State of Victoria v Seal Rocks Victoria

State of Victoria v Seal Rocks Victoria - [2003] VSC 84 - VSC 2003 case summary — Zoe

[87]

"842. Thirdly, the State contends that the Claimant's reliance upon the best endeavours clause (clause 46.11 DCA) asserts an entitlement, in terms of performance on the part of the State, which goes well beyond the intentions of the parties. The State contends that clause 46.11 is to be construed in light of other clauses in DCA, including clause 31, in which the Claimant acknowledges that `no risks or responsibilities in relation to' the operation and management of the Centre and the Facilities are to be accepted by the State (except, where expressly assumed by it) and clause 1.6 in which the parties acknowledge that nothing in DCA or other Agreements is to be construed as constituting the relationship of principal and agent, partnership or joint venture As the cases state, it is fundamental, in an action on contract, that the alleged wrongdoer is not to be held liable for failing to do something which he has not promised. The best endeavours clause should be read subject to the Objectives of the parties. I agree with these latter submissions. Indeed, the Claimant founds its own case against the State upon them. I do not accept, however, that clause 31 or 1.6 inhibit the operation and effect of clause 46.11 so that the Claimant cannot rely upon it as it has done in this case. Insofar as the State relies upon clause 31, it cannot excuse the State from its own conduct, including a failure to act or not to act under the best endeavours clause which I found it [sic] to be a fundamental obligation imposed upon each party. To accede to the State's reliance upon this submission amounts to exempting the State from using its best endeavours on every occasion the Claimant requires it to do or not to do something in order to enable the Claimant to operate and manage the Centre. I am satisfied that the parties never intended clause 31 to have this effect or operate in this manner. As for clause 1.6 of DCA, it is not a logical extension of a finding against the State that, by reason of it breaching the best endeavours clause, the relationship of principal and agent, partnership or joint venture somehow emerges between the parties."

[126]

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract."[30]

[144]

"118. At the time the parties entered DCA and other Agreements, they were fully aware of the circumstances that there would be penguins on Ventnor Road after dark. Evidence was given at the hearing that they could be present on Ventnor Road any time after sunset. Despite being `a wild animal' it is more likely than not they would be present on Ventnor Road 30 minutes after sunset. On any view of the evidence this phenomena was known to at least 1 officer of the State. If this was so why would the parties vest the Penguin Parade Manager with a discretionary power to close the Centre and the Facilities when penguins were likely to be present on the road? Why did the parties simply not provide that the Claimant could only operate its business when penguins would not be present on it? In my opinion the parties expected the Claimant to operate and manage its business in the presence of penguins and to co-exist with them. They expected and required the Claimant to conduct its business accordingly. 119. In effect the State is contending that, if the Penguin Parade Manager considers the welfare of penguins may be endangered by the Claimant carrying on its business at the Facilities, he is empowered by the definition to notify the Claimant to close the Centre and vacate the Facilities. He is not required to consider what courses may be open to the Claimant to avoid endangering the penguins whilst carrying on its business. It does not matter what are the consequences of the closure upon the business. The State says, in effect, that it was never intended by the parties that the Claimant should carry on business in the presence of penguins, particularly those appearing on Ventnor Road. 120. I do not accept these submissions and the outcomes of them. Indeed, I consider this interpretation and what may follow from it could relieve the Claimant, wherever the expression `dusk' appears in DCA, from its obligations under it. It would be easy for the Claimant, when faced with an allegation of non-performance, to argue that it was relieved from performing its obligation because the Penguin Parade Manager should have intervened and exercised his discretion, as penguins may have been present at the relevant time of performance. Such an outcome is not one which the parties, I am satisfied, ever intended when they made the Agreements."

[149]

"132. At the time of making DCA and other Agreements the parties intended, in my opinion, that the Penguin Parade Manager should only exercise the power conferred on him by the definition `dusk' to notify the Claimant to close the Centre and vacate the Facilities when he perceived and determined that circumstances were present which warranted the Claimant ceasing its business operations. Given the effect upon the business of a notification, in my opinion, the parties intended that the Penguin Parade Manager should only exercise his power in special circumstances. It would be open to him to exercise this power, at any time, whilst the Claimant was operating its business. The circumstances, however, must be `exceptional'. They would be circumstances which the parties considered, more likely than not, to be unusual and which would rarely occur. They would not be circumstances which already would be known to the parties as foreseeable and regular occurrences or already dealt with by DCA or other Agreements. The Agreements expressly refer to and recognise `wildlife' in the area. The parties vested the Penguin Parade Manager with this power because, as the principal officer of the most dominant Governmental operation on Summerland Peninsula, he was in the best position to assemble information and determine whether or not circumstances were present which were exceptional, warranted closing down the Claimant's business and taking necessary measures and precautions to overcome or relieve the situation that had emerged. COMA speaks of measures to be considered and introduced to deal with these types of circumstances. The power was not to be exercised capriciously or unfairly. On any view, it was not intended by the parties that this power should be exercised so as to conflict with the rights conferred upon or which were to enure for the benefit of the parties under DCA and other Agreements or, more importantly, to displace or interfere with an obligation imposed upon a party so as to result in the parties failing to satisfy their Objectives, unless exceptional circumstances were present, which warranted the intervention of the Penguin Parade Manager."

[211]

"717. I have found that the Claimant has established a number of breaches it has alleged against the State. In short, a private business cannot operate profitably if it is denied the opportunity to trade during the busiest period of the day, if its patrons cannot make their way to its doors on peak days because of traffic congestion, particularly if it is located in an isolated area and patrons require a motor car to access it, if barriers are erected across the road to it or if it relies on patrons holding tickets to be admitted to it and its ticket seller shows little enthusiasm for selling tickets. Also, it cannot operate profitably if it incurs financial obligations without being afforded the opportunity to challenge them or is dependent upon Government officials for permission to enhance its enterprise in order to improve its profitability. All these things happened to the Claimant as a result of the breaches which I have found against the State. 718. On numerous occasions before and after it opened for business, the Claimant informed the State of the difficulties it was experiencing and, in most instances, how they could be overcome. I do not rehearse these complaints save to refer to what the Claimant conveyed to Project Monitor, the Premier of Victoria in 1998 and 2000, Ministers, the Executive Director and Senior Public Service Officers. Apart from resolving the problem of the traffic congestion, all these difficulties in my opinion could have been overcome by the State, with little effort, either doing or refraining from doing some thing. Regrettably, as the Project Monitor observes in one of his reports, the actions required to resolve these difficulties had become `bargaining points'. The State did not appear to understand how the difficulties were affecting the Claimant's business. I only set apart the resolution of the traffic congestion, as requiring more effort on the part of State, because it required a little bit of thinking and analysis, as well as some positive action on the part of the State. On the other hand, the State has an abundance of expertise in VicRoads combined with an input from the Penguin Parade Manager to assist the Claimant as to how to best resolve this problem which was so apparent on peak days (80-100-120 days of the year). 719. Had the State used its best endeavours many of the difficulties, being encountered by the Claimant, would have been overcome, allowing the Claimant to enjoy its rights and to receive the benefit of and discharge its obligations under the Agreements, to satisfy the Operating Requirements and to comply with the Amenities Performance Criteria. These difficulties have precluded the Claimant from generating the returns of revenue, forecast and expected by the parties which were so necessary to making it profitable and financially viable and enabling it to pay the concession fees and rental premium, as well as the contribution fees. 720. The matters and events which constitute the breaches of these clauses also amount to breaches of other clauses in DCA, the Lease and COMA. I refer to the findings made by me. I do not repeat them, apart from observing that I cannot think of a more classical breach of quiet enjoyment of a lease, for the demise of business premises, than for a lessor to require his lessee to close the business, being conducted on the premises, at times, when the parties expect the lessee to generate sales and for which the lessee had leased the premises in the first place. 721. All these things combine to move me to conclude that, by it beaching these clauses, as I have found them in sections 2, 4, 6, 7, 9, 10, 12, 13, and, insofar as I found that the State should have consented to the proposals submitted by the Claimant to it on 14 July 1999, 15 of the Reasons, the State has deprived the Claimant substantially of the rights and benefits of the Agreements. The State deprived the Claimant of the opportunity to establish and operate a profitable enterprise. Accordingly, I find that the State did repudiate its obligations under DCA and other Agreements and that all the breaches, apart from denial of access for emergency maintenance purposes and breach of confidentiality requirements, go to the root of the contract. In other words the State breached fundamental obligations of the Agreements. I find that these breaches also breached material obligations of the Lease and COMA." [54]

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Judgment (270 paragraphs)

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Cases Cited (18)