepted from that is any facility operating at the date of the Deed, the Olympic Village and the RAS Showground (cl 11.1). 22 The plaintiff agreed to take all reasonable steps to assist the defendant to secure the rights to provide Catering Services during the Olympic Games period. Those steps included but were not limited to assisting the defendant to secure a first right to negotiate with SOCOG (cl 17.3). 23 Part 20 of the Deed, Stadium Marketing, provides that the plaintiff is solely responsible for the marketing and promotion of Event Days and the plaintiff and the defendant are jointly responsible for the marketing and promotion of Function Days (cl 20.1 and 20.5). Clause 20.2 (d) provides: (d) In approving Functions SAM must have regard to maximising both Stadium use and commercial returns for each party and SAM may also have regard to commercial returns from other Functions and Events beyond the relevant Function or Event. 24 The defendant is the sole point of contact for Function clients in respect of Function bookings. It is also responsible for all activity required to attract and secure Function bookings, including undertaking advertising programs, preparation and distribution of brochures and other promotional activity (cl. 20.2(e) and 20.5 (b)). It is also required to develop innovative marketing strategies including developing a brand image and customer loyalty program. It is required, at its own cost, to develop and produce promotional material which is to be submitted to the plaintiff for approval prior to use (cl. 20.5 (e) and (f)). 25 The Deed records that the defendant adopted the response to the Invitation to Tender (cl. 24.1). In respect of that Invitation, the defendant represented and warranted that the material set out in Schedule 12 was true and accurate in all respects and that the defendant undertook to carry out the Catering Services in accordance with the representations, promises, guarantees and assurances contained in Schedule 12 (cl 24.1 and 24.2). 26 Schedule 12 included Schedule R, Projected Catering Rights, which provides:

Based on the projected stadium usage figures supplied in Clause 7.02 of the Invitation to Tender, and our estimates of potential usage of function areas within the complex, we have calculated the following Projected Catering Rights for the first five years of the contract period.

