88 It will be observed that the notice clause in the Burger King case specifically drew a distinction between breaches that were capable of cure and breaches that were not. Rolfe J did advert to that point at [262].
89 The Court of Appeal expressed the view that the first question was whether the breach was capable of remedy and not whether it was capable of remedy within the 30 day period: at [118]. The second question was "Is a breach, which is a once and for all breach, for example, failure to comply with a time provision, capable of being cured?": at [119]. The Court referred to the passage in Lord Reid's judgment in Schuler which I have set out above, and also referred to the judgment of Sugerman J in Batson v De Carvalho (1948) 48 SR (NSW) 417, and Samuels JA and Waddell A-JA in Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689. These authorities, said the Court of Appeal in Burger King, supported Rolfe J's construction of clause 15.2 which they considered to be correct: at [124].
90 It is true that the Burger King notice clause specifically referred to breaches that were "capable of being cured", whereas the clause presently under consideration does not. As I have mentioned inferentially, Lords Reid, Simon (and probably Kilbrandon) seem to accept that the notice is only available for breaches that are curable, so the specific reference to "capable of cure" in clause 15.2 in Burger King should make no difference and in any event, it is WL's contention that the notice provision here should be read implicitly as only available for breaches that are capable of cure.
91 The second point of distinction concerning Burger King is that in Burger King the clause spoke about curing such breach within 30 days, but did not speak as the clause does here of giving a notice providing an opportunity to remedy ("rectify or correct" it was submitted by WL, and seemed to be accepted by Sweeney, was synonymous with "remedy"). Thirdly it was submitted that the defect in Burger King was capable of rectification in the future even if not capable of rectification within 30 days, but here it is said that the breaches are not capable of rectification in the future.
92 Whilst I accept that the clause in Burger King is not identical with clause 8, in my view, the essence of the two clauses is the same. By concluding that a breach to establish four restaurants within a specific 12 month period was a breach that was capable of cure within the meaning of the clause, notwithstanding that it was specifically conceded that it was not possible for HJPL to establish the restaurant within the 30 day period of the notice, Rolfe J and the Court of Appeal were of the view that "capable of cure" where expressly stated is to be read widely. In my view, no different approach ought be taken to "capable of cure" where it is to be implied, or by reason of the differences in wording between the two clauses. In my view, Burger King not only applies the principle in Schuler that a requirement to do something in the past can be put right for the future, but goes beyond Schuler in treating a breach that cannot be cured within the period given by the notice as nevertheless one which is "capable of cure". In my view, Burger King is authority for the proposition that specific time limits within which obligations are to be performed does not make the breaches incapable of cure after that time has lapsed. Nor do I think the approach taken in Burger King requires that breaches of an obligation to use all reasonable endeavours and the like are to be treated as not "capable of cure". In my view, each of the breaches relied upon (apart from Breach 9 upon which I express no view) were "capable of cure" in the wide sense adopted in Burger King.
93 Both sides, it seems, agree that the purpose of clause 8.2 is to provide a party in default with an opportunity to cure the breach - WL says that the breach must in fact be curable. Sweeney says it need not be "capable of cure" or, alternatively, only be "capable of cure" in the wide sense adopted in Burger King. In my view of the operation of clause 8, neither clause 8.2(a) or (b) are "otiose", "inoperative" or "surplus" (see para 8 of WLSR). Nor do I agree that for Sweeney's construction to be accepted, clause 8 must expressly provide that it applies in the case of all breaches whether material or fundamental (see para 13 of WLSR). Clause 8 applies to all material breaches (whether characterisable as "fundamental" or not) and nothing in the passage from Concut Pty Ltd v Worrell (2000) 176 ALR 693; [2000] HCA 64 cited in para 13 or the passage in Taylor v Raglan Developments Pty Ltd [1981] 2 NSWLR 117 per Powell J appears to me to affect the position.
94 It is clear that Lord Reid envisaged in Schuler that there may be cases in which it is obvious that a breach is incurable. He gave the example of a breach of confidentiality. If the breach involved disclosure in public it would be clearly impossible to put matters right, but one can envisage a situation where a limited breach of the obligation could be put right (for example where the party in breach retrieves the document containing the information and obtains a binding and effective undertaking by the recipient of the confidential information, not to produce the product the subject of the confidential information). The advantage of notice to a party in default is that it at least gives that party an opportunity to see what is can do to "put matters right", even in circumstances where it might appear to the innocent party that there is nothing that can be done.
95 In my view, no heavy onus should be placed on the innocent party to make assessments of whether or not the party in default can or cannot cure the breach within the requisite period, particularly when not all the relevant facts are known to the innocent party. I reject WL's contention that Sweeney was required to engage an expert to determine whether or not approval could be obtained within 20 days, particularly when it did not know what had been done by WL because WL had not informed it (indeed it was part of WL's contractual obligation to inform Sweeney that a condition could not be satisfied by 9 March 2008: see clause 4.3).
96 Sweeney submitted that it cannot be found as a fact that the breach was not capable of being cured within 20 days because by the expedient of notice being given under clause 4.5, WL was able to extend the period within which approval could be obtained. That expedient, if adopted, would require WL to pay $2 million. The argument has a degree of attraction but I think, consistent with the view I have taken, the contract required approval by 9 March 2006, and WL's conduct must be measured by that date, not some expanded date. The question is whether, as the contract stood unamended, notice could be given, not whether if some further step occurred (that had not occurred, and which WL was not contractually obliged to take), the notice could be complied with. If notice pursuant to clause 4.5 was given in response to a notice under clause 8, different considerations would apply.
97 Sweeney also contends that if WL is correct in its assertion that clause 8.2(b) has no application to the breaches here because they were incurable and hence not capable of being the subject of notice, then clause 8.1(b) applies. It entitles Sweeney to terminate because there has been a material breach. If the notice provisions do not apply, then 8.1(b) stands. As I have indicated, in my view, 8.2(b) should be read expansively, but if I am wrong in that view, clause 8.1 in my opinion should be read as permitting termination without notice. I agree with Sweeney's submissions that if this were not so, the HOA would permit notice and hence termination (in the absence of rectification) for a material breach that was remediable and not permit termination for an irremediable material (but not fundamental) breach, which is a surprising consequence and one unlikely to have been intended by the parties.
98 This last point leads to another issue, which is whether termination for fundamental breach is available. WL argues that Sweeney by utilising the clause elected to exercise a right that was inconsistent with its common law rights. I shall deal with that point separately.
99 WL also argues that the approvals could not, as at 15 December 2005, be obtained by 20 January 2006 or by 9 March 2006. WL makes reference to the legal maxim "lex non cogit ad impossibilia" ("the law does not compel a man to do that which he cannot possibly perform"): see "Broom's Legal Maxims", 10th ed, 1939, Sweet & Maxwell.
100 Sweeney's riposte to that is that the principle has no application where the impossibility of performance is brought about by that contracting party's conduct, the principle being intended to excuse a party where the party's inability to perform arises without any default in it and it has no remedy over that cause. "A necessity created by a man's own act, with a fair previous knowledge of the consequences that would follow, and under circumstances which he had then a power of controlling", is not of a nature that the law itself respects: Broom, p 163. Broom deals specifically with the issue of contractual performance as follows at p 164:
"If, however, as already stated, a person, by his own contract, absolutely engages to do an act, it is deemed to be his own fault and folly that he did not thereby expressly provide against contingencies, and exempt himself from responsibility in certain events: in such case, therefore, that is, in the instance of an absolute contract, the performance is not excused by an inevitable accident or other contingency, although not foreseen by nor within the control of the party. Thus, where a builder admitted that he had contracted to complete within a fixed time, not only specified works, but also extra works if ordered, it was held that his failure to fulfil his contract within the fixed time was not excusable on the ground that it was impossible for him to carry out within that time an order to do the extra works." [footnotes omitted]
101 In my view, where WL was obliged contractually to use all reasonable endeavours to achieve a result, it cannot rely on its own failure to use all reasonable endeavours (if that be the case) to assert that a notice to remedy is defective.
102 WL maintained another argument based on the assertion that even had WL used all reasonable endeavours, it could not have obtained approvals by 9 March 2006, and therefore applying a "but for" test, the failure to use best endeavours did not lead to the absence of approvals.
103 If by that argument it is intended to assert that even had WL used all reasonable endeavours from the start, then approvals would not have been obtained, then there is insufficient evidence to support such a contention. No expert evidence was called to show that had all the steps that could reasonably have been taken to achieve approval by March 2006 been taken, they would not have had any significant prospect of producing a positive outcome. It was not Howard's evidence that he believed that the objectives were unattainable from the start and even if the Sunset Date were extended. There is evidence that suggests that the task of obtaining approval would not have been easy, but that is insufficient. In my view, WL had an obligation to take all reasonable steps to obtain approvals unless it was satisfied that the approvals could not be obtained, in which case it was required to notify Sweeney pursuant to clause 4.3 of the HOA, and/or at its option to extend the Sunset Date pursuant to clause 4.5.
104 If the argument is limited to the period after notice was given (as I understood it was) then I think WL cannot rely on it for the reasons given at [100]-[101] above.
105 WL relies on several cases which deal with best endeavours clauses and consider the "but for" test. In Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW Conv R 55-461, a contract for sale of land was conditional upon a lease of a number of parking spaces being obtained from the State Rail Authority. The Club undertook to use its best endeavours to obtain a lease for the car parking spaces. It failed to obtain the lease of spaces and sought to avoid completion of the contract on the basis of the absence of lease. The Bank asserted that the Club had not used its best endeavours to obtain SRA approval. Bryson J (as he then was) found that the Club had not used its best endeavours and ordered specific performance of the contract. The Court of Appeal dismissed the appeal.
106 Mahoney JA (with whom Kirby P agreed) considered the argument of the Club that even had it used best endeavours that would not have achieved the grant of parking spaces from the SRA. Mahoney JA at 58,342 expressed the test as:
"The essential question in this regard is whether, had the Club pursued its application for a lease with due diligence at an earlier stage, the lease would have been given or whether it would always have foundered on requirements which operating departments of SRA had for the use of the land."
107 In Egan v Geraghty, the Queensland Court of Appeal considered a vendor's obligation to "use her best endeavours to become registered as proprietor of the subject land as soon as is reasonably practicable". The Court was unanimously of the view (Fitzgerald P, Pincus and Williams JJA) that the vendor had, by her approach to obtaining probate, not used her best endeavours and hence was not entitled to terminate a contract for sale of a house because her registration as executrix of the registered owner's will had not been achieved. Fitzgerald P referred to Italo-Australian Club in the course of considering an argument on behalf of the vendor that even if she had used her best endeavours, probate would not have been obtained. The learned President considered whether for the purposes of that argument the conduct of the vendor had to be the sole cause of probate not being obtained or whether it need be only a contributing factor. He concluded that the question was "if she had used her 'best endeavours', is it more probable than not that probate would have been obtained by that date?". He described it as a "but for" test. Pincus and Williams JJA agreed that the test was whether or not the respondent could have obtained probate by 1 June 1989 if she had used her best endeavours to do so.
108 Sweeney submits that the principles of Italo-Australian Club and Egan have no application here. There a party was seeking to rely on a failure to achieve something by asserting that even if it had used its best endeavours it would not have made any difference to the inability to meet the condition.
109 WL also relied on the comments of Dr Elisabeth Peden in "Good faith in the performance of contracts", 2nd ed, LexisNexis Butterworths, Sydney, 2003, para 7.16, in which she said on this point:
" Test for breach . When determining whether a best endeavours clause has been breached, it seems a 'but for' test is adopted, namely, but for the breaching party's omission to use best endeavours would the negative consequence have resulted? Alternatively, the court can ask whether the result would have been achieved, had best endeavours been used. This then can lead to a consideration of the possibilities or chance of the proposed result being achieved."
110 Sweeney argues that these cases have no bearing on the present problem, and that Dr Peden's comments on proper analysis are directed to loss. I do not think that Dr Peden's text does read in that way, but I think there is substance in Sweeney's contention that Egan and Italo-Australian Club are not applicable here. Those cases involved the question of whether the best endeavours obligation had been breached and in both cases it was held that the appellants had breached the obligation. They then went on to consider what was the consequence of that breach. In neither case was the "best endeavours" clause the focus of primary obligation, but rather it was contained in a subsidiary clause. More significantly in those cases it was the party seeking to terminate the agreement on the basis of non-achievement of a condition that was required to use best endeavours. Neither was a case in which the promisee was seeking to enforce a "best endeavours" or "all reasonable endeavours" obligation. The first question here is whether WL was in breach of its obligation to "use all reasonable endeavours" - the question of breach is not determined by considering what effect the breach has (save to the extent that its materiality is in issue, which is not the case here).
111 The only way cause and effect become relevant is when WL says there is no point in doing anything now because it is too late. That is really the same argument based on lex non cogit ad impossibilia that I have considered earlier. The other argument, with which I have also dealt, is the argument that there was no point in ever taking all reasonable endeavours because the objectives of the HOA were unattainable. If the goal was unattainable by 9 March 2008 then notice should have been given under clause 4.3. If it was unattainable by 9 March 2006, WL had the right to extend the time, which it has not done or to give notice under clause 4.3. If WL did not want to take steps to achieve the objectives then it ought be open to Sweeney to bring the HOA to an end.
Breaches 3, 4 and 8
112 I now approach the question of the Breaches 3, 4 and 8 in the light of my conclusions on the Sunset Date, the content of the all reasonable endeavours requirement and the validity of notice point, and the matters referred to in [32]-[40] above, but I need first to deal with the credit of Howard.
113 Sweeney's submissions contended that the following matters are pertinent to assessing Howard's credibility: