Woolworths Limited v About Life Pty Ltd - [2017] NSWSC 1117 - NSWSC 2017 case summary — Zoe

NSWNSWSC

Woolworths Limited v About Life Pty Ltd

[2017] NSWSC 1117

Supreme Court of NSW|2017-07-28|Before: Marks J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2017-07-28

Before

Marks J

Catchwords

[2011] NSWCA 396 Booker Industries v Wilson Parking (Qld) (1982) 149 CLR 600
[2015] HCA 23 Goldus Pty Ltd v Australian Mining Pty Ltd [2015] SASC 32 Hall v Busst (1960) 104 CLR 206
[1960] HCA 84 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326
[1983] HCA 30 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546

Source

Original judgment source is linked above.

Catchwords

[2011] NSWCA 396 Booker Industries v Wilson Parking (Qld) (1982) 149 CLR 600[2015] HCA 23 Goldus Pty Ltd v Australian Mining Pty Ltd [2015] SASC 32 Hall v Busst (1960) 104 CLR 206[1960] HCA 84 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326[1983] HCA 30 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546[1971] HCA 57 John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334[2004] SASC 128 Lapin v Abigail (1930) 44 CLR 166[1930] HCA 6 Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265[2012] SASC 70 Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149[2004] NSWSC 512 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516[2006] HCA 31 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315[2003] HCA 57 THL Robina Pty Ltd v The Glades Golf Club Pty Ltd [2005] 2 Qd R 186[2004] QSC 461 Thorby v Goldberg (1964) 112 CLR 597[1954] HCA 22 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

Judgment (24 paragraphs)

[1]

Introduction

The first defendant, About Life Pty Ltd (About Life), is the tenant under a registered lease No AJ194877N (the Lease) of retail premises situated at Double Bay, New South Wales (the Subject Premises). About Life operates grocery shops specialising in wholefood, health food products, ready-to-eat meals and cafe style offerings. The third defendant, Woollahra Municipal Council (the Council), is the landlord under the Lease.
On 21 April 2017, About Life entered into a contract for the sale of business (the Sale Contract) with the second defendant, Harris Farm Markets Double Bay Pty Ltd (Harris Farm). The business that is the subject of the Sale Contract (the Business) is carried on by About Life in the Subject Premises and the Sale Contract would involve the assignment of the Lease to Harris Farm. Harris Farm is a member of a group that carries on the business of the retail sale of fresh food and groceries. In these proceedings, Harris Farm seeks an order for specific performance of the Sale Contract by About Life. About Life has played very little part in the proceedings and has advanced no basis upon which it would be entitled to resist Harris Farm's claim for specific performance of the Sale Contract.
However, the plaintiff, Woolworths Limited (Woolworths), seeks an order restraining About Life from transferring its interest in the Lease to Harris Farm unless it has first offered to assign the Lease to Woolworths and Woolworths has declined such offer. Woolworths is a public company whose shares are listed on the Australian Stock Exchange. It is a large, national retailer. Its brands include "Woolworths" supermarkets and small format "Metro" stores, "Thomas Dux" grocery stores, "Big W" discount variety stores and "BWS" and "Dan Murphy's" liquor stores.
Woolworths bases its claims on a deed made in March 2014 between Woolworths and About Life (the Deed of Agreement), by cl 2.5 of which About Life irrevocably granted to Woolworths "a first right of refusal to lease the [Subject Premises]" if at any time during the term of the Lease specified circumstances existed or specified events occurred. It claims that the performance of the Sale Contract would have the effect of defeating such rights as it has under of the Deed of Agreement. Harris Farm advances several grounds upon which it says Woolworths is not entitled to any relief in respect of cl 2.5, including that cl 2.5 involved a breach by Woolworths of an undertaking (the Enforceable Undertaking) given by Woolworths to the Australian Competition and Consumer Commission (the Commission) for the purposes of s 87B(1) of the Competition and Consumer Act 2010 (Cth) (the Competition Act), which was formerly called the Trade Practices Act 1974 (Cth) (the Trade Practices Act).
The Council has been joined as a defendant because, under the terms of the Lease, About Life must not assign the Lease without the consent of the Council, in its capacity as landlord under the Lease. The Council has submitted to such order, except as to costs, as the Court sees fit to make.
In order to put the dispute between Woolworths and Harris Farm into context, it is necessary to say something about the background to the grant of the Lease and of the entry into the Sale Contract. First, however, it is necessary to say something about an inquiry into the competitiveness of retail prices for standard groceries (the Grocery Inquiry) conducted by the Commission in 2008, in consequence of which Woolworths gave the Enforceable Undertaking.

[2]

The Grocery Inquiry

On 14 March 2008, Woolworths made a written submission to the Commission in connection with the Grocery Inquiry (Woolworths' Inquiry Submission). Woolworths' Inquiry Submission referred to "cornerstone issues" articulated by the Commission upon which the Grocery Inquiry was founded. Those issues were as follows:

a concern as to whether Australian grocery food prices had increased at a significantly higher rate than the headline inflation rate;
a concern as to whether Australian food price inflation was higher than in many other industrialised countries;
a concern as to whether Australia has a highly concentrated grocery industry; and
on the basis of the above concerns, a concern as to whether Australian retail prices for standard groceries were competitive.

Section 5 of Woolworths' Inquiry Submission addressed the current food retailing environment and asserted that that environment is diverse and very competitive. It asserted that Woolworths operates in a "highly competitive take home food and grocery retail sector, which ensures that Australian consumers benefit from a wide choice of good quality, safe, fresh food and other groceries, at prices that are relatively low by world standards". In dealing with "trends in grocery retailing", Woolworths' Inquiry Submission asserted that "competition for the retail sale of grocery products occurs across a spectrum of formats, including supermarket, convenience and speciality stores and more generally across a spectrum of relevant competitive factors, including price, quality, service, range and convenience". It said that, while those formats have different characteristics, they are "ultimately seeking to meet the same consumer demand, and to increase their sales and share of sales in the face of competition".
Woolworths' Inquiry Submission also asserted that a significant trend in grocery retailing, described as the "top up trend", has been that customers are making more frequent, lower-value purchases in each visit to meet their short term needs for food and groceries. It said that that has resulted in a "shift away from a shopping mode in which customers made infrequent visits to a single retailer for a higher value purchase of a 'basket' of products". Woolworths' Inquiry Submission asserted that, as a result of the "top up trend", larger scale supermarkets compete "ever more closely with small supermarkets and convenience and speciality stores for the same retail sales, with each format adopting competitive strategies to capture such customers".
Woolworths' Inquiry Submission set out figures for cross-shopping behaviour for:

different supermarket chains;
bakery items;
meat;
fruit and vegetables; and
delicatessen items. It asserted that in each of the fresh produce areas, being bakery, meat, fruit and vegetables and delicatessen items, Woolworths faced "strong competition from specialist retailers as well as from other supermarket operators".

In its report following the Grocery Inquiry (the Grocery Inquiry Report), the Commission said that, in Australia, the vast majority of standard groceries are purchased in supermarkets and that, at the retail level, the focus of its inquiry was therefore on supermarkets. It said, however, that many product categories, such as bread, fresh fruit and vegetables, delicatessen items, meat and fish, are also sold through specialist stores, including bakeries, butchers, delicatessens, fishmongers and produce markets. The Grocery Inquiry Report said that standard groceries are also available for purchase in "a diverse range of other retail outlets, such as convenience stores, petrol outlets and general merchandise stores". It said that the Commission had taken into consideration the competitive influence of those outlets and how links between supermarket retailers and other forms of retailing may affect the price of groceries. However, given that the majority of standard groceries are purchased in supermarkets, the focus of the Grocery Inquiry was on supermarkets.
The Grocery Inquiry Report stated that, faced with a choice, shopping centre owners' preference was for the two largest supermarket chains, Woolworths and Coles, as supermarket tenants in their centres, as compared with other supermarkets operators. It said that anchor tenants, such as supermarkets, generated sales and foot traffic that benefit all tenants and drive the success or otherwise of the shopping centre. Because of the track record that Woolworths and Coles had of driving sales, they were considered by many developers to be the only supermarkets that could successfully anchor a shopping centre development. The Grocery Inquiry Report said that, while the preference of centre owners to have Coles and/or Woolworths as tenants was a reflection of their importance to the success or otherwise of centres, that created a significant barrier to entry for other supermarket operators.
The Grocery Inquiry Report then referred to concerns raised by a number of parties regarding restrictive provisions in leases between shopping centre owners and major supermarket chains. Such restrictive provisions:

prohibit landlords from introducing a second or third supermarket over a certain size to the shopping centre for a specific period of time; or
provide for a significant reduction in the rent payable by the major supermarket chain if a second or third supermarket over a certain size is introduced to the shopping centre within a specific timeframe. The Grocery Inquiry Report also referred to evidence of clauses in leases that gave existing tenants a first or last right of refusal over access to additional space in shopping centres, such as for a discount department store or petrol site, and of clauses in deeds of surrender for leases that provide that the relevant site could not be re-let to another supermarket operator.

The Grocery Inquiry Report said that information available to the Commission confirmed that many leases entered into by the major supermarket chains contained provisions that took the form of a prohibition on the introduction of an additional supermarket or provided for a sufficient reduction in a major supermarket chain's rent if an additional supermarket were introduced, making it financially unviable for the shopping centre to do so. The Grocery Inquiry Report observed that the restriction on new supermarkets entering a shopping centre did not generally apply to grocery retailers below a size of between 500 sq metres and 2000 sq metres but most commonly around 1000 sq metres or 1500 sq metres.
The Grocery Inquiry Report accepted that there are some circumstances, particularly in areas of projected future population growth, where shopping centre developments are occurring, where a guarantee of a period of exclusivity may encourage a supermarket operator to enter a shopping centre that it may not otherwise enter. Accordingly, the Commission considered those provisions play a role in attracting an anchor tenant to a complex that may not be built without that tenant. In those circumstances, provided there is no evidence of an anti-competitive purpose and good evidence that there would be no competitive entry even if the clause were removed, the Commission may not be concerned. While such provisions guarantee a return on a supermarket's investment by creating certainty as to the competitive environment, such exclusivity does not appear to be justified by the commercial risk undertaken by the supermarket in entering the shopping centre in those instances. Indeed, the Commission said that, in the vast majority of leases in large metropolitan centres, there appeared to be little justification for such provisions other than to prevent competitive entry. Restrictive provisions in those cases were "sought so as to maximise the profitability of the supermarket by restricting its exposure to competing grocery offerings".
The Commission was satisfied that landlords already have a strong incentive to ensure that the tenant-mix in a shopping centre is such as to ensure that tenants trade profitably and that there are few incentives for competitors to enter a shopping centre if the potential turnover does not justify it. It considered that those market factors should be enough to ensure that investments would be protected.

[3]

The Enforceable Undertaking

Woolworths executed the Enforceable Undertaking on 8 September 2009. The Commission accepted the Enforceable Undertaking on 17 September 2009. It was expressed to be for the purposes of s 87B of the Trade Practices Act.
Section 87B(1) of the Competition Act relevantly provides that the Commission may accept a written undertaking given by a person for the purposes of s 87B in connection with a matter in relation to which the Commission has a power or function under the Competition Act. Section 87B(3) of the Competition Act provides that, if the Commission considers that the person who gave such an undertaking has breached any of its terms, the Commission may apply to the Federal Court of Australia for an order under s 87B(4). If the Federal Court is satisfied that the person has breached a term of an undertaking, that Court may make all or any of the following orders: (a) an order directing the person to comply with that term of the undertaking; (b) an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach; (c) any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach; and (d) any other order that the Court considers appropriate.
The Enforceable Undertaking recited that, in 2008, the Commission had conducted the Grocery Inquiry and that the Grocery Inquiry Report had "identified concerns that restrictive provisions in lease agreements in respect of supermarket space could restrict the ability of supermarket operators to establish supermarkets in shopping centres". It also recited that "[l]ease agreements often involve major investment and long term commitment by both the supermarket operator and the shopping centre owner and provide a committed rental stream to assist to finance the development". Finally, the Enforceable Undertaking recited that, "[f]rom time to time, as a result of population growth and consequent growth in retail grocery demand in a particular area, opportunities arise for entry into retail grocery markets which may be accommodated through the expansion or reconfiguration of an existing shopping centre to provide additional supermarket space".
Relevantly for present purposes, the pivotal provision of the Enforceable Undertaking is cl 15, whereby Woolworths undertakes, for the purposes of s 87B, that it will not, and that its subsidiaries will not, "enter into a lease agreement that includes one or more restrictive provisions". The object of the Enforceable Undertaking is stated to be to eliminate the use of restrictive provisions in lease agreements, which the Commission considers may create a barrier to entry to markets for the acquisition of supermarket space and retail grocery markets. The Enforceable Undertaking contains definitions of the terms "lease agreement" and "restrictive provision". The effect of the Enforceable Undertaking depends upon those terms.
Clause 14 of the Enforceable Undertaking provides that, in the interpretation of a clause of the Enforceable Undertaking, a construction that would promote the object underlying the Enforceable Undertaking, whether that object is expressly stated or not, is to be preferred to a construction that would not promote that object. In that context, under the heading "Conduct of concern", the Enforceable Undertaking states that the Commission considers that, by making, or giving effect to, a lease agreement containing a restrictive provision, supermarket operators may have contravened the Trade Practices Act, in that the conduct may have constituted the making of, and/or giving effect to, a provision in a lease agreement that had the purpose, effect or likely effect of substantially lessening competition in markets for the acquisition of supermarket space and/or in retail grocery markets. In particular, the Commission was said to be concerned that, by including restrictive provisions in lease agreements, supermarket operators may have prevented and/or hindered other supermarket operators from entering and competing in markets for the acquisition of supermarket space and/or in retail grocery markets. Woolworths is stated to wish to address those concerns responsibly by offering the Enforceable Undertaking in accordance with s 87B.
Under cl 6(b) of the Enforceable Undertaking, "lease agreement" means a "contract, arrangement or understanding relating to proprietary rights in respect of supermarket space". Specifically, lease agreement includes "letters of agreement, agreements for lease and registered leases". The term "supermarket space" is defined as meaning "retail premises for the purpose of operating a supermarket". The term "supermarket" is not defined. The term might be understood as meaning a large, usually self-service, retail store or market selling food and other domestic goods. [1] Alternatively, it might be understood as a large store, typically one of a chain, selling a wide range of food and groceries, as well as household goods and other products. [2] Those definitions suggest that a supermarket is a large store that sells a wide range of products, including household and domestic goods. Household and domestic goods would include, for example, laundry and cleaning products, medicines, personal care and hygiene products and home hardware, such as light bulbs, batteries and the like.
The term "proprietary rights", used in the definition of "lease agreement", is not itself defined. However, it must be understood as including an interest in a leasehold. Accordingly, the term lease agreement would include a contract relating to a leasehold in respect of retail premises for the purposes of operating a supermarket in the sense just described.
The other critical term used in the Enforceable Undertaking is "restrictive provision", which is defined as meaning a provision of a lease agreement that, in form or substance, has one or more of seven effects. Only one of those effects is relied upon by Harris Farm in contending that cl 2.5 of the Deed of Agreement constituted a contravention of the Enforceable Undertaking. Thus, under cl 7(e) of the Enforceable Undertaking, a provision of a lease agreement will be a restrictive provision if, in form or substance, it "gives the lessee a first or last right of refusal in relation to additional supermarket space in the shopping centre in which the relevant supermarket is located unless the grant of that additional supermarket space to the lessee is conditional upon the lessee surrendering the supermarket space upon which the relevant supermarket is located". Each of the terms shown in bold in the previous sentence is defined in the Enforceable Undertaking.
"Additional supermarket space" means "supermarket space that is separate from, and not adjoining, the relevant supermarket". "Relevant supermarket" means "the supermarket that would directly obtain the benefit of a restrictive provision". "Shopping centre" means "a shopping centre or complex, including as expanded and/or reconfigured".

[4]

Background to the Lease

From February 1967, Woolworths operated a supermarket in premises owned by it on New South Head Road, Double Bay (the Old Supermarket Premises). From before December 2011, Woolworths and a related entity, Fabcot Pty Limited (Fabcot), owned several other parcels of land (the Woolworths Land) located near the Old Supermarket Premises. The Old Supermarket Premises and the Woolworths Land are separated by Kiaora Lane. The Council also owned other parcels of land (the Council Land) located near the Woolworths Land.
On 21 March 2011, a submission was made to the Woolworths Property Committee (the 2011 Submission) seeking approval for an agreement for lease for a proposed Thomas Dux store in the Subject Premises. The 2011 Submission said that Fabcot would provide the store to a "turn-key shell" in line with the specification of the "Woolworths supermarket kit", with amendments to finishes within the trading floor and areas as selected by Thomas Dux. The Woolworths supermarket kit is a design brief specification for new supermarkets and liquor stores of Woolworths.
The 2011 Submission stated that the Double Bay area is characterised by a wealthy population with an average income of nearly twice the average for the Sydney metropolitan area. The primary trade area population was said to be some 26,000 with a total trade population of some 66,000. The 2011 Submission stated Woolworths' reasons for proposing to take a lease of the Subject Premises. It stated that the development would provide for a Thomas Dux store on the ground floor with 195 parking spaces at its front door and a further 206 parking spaces on a roof top level, together with a Woolworths supermarket and a Dan Murphy's liquor store on the intermediate level. Reference was made to proposals for office space and a library to be constructed on the site. The 2011 Submission stated that the proposed Thomas Dux store would provide for the latest concept for the brand, which included refrigerated produce cabinets, bakery, café and sushi offerings. It stated that the Subject Premises would have an optimum size of 1,140 sq metres, which would allow for the full range of products offered by the Thomas Dux brand, while allowing customers room to move comfortably through the store.
In December 2011, the Council, Fabcot, Woolworths, Woolworths Property Double Bay Pty Ltd (Woolworths Double Bay) and Woolworths Properties Pty Ltd (Woolworths Properties) entered into a deed (the Development Deed) concerning the development of the Old Supermarket Premises, the Woolworths Land and the Council Land (together the Development Site). In the Development Deed, the parties recited that:

the Council and Fabcot proposed to undertake the development of the Development Site on the terms of the Development Deed;
the Council had agreed to grant and Woolworths Double Bay had agreed to take a lease, in the form annexed, of proposed supermarket premises to be constructed on the Development Site (the New Supermarket Premises); and
the Council had agreed to grant and Woolworths had agreed to take a lease, in the form annexed, of the Subject Premises.

Under cl 2.11 of the Development Deed, the parties agreed to enter into contracts for the sale of the Woolworths Land to the Council. By cl 6, Fabcot covenanted with the Council that Fabcot would carry out certain works (the Stage One Works) on part of the Development Site. The Stage One Works were to be on the Woolworths Land and the Council Land, on the other side of Kiaora Lane from the Old Supermarket Premises. Following practical completion of the Stage One Works, Fabcot was to carry out further works (the Stage Two Works) on the remainder of the Development Site. Fabcot agreed, under cl 6.2, to accept all risks associated with or arising from the proposed re-development of the Development Site as contemplated by the Development Deed. Woolworths guaranteed the obligations of Fabcot under the Development Deed.
Under the Development Deed, Woolworths, or a related entity, was entitled to enter into long term leases in respect of each of the New Supermarket Premises, the liquor store premises and the Subject Premises. Under cl 25 of the Development Deed, the Council was required to grant a lease of the New Supermarket Premises and the Liquor Store Premises to Woolworths Double Bay and to grant a lease of the Subject Premises to Woolworths. The New Supermarket Premises were to consist of 5,027 sq metres and the liquor store was to consist of 1,181 sq metres. The Subject Premises were to consist of 1,135 sq metres for a Thomas Dux branded grocery shop.
Provision was made in cl 25 for the dates of commencement of the respective leases to be inserted in copies to be executed by the parties. The term for each lease was to be 30 years with five options to renew, each for a term of 10 years, making total prospective terms of 80 years.
The application for approval by the Council of the development of the Development Site described the proposal as being "for major retail/commercial development" facilitating a significant increase of public parking in Double Bay, transferring public library facilities into the centre and creating additional public space. The Development Site was described as a major land holding comprising private and public land in the southern part of the Double Bay commercial centre owned by either the Council or Woolworths. The proposed development was described as consisting of the demolition of all existing buildings and structures, the construction of two new buildings, one with a frontage to Kiaora Lane, being the Stage One Works, and the other with a frontage to New South Head Road, being the Stage Two Works. The New South Head Road building was to be four storeys and would accommodate a public library and retail and commercial spaces, the specific use of which was to be determined. The Kiaora Lane Building was to be three levels with public parking, loading docks and a grocer on the ground floor, a large supermarket, liquor store and commercial office space on the middle floor and further public car parking on the top level. The development was described as creating a "shared zone" along Kiaora Lane, including a public plaza. The application contained detailed descriptions of the new buildings.

[5]

Arrangements between Woolworths and About Life

Mr Ralph Kemmler is Woolworths' Director of Property. He gave evidence by affidavits sworn on 30 June 2017 and 24 July 2017. He also gave oral evidence and was cross examined. As Director of Property, Mr Kemmler is responsible for the growth and development of Woolworths' property portfolio nationally, including freehold and leasehold interests. He has day-to-day oversight of Woolworths' national property team, which consists of approximately 140 employees. The property team is responsible for all aspects of the Woolworths group property network, including the identification and acquisition of new store sites, the refurbishments and re-development of existing stores, negotiating with landlords, managing existing leases and landlord relationships, procuring the necessary consents and approvals for developments and generally ensuring that Woolworths identifies and retains the best possible sites for the operation of its retail stores. Mr Kemmler has had over 25 years of experience in the property team. Mr Kemmler was responsible for the decision to seek, and for ultimately obtaining, the approval of Woolworths' Property Committee for the transaction with About Life.
In 2013, the growth of the "Thomas Dux" brand began slowing down and Woolworths decided not to open a Thomas Dux store in the Subject Premises. At that time, Woolworths was approached by About Life concerning the possibility of taking a lease of the Subject Premises. Mr Kemmler said that he believed, at the time, that, because the offerings of Woolworths and About Life did not overlap, the co-location of the two stores in the Kiaora Lane Building would be an attractive customer offering by reason of the diverse and complementary product ranges of the two stores. When asked in oral evidence-in-chief for his reasons for seeking the Property Committee's approval of the Deed of Agreement, with the first right of refusal in it, Mr Kemmler said that the Subject Premises was a very valuable piece of real estate and that, in considering the assignment to About Life, Woolworths wanted the ability, in the event that About Life wanted to assign the Lease, to itself go back into "that piece of real estate". He agreed that they were the reasons for wanting the first right of refusal in the Deed of Agreement.
On 18 November 2013, Mr Kemmler made a submission to the Woolworths Property Committee concerning a proposal for About Life to take the proposed lease of the Subject Premises (the 2013 Submission). The 2013 Submission referred to the approval by the Property Committee in April 2011 of the proposed new Thomas Dux store at Double Bay as part of the larger agreement with the Council and stated that, following that approval, the design for the new supermarket had changed to include the latest design, which captured "a large percentage of the Thomas Dux initiatives". It said that, further to the enhancements to the supermarket, the strategy for Thomas Dux had been revisited, and a direction had been given that loss making stores needed to break even and become profitable.
The 2013 Submission then stated that the Double Bay Thomas Dux store may not meet its projections and that the store may continue losing money for a longer period. It said that, therefore, About Life was proposed as an assignee for the Subject Premises, to take over all of the obligations under the proposed lease, and that Thomas Dux would be released from the proposed lease so that Woolworths would save in capital costs for the Thomas Dux fit out. Reference was made to the fact that About Life had also agreed to take over the lease for the Thomas Dux Surry Hills store, which was currently losing money, but that About Life would not take the assignment of the Surry Hills store without the assignment of the Subject Premises. The approach by About Life resulted in an arrangement whereby About Life would take a lease of the Subject Premises as well as a lease of the Thomas Dux store in Surry Hills. The arrangement was evidenced by three separate instruments entered into in March 2014, none of which is dated.
First, a deed of variation (the Deed of Variation) was entered into by the parties to the Development Deed. By the Deed of Variation, the parties recited that they had entered into a Development Deed and, under cl 25 of the Development Deed, the Council had agreed to grant, and Woolworths had agreed to take, a lease of the Subject Premises. The parties also recited that they had agreed that About Life, rather than Woolworths, would take a lease of the Subject Premises, that the Council had agreed to grant the lease of the Subject Premises to About Life and that Woolworths had agreed to guarantee About Life's obligations as tenant for a period of five years from the commencement date. The Deed of Variation provided for variation of the Development Deed to achieve those ends.
Secondly, the Council and Woolworths entered into a deed of guarantee and indemnity (the Guarantee). Under the Guarantee, Woolworths unconditionally and irrevocably guaranteed to the Council during the period commencing on the commencement date of the proposed lease of the Subject Premises and ending on the fifth anniversary of that date, the due and punctual payment and satisfaction of all present and future monies payable by and liabilities of About Life to the Council in respect of the obligations of About Life to pay money under specified clauses of the proposed lease of the Subject Premises.
Thirdly, Woolworths and About Life entered into the Deed of Agreement. By the Deed of Agreement, the parties recited that:

Woolworths leases premises in Crown Street, Surry Hills and is entitled to lease the Subject Premises;
Woolworths wishes to be released from its obligations to enter into a lease of the Subject Premises so that About Life may lease the Subject Premises; and
About Life agrees to take a lease of the Subject Premises and an assignment of the lease of the Surry Hill premises. Clause 2.1 of the Deed of Agreement provided that About Life must enter into an agreement with the Council to lease the Subject Premises and cl 2.2 provided that About Life must promptly and diligently pursue agreement with the Council to lease the Subject Premises. Woolworths was obliged to do all things and provide all documents and information reasonably required by the Council in considering About Life's request to lease the Subject Premises.

Clause 3 of the Deed of Agreement dealt with the arrangements concerning the proposed assignment of the Surry Hills premises. The arrangement in relation to Surry Hills was conditional upon About Life reaching agreement with the Council in relation to the Subject Premises. Clause 4 dealt with the proposed offer of employment by About Life to casual and part time staff employed by Woolworths at the Surry Hills premises. Clauses 5, 6, and 7 dealt with aspects of the transfer by Woolworths to About Life of the Surry Hills business.
Critically for present purposes, cl 2.5 of the Deed of Agreement provided as follows: 2.5 Right of first refusal to lease [the Subject Premises] On the date [About Life] enters into a lease of the [Subject Premises] with Council [About Life] irrevocably grants [Woolworths] a first right of refusal to lease the [Subject Premises] if at any time during the lease [About Life]: (a) wishes to assign its lease of the [Subject Premises] to a third party; or (b) wishes to grant a sublease of over 20% of the lettable area of the [Subject Premises] to a third party; or (c) wishes to surrender its lease of the [Subject Premises]; or (d) becomes insolvent or is otherwise in material breach of its lease of the [Subject Premises] such that Council is entitled to terminate the lease; or (e) proposes any other dealing or action which would result in a third party occupying the [Subject Premises].
Clause 2.6 of the Deed of Agreement imposed an obligation on About Life to comply in all respects with its lease and the terms of any other right of occupation of the Subject Premises and to notify Woolworths of:

receipt of each communication served on or received by it from the Council as landlord in relation to the Subject Premises;
any insolvency event that occurred in relation to About Life; and
About Life becoming aware of a proposal to vary its lease or otherwise to vary the terms of its occupation of the Subject Premises. About Life was also required to liaise closely with and have regard to the views and interests of Woolworths in respect of any disputes with the Council relating to the Subject Premises or occupation of the Subject Premises. About Life agreed to indemnify Woolworths against all loss incurred by Woolworths arising from or in connection with any breach of cl 2.6 by About Life.

While the Deed of Agreement related to both the Subject Premises and the Surry Hills premises, the regimes relating to each differed significantly. First, because Woolworths was not operating any business at the Subject Premises, there was no equivalent of cll 4, 5, 6 and 7 in relation to the Subject Premises. More significantly, there was no equivalent of cl 2.5, conferring on Woolworths a right of first refusal in relation to the Surry Hills premises.
Mr Kemmler's role in relation to the decision to enter into the Deed of Agreement was to endorse the transaction. He was the decision-maker who endorsed the property components, which included the Deed of Agreement and the first right of refusal. He was a member of the Property Committee at the time that it approved the transaction with About Life. Harris Farm attaches some significance to the fact that no mention was made in the 2013 Submission of the first right of refusal that was subsequently included in the arrangements with About Life. Harris Farm points out, there was no suggestion in the 2013 Submission that Woolworths might take back the proposed lease of the Subject Premises in any circumstances.
On 16 May 2014, the Council and About Life entered into a deed of agreement for lease (the Agreement for Lease). By the Agreement for Lease, the parties to it recited that:

the Council had entered into the Development Deed with Woolworths for the construction of the development on the Development Site and the grant to Woolworths of leases of the Supermarket Premises and the Subject Premises;
Woolworths agreed to take a grant of a lease of the Subject Premises commencing the day after the date of completion of the contract for the sale by Woolworths of the Woolworths Land to the Council;
at the request of Woolworths, the Council had agreed to vary the Development Deed so that it would grant a lease of the Subject Premises to About Life rather than Woolworths; and
the Council had agreed to grant the lease of the Subject Premises to About Life.

The pivotal provision of the Agreement for Lease was cl 5, which provided for About Life to sign and deliver to the Council copies of the Lease, which was not to come into operation until the commencing date. The Council was also required to sign the copies of the Lease and hold the signed copies until the commencing date. The Lease was executed by the Council and About Life.
The commencing date of the term of the Lease was 5 June 2014 and the terminating date was 4 June 2044. It provided for five options to renew, each for a period of 10 years. Clause 10.1 of an annexure forming part of the Lease provided that About Life could not assign the Lease without the consent of the Council. About Life was required to make a written request for the Council's consent to an assignment. Under cl 10.1(c), the Council could withhold its consent only if:

About Life was in substantial breach under the Lease at the time that it made the request; or
the proposed tenant failed to prove, to the reasonable satisfaction of the Council, that it is a respectable, responsible and solvent person capable of adequately carrying on a use that is not inconsistent with the permitted use in the premises. The permitted use specified in the Lease is: Retail sale and ancillary purposes including supermarket, banking facilities, the sales of alcoholic liquors and beverages and any other use permitted by Law.

Clause 12.3 of the annexure to the Lease relevantly provided that the Council had to consider promptly any request by About Life for consent or approval. Subject to any express provision in the Lease to the contrary, the Council could not unreasonably withhold or delay its consent or approval or impose any unreasonable conditions on its consent or approval. If the Council did not give About Life a written response providing reasons for the refusal to a request for consent or approval within 30 business days after the receipt of the request, then the consent or approval would be deemed to have been given by the Council unconditionally.
At some time after 21 April 2017, About Life made a written request to the Council under cl 10 of the annexure to the Lease for consent to transfer the Lease to Harris Farm. For the purposes of these proceedings, About Life and Harris Farm have each undertaken, so far as Woolworths is concerned, not to rely upon any deemed giving of consent under cl 12 of the annexure to the Lease.

[6]

Arrangements between About Life and Harris Farm

The Sale Contract is dated 21 April 2017. It is in the form of the 2015 edition promulgated by the Law Society of New South Wales and the Real Estate Institute of New South Wales. The cover page of the Sale Contract described About Life as "vendor" and Harris Farm as "purchaser". Under the operative provision of the Sale Contract, the vendor sells and the purchaser buys "the business" for "the price". Under cl 1.1, "the business" is defined as the business identified on the cover page of the Sale Contract and includes "the chattels, fittings, fixtures and furniture, goodwill, licences, permits, plant, together with any other items referred to in [the] contract as forming part of the business".
Page 1 of the Sale Contract states the following as the "type of business": Retail sale and ancillary purposes including supermarket, banking facilities, the sales of alcoholic liquors and beverages and any other use permitted by law, carried on at the Premises. It is of some significance that the description of the type of business is identical to the permitted use under the Lease. The cover page of the Sale Contract described the "Premises" as follows: Retail Shop Premises shown on the Premises Plan annexed to the Lease at Kiaora Place, 1 Kiaora Road, Double Bay 2028. The cover page stated that the price is $10 million, with a deposit of $1 million. The cover page apportioned the price as follows: Goodwill $8,931,322 Equipment $1,068,678 It may be significant that no part of the price was apportioned to the Lease.
Clause 2 of the Sale Contract provided that the purchaser had to pay the deposit to the depositholder as stakeholder. The cover page specified the vendor's solicitor as depositholder. Harris Farm, as purchaser, paid the deposit of $1 million to About Life's solicitor at the time of making the Sale Contract, as provided for in cl 2.2.
Clause 10 of the Sale Contract relevantly provided as follows: 10.1 The vendor promises that, to the best of the vendor's knowledge and other than as disclosed in this contract- 10.1.1 the vendor has full authority and capacity to enter into this contract and sell the business; 10.1.2 the vendor has absolute title to the business; 10.1.3 the business and the lease is not subject to any charge, encumbrance, lease, mortgage, security interest under the PPS Act or other liability or security; … 10.2 These promises are made as at the contract date and are also made as at completion, other than 10.1.3, which is made at completion only. … "PPS Act" is defined as the Personal Property Securities Act 2009 (Cth).
Clause 15 of the Sale Contract dealt with "Rescission by vendor and termination by purchaser". Clause 15.2 provides as follows: If the vendor does not comply with this contract (or a notice under or relating to it) in an essential respect, the purchaser can terminate by service a notice. After the termination - 15.2.1 the purchaser can recover the deposit and any other money paid by the purchaser under this contract; 15.2.2 the purchaser can sue the vendor to recover damages for breach of contract; and 15.2.3 if the purchaser has been in possession a party can claim for a reasonable adjustment.
Clause 19.2 of the Sale Contract provided that, if a consent was required from a landlord, the purchaser did not have to complete earlier than 28 days after service of the consent. Clause 20 dealt with "Completion" and relevantly provided as follows: 20.1 On completion the vendor must give the purchaser - 20.1.1 possession of the business and the premises; 20.1.3 any document evidencing tenure of the premises; 20.1.4 any other document needed to effect registration of the business under legislation; and 20.1.5 any other document of title that relates only to the business. … 20.3 On completion the vendor must - … 20.3.2 cause the legal title to the business to pass to the purchaser (subject to any necessary registration), free of any mortgage or other interest. 20.4 By completion, the vendor must serve - 20.4.1 the consent of any mortgagee or head lessor of the land to the transfer or grant of the lease of the premises; and … 20.5 On completion the purchaser must - 20.5.1 pay to the vendor … the price …; and 20.5.2 take over the burden and benefit of the continuing agreements listed in this contract and indemnify the vendor against any liability under those agreements arising after completion. …
Clause 27 of the Sale Contract dealt with "Lease of premises - general provisions". Clause 27 relevantly provided as follows: 27.1 This clause applies … if the premises are, or are on completion to be, subject to a lease. 27.2 The purchaser must - 27.2.1 supply references and other information reasonably required by the landlord to allow the landlord to consider the application; … 27.3 The vendor must - 27.3.1 apply to the landlord for the consent of the landlord to the purchaser becoming the tenant; … The term "landlord" was defined as "the landlord (lessor) of the premises". I have already set out the description of the "premises" shown on the cover page of the Sale Contract. By special condition 43, the purchaser acknowledged that copies of certain documents were attached to the Sale Contract, including a copy of the Lease.

[7]

Woolworths' Intentions

Mr Matthew Franich is the General Manager, Property Management, of Woolworths. He joined Woolworths in May 2015 as the head of small format stores and petrol. Mr Franich swore an affidavit on 29 May 2017. While the affidavit was not read on behalf of Woolworths, parts of it were tendered by Harris Farm and admitted without objection.
Mr Franich described the supermarket that Woolworths opened in the New Supermarket Premises on 5 June 2014 as a "large" one, being in the order of 5,000 sq metres, whereas most Woolworths supermarkets are in the range of 3,000 to 4,000 sq metres. He said that the New Supermarket Premises contained a number of new features not available at many Woolworths supermarkets elsewhere, making it a "flagship store for the 'Woolworths' network". Mr Franich said that, since it opened, the Woolworths supermarket at Double Bay has performed very well and has met or exceeded its forecast performance, such that it is likely, on the current trajectory, that the store will be one of the top two or three performing stores nationally for Woolworths within the next two or three years.
Mr Franich also said that the offering of products available at the About Life store is "quite different" from the products available at the Woolworths supermarket, because About Life focuses very much on wholefoods and health food products and ready-to-eat meals. Consequently, the two stores, being located close together, present a more attractive customer offering because of the breadth of products on offer. Woolworths "enjoys the benefit of that proximity".
Mr Franich said that, in those circumstances, the opportunity to exercise the first right of refusal conferred by cl 2.5 of the Deed of Agreement, and to occupy the Subject Premises, is of significant value to Woolworths. He said that Woolworths initially agreed to relinquish its right to the Subject Premises to About Life because, having decided not to expand its Thomas Dux business, it had no immediate use for the Subject Premises and, because of the symbiotic relationship between Woolworths and About Life, was content to see About Life take the Lease in its place.
However, Mr Franich said that that is no longer the case and that Woolworths would value the opportunity to establish "its own smaller innovative retail offering such as a Woolworths Food Quarter", which would predominantly provide ready-to-eat meals in a similar fashion to About Life, expansion of Woolworths' e-commerce operation through "Click & Collect", or a Dan Murphy's cellar business, of the kind operated by Woolworths from its store in Prahran, Victoria. He said that that type of offering would sit well with the existing Woolworths supermarket and Dan Murphy's liquor store now operating at Double Bay and would not diminish and would possibly improve the trading performance of the Woolworths supermarket and would give Woolworths additional revenue and profit from the retail offering to be conducted from the Subject Premises.
Mr Franich said that, conversely, if the Subject Premises were occupied by a retailer that sells many of the same products that are sold by the Woolworths supermarket, as a typical Harris Farm store would, Woolworths would lose the benefit that the co-location with About Life brings to the supermarket, without obtaining any offsetting benefit. He said that some customers who would have shopped at the Woolworths supermarket may also do some or all of their grocery shopping at the Harris Farm store and that could have an adverse effect on the trading of the Woolworths supermarket store.
Additionally, Mr Franich said, the assignment of the Lease to a third party would result in a loss of control over any future assignments of the Lease for the almost 77 years of the remaining term and options. He said that the attractiveness and overall presentation of the Woolworths supermarket and the Dan Murphy's liquor business on the first floor of the retail development is directly affected by the nature of the tenant operating out of the Subject Premises. Mr Franich said that it was not possible to know what kind of tenant could take over the Subject Premises