Year 2 $3, 043, 270 Year 3 $3, 195, 434

A full and detailed profit and loss report has not been prepared. Following however, is a summary report showing the values and percentages that we forecast will apply to stadium and function revenue. Our projections are made by applying appropriate spends per head to the level of stadium usage indicated in the Invitation to Tender. 27 The summary report includes an analysis of the revenue forecast in the first year broken up into Stadium Corporate, Stadium Public and Functions. That document shows that 47.12% of the revenue forecast to be made in the first year was expected to be generated by Functions, 29.82% of the revenue was expected from Stadium Public and 23.06% of the revenue was expected from Stadium Corporate. The net profit in relation to Functions was only 20% compared to Stadium Corporate at 29.50% and Stadium Public at 30%. The labour and overheads of the Functions were significantly higher than in the Stadium Corporate and Stadium Public sections of the forecast. 28 Schedule 12 also described the defendant as the "world's largest catering management and consultancy organization and referred to some 11, 000 clients worldwide serving more than one million meals per day." It included the description of the defendant's operations in seventy countries throughout the world and a statement that since its arrival in Australia in 1988 it had grown significantly to become "a leading force in contract catering, servicing many of Australia's major contracts" with an annual turnover in Australia of approximately $53 million. Catering Rights Fee / Guaranteed Amount 29 The defendant agreed to pay a Catering Rights Fee in respect of Catering Services and External Catering. The parties agreed that such fee is to be calculated and payable in the manner set out in Schedule 1 of the Deed. 30 The Catering Rights Fee in respect of Catering Services is an amount equal to certain percentages of the annual gross revenue from Catering Services during the year ending 31 December. Those percentages commence at 10% up to $20 million of gross revenue, increasing by 1% for each $10 million capped at 20% for gross revenue from $29 million. The gross revenue is indexed according to the formula in paragraph 2 of Schedule 1. 31 The defendant agreed to pay to the plaintiff 3% of the gross revenue from External Catering. The defendant guaranteed that the fee would be no less than $3 million in any guaranteed year (cl 5.2, 5.3 and Sch. 4). However in the circumstances set out in clause 5.4 the defendant was released from its promise to pay that amount for that year. The competing submissions on cl 5.4 32 The plaintiff submitted that, on a proper construction, clause 5.4 means that the defendant's obligations to pay the minimum guaranteed amount continue to apply except when the circumstances stipulated in either (a) or (b) of clause 5.4 apply. It was submitted that the circumstances stipulated by the words "of the Premier League / Union matches, all of those played in Sydney are not played at the Stadium" require that all of the members of a defined class, being those Premier matches played in Sydney, exhibit a certain characteristic, that is, that they are not played at the Stadium. 33 It was submitted that consequently, when either the defined class does not exist, that is, no Premier matches are played in Sydney that year, or some members of the class do not exhibit that characteristic, that is, some of the Premier matches played in Sydney are played at the Stadium, then the stipulated circumstance does not occur, the exception in 5.4(a) is not satisfied and the defendant's obligation under clauses 5.2 and 5.3 continue to apply. 34 It was submitted that each of the exceptions contained in clause 5.4 stipulates a universal negative, that is, all Premier matches are not played at the Stadium. Further that in the event of a positive case, that is, when at least one such Premier match is played at the Stadium, the relevant exception is not activated. It was also submitted that similarly, the exception does not apply when the defined class does not exist, that is, no Premier League / Union matches are played in Sydney that year at all. 35 The plaintiff submitted that the Arbitrator's process of reasoning in relation to the analogy "all soldiers were not killed" is incorrect because the analogy is incomplete. In short, it was submitted that the analogy omits all reference to the sub-class, all of those played in Sydney, within a class, of the Premier League / Union matches, to which the negative is applied in order to determine whether the exception in clause 5.4 has been triggered, thereby altering the sequence and structure, and therefore the meaning, of the phrase which falls to be construed. 36 It was submitted that the analogy is false because the statement "all soldiers were not killed" has no qualification as to location, unlike clause 5.4 which is concerned first with the class of Premier matches played in Sydney, and then with whether all were not played at the Stadium. For the analogy to be complete it is submitted the Arbitrator would have had to say something like "of all the soldiers killed in France, all were not killed at the Somme" and then construe the effect of the universal negative in its full context. It was also submitted that it is not helpful to approach the construction of clause 5.4 by reference to an analogy and that construction should have occurred of the words that are actually used in the sequence in which they appear. 37 The plaintiff submitted that the Arbitrator's construction was erroneous because that construction: (a) converts the universal negative "all (are) not" into a negative universal, "not all are", which are not the words as used in the sequence in clause 5.4(a) or (b);

(b) removes the word "not" from the context in which it is used, namely, a sentence which is essentially in the form "the obligation does apply unless all matches are not played at the Stadium" and creates a different syntax as though the words used had essentially been "the obligation does not apply unless all games are played at the Stadium";

(c) misconstrues the word "all" to mean "any", rather than giving "all" its natural and ordinary meaning, namely "the whole of";

(d) effectively substitutes "is" for "are" rather than giving "are" its correspondingly natural meaning; and

(e) thereby produces a materially different meaning from the words agreed and used in the clause. 38 The plaintiff submitted that correctly construed, the words used, namely "all of those (matches) played in Sydney are not played at the Stadium" are true if, and only if, every match played in Sydney is not played at the Stadium, with the result that, if one or more matches played in Sydney is played at the Stadium, the exception does not apply and the minimum payment obligation applies. 39 It was also submitted that the Arbitrator's construction renders the defendant's guarantee of a minimum fee to the plaintiff illusory because the benefit of the guarantee of a substantial income stream is lost upon the happening of what is submitted is a marginal event such as the playing of one Premier match at a venue in Sydney other than at the Stadium. The plaintiff relied upon the example of a minor Rugby Union international match or a minor semi-final Rugby League match played at one of the other Sydney grounds such as Concord Oval, Parramatta Stadium or Aussie Stadium for any number of reasons outside of the control of either the plaintiff or the defendant. It was also submitted that the Arbitrator's construction produces an incongruous result whereby the defendant remains liable for the guaranteed amount when no Premier matches are played in Sydney at all but is relieved from the obligation to pay the guaranteed amount when one Premier match is played at the Stadium. 40 The defendant submitted that the Arbitrator's construction of clause 5.4 was correct. It submitted that the language of the clause has a plain meaning in prescribing the circumstances in which obligations under clauses 5.2 and 5.3 do not apply. It was submitted that clause 5.4 defines those circumstances under which the defendant's obligations do not apply by: (i) identifying a set of football matches, the Premier League / Union matches;

(ii) identifying a subset of the set referred to in (i), all of the Premier League / Union matches played in Sydney; and (iii) providing an escape from the minimum guarantee if it cannot be said that all of the football matches referred to in (ii) are played at the Stadium. 41 It was also submitted that the drafting of clause 5.4 reflects that the parties were contemplating a baseline of quality events which would have to be held at the Stadium each year, otherwise the guarantee would fall away. The baseline was essentially that all of the Premier matches in Sydney had to be played at the Stadium. If that condition was not met, that is, it could not be said that all such games were played at the Stadium, the minimum guarantee was inoperative. 42 By reason of the view that I have reached in respect of whether clause 5.4 is ambiguous and whether the Arbitrator's finding that it was not was a manifest error, I do not need to decide the issue of whether the Arbitrator's construction of clause 5.4 contained an error that was manifest. The question of whether the Arbitrator fell into error in construing clause 5.4 is the issue to be decided on appeal for which I intend to grant leave because I have reached a conclusion that the Arbitrator's finding in respect of ambiguity was a manifest error, the reasons for which appear below.

Ambiguity 43 The plaintiff argued that the Arbitrator's finding that clause 5.4 was not "ambiguous, or susceptible of more than one meaning, considered in the context of the Deed as a whole, including those documents incorporated in it by reference" was a manifest error. 44 There was quite a deal of debate as to what was admissible on the application for leave to appeal in respect of what the Arbitrator had regard to in reaching the conclusion that the clause was not ambiguous or susceptible of more than one meaning. The Arbitrator did not specify what particular documents fell into the category of being included in the Deed by reference to which he had regard, but I have admitted into evidence, after debate, those which I regard as falling within such category. In making a decision as to whether clause 5.4 is ambiguous I intend to refer only to the materials to which the Arbitrator had regard, that is, the Deed and those documents. 45 The parties are not at issue that if the finding that there was no ambiguity was an error, it is an error of law. 46 In Allstate Explorations v LV Beaconsfield Gold NL [1999] NSWSC 832 Santow J at par [42] said: Indeed "ambiguity" is itself a word of ambiguous reference. Does it mean that one of two (or more) meanings are equally available, or does it also comprehend the commoner situation where the literal words have a likely conventional meaning but are capable of bearing a less likely one; one which, under well-accepted canons of construction can be established as the parties' common intention in an objective sense by reference to what Lord Steyne calls "the objective contextual scene"? 47 Kirby P in State Lotteries Office v Burgin (NSWCA, 23/04/93, unreported) said:

Ambiguity is not the same as difficulty of construction. See Schuler (L) AG v Wickman Machine Tool Sales Ltd [1974] AC 235 (HL), 261. Conventionally, the law has classified ambiguity into two types: the patent and the latent. A patent ambiguity appears plainly from nothing more than the words of the instrument under consideration. Those words may be self-contradictory or irreconcilable. As a last resort, in such cases, a court will conclude that the parties had not reached agreement at all. It will declare the supposed contract void … A latent ambiguity arises where evidence of the circumstances surrounding the making of the instrument is essential to clarify the words used which are otherwise obscure… 48 The Arbitrator in fact defined ambiguity in the Reasons to mean "susceptible of more than one meaning". He found that the susceptibility was not present because of a context that the exception focused upon the state of affairs at the Stadium and the circumstance that might there arise in which the capacity of the defendant to pay the guaranteed amount might be adversely affected. It was that context that led the Arbitrator to the conclusion that the clause was not susceptible to more than one meaning.

49 It also seems that the Arbitrator reached the conclusion that the clause was not ambiguous by comparative reasoning with the statement "all soldiers were not killed". I am of the view that this statement was too restrictive to be of assistance in the construction process. A proper analogy would have been "the fee will be paid unless, of the British soldiers, all of those killed in France are not killed in Paris". That could mean that the fee is payable only when all the soldiers are killed elsewhere than in Paris or the fee is payable only when not all the soldiers are killed in Paris, that is, some are killed in Paris and others are killed elsewhere. 50 Returning to the actual words of clause 5.4, the same position pertains. The clause could mean that the fee is only payable if all of the Sydney matches are not played at the Stadium or the fee is only payable if not all of the Sydney matches are played at the Stadium, that is, some are played at the Stadium and some are played elsewhere. The Arbitrator concluded that it was not ambiguous, in that only the second of the meanings was available, because the Deed and the context in which clause 5.4 is found focused upon circumstances in which the defendant's capacity to pay the guaranteed minimum might be adversely affected. He concluded that in this context the clause meant that as soon as one Sydney match of either Premier Union or Premier League was played elsewhere than at the Stadium, the defendant was released from its obligation to pay the plaintiff the guaranteed minimum. 51 The Arbitrator concluded that the Gross Revenue out of which the Catering Rights Fee and the guaranteed amount was paid was a return critically dependent upon patronage and thus upon the number and character of Events and Functions held at the Stadium. He also concluded that a significant element in that return "must be" the playing of Premier League and Union matches which are the most important encounters in each code and likely to attract the largest crowds. 52 In emphasising that the clause focused upon the adversity to the defendant when Premier Union / League matches were not played at the Stadium, the Arbitrator made no assessment of the defendant's capacity to utilise the Stadium for income or "return" from its External Catering business or its capacity to generate income or "return" from the Functions for which it catered. Both of these matters are set out within the Deed and the documents included in it by reference. From these documents the External Catering and the Functions may also be seen to supply a "significant element" in the "return" and, on the Arbitrator's approach, a capacity to pay the guaranteed minimum. If that is so, it may be asked, why would clause 5.4 be so focused upon the defendant's position to enable it to escape the payment of the fee when only one union / league match was played elsewhere? This question seems even more apt when one takes into account the "Mission Statement" in the Deed to "maximise financial returns and economic viability of the Stadium" for all stakeholders. 53 Additionally the Deed makes clear that the defendant was also to negotiate with SOCOG to provide catering during the Olympics and in that regard it had a promise from the plaintiff that it would take all reasonable steps to assist the defendant to secure the rights to provide that catering and to secure a first right to negotiate with SOCOG (cl 17.3). A construction was also available, but not taken into account by the Arbitrator, that the income or return from this avenue of endeavour would also be a significant "return" available to the defendant to pay the minimum fee. 54 I am of the view that the whole of the Deed and the context in which cl 5.4 is found leads to an irresistible conclusion that both parties' interests were being protected by the promise to pay the Guaranteed Amount and the circumstances in which it would not be paid. I am also of the view that the Arbitrator fell into error in finding that the Deed and the context in which clause 5.4 is found rendered the clause susceptible to only one meaning. I am of the view that the Arbitrator's finding that the clause was not ambiguous was a manifest error of law. 55 Mr Gleeson SC submitted that, if I reached this conclusion, I would not grant leave to appeal unless I was satisfied that the plaintiff had made out a case that the result would be different if the Arbitrator took into account the evidence of surrounding circumstances. Although Mr Kelly SC submitted that this is not a requirement on the plaintiff he did not object to the tender of that material before me on the alternative basis that if I was satisfied that his client was required to satisfy the test, his client had done so. 56 In the circumstances of this case I am not convinced that I am required to assess the evidence that was not assessed by the Arbitrator for the purpose of concluding that the outcome would be different if he had assessed it. Such a process may be more attractive if the exercise of discretion to grant leave depended upon reviewing the evidence that the Arbitrator had taken into account but had reached a conclusion that was to be attacked in the appeal. Having said that, in any event it seems to me that if it is appropriate to review that evidence, the proposed test is a too stringent. I am of the view that a more appropriate test to apply would be whether such material may lead to a different result. I will therefore express a view in respect of that matter notwithstanding that I am not satisfied that I need to do so. 57 The evidence to which the Arbitrator did not have regard includes a Business Plan prepared by the plaintiff in which the defendant was given notice that the plaintiff did not expect to enter into any formal hirer agreements until "much closer to the commencement of the commercial operations of the Stadium". It also includes a document prepared by the defendant entitled "Project Summary". That document referred to the projections of Events and the Annual attendances at those Events. There is also reference to the defendant's capacity to "operate Function services throughout the year" and to discussions which were "underway to reconfigure the pitch to incorporate facilities for Australian Rules Football and possibly cricket" with the statement that the addition of these events would "increase the financial returns". 58 The Project Summary also contained presentation documents that include one entitled "Stadium Activities" listing Rugby League, Rugby Union, Football, Outdoor Concerts, Australian Football League and Corporate Functions. This document also includes the statements: "there is a huge following of Rugby League in Sydney which is helped by the fact that Australia are currently the world champions" and "all international matches in NSW for each sport will be played at the new stadium". In contrast to this statement the Deed defines Premier League as the Premiership Finals series, State of Origin matches and Test matches and Premier Union as matches played by the NSWRU Senior Representative Team against other National or Provincial Senior Representative Teams and Test matches (cl 1.1). 59 There are also two documents entitled "Sensitivity - Year One". The first is in the following terms:

Revenue drops to A$27m (71%) before the guarantee would take effect. Break even occurs at A$11m. With revenue dropping to A$27m (the defendant) will still be making a profit of A$4m. The breakeven revenue of A$11m represents a reduction to 29% from our projected figures. 60 The second document entitled "Sensitivity - Year One" is in the following terms:

Proposed financials 20.89% Without Rugby Union 15.92% With Australian Football 24.37% 50% turnover 6.93%

Base Model has turnover @ A$38m, PBF A$5,037k Worst case is no Rugby. Turnover @A$30m PBF A$4,388k Best case with Aussie Rules. Turnover at A$44m, PBF A$5,493k. Slow Start assuming 50% turnover. A$19m, PBF A$3,204k. With Minimum Guarantee @ A$3m PBF = A$2,116k 61 These documents provide available evidence that the defendant contemplated that there may well be no Rugby but that there would still be the obligation to pay the minimum guarantee. That is a very different circumstance to the contemplation that if only one Rugby match was played elsewhere the guarantee would not be payable. That is a circumstance that may lead to a different construction of clause 5.4. 62 I am satisfied that the plaintiff has demonstrated that there is material within the evidence to which the Arbitrator did not have recourse that when reviewed may lead to a different result. I am persuaded that I should exercise my discretion to grant leave without having regard to this evidence, however the evidence is also supportive of a grant of leave. 63 I grant leave to the plaintiff to appeal from the Award made by the Honourable Gordon Samuels AC CVO QC on 4 January 2002. 64 The defendant argued this matter on the basis that I would only give judgment in respect of whether leave to appeal should be granted. Having regard to the fact that the Court must be satisfied that there is a manifest error of law before leave is granted the defendant submitted that a different judge should hear the appeal. Although this was not the subject of detailed argument I understand that the plaintiff took no objection to that course being followed. If the parties are unable to agree on an appropriate costs order of the hearing in relation to the granting of leave I will hear argument on a date to be fixed. **********

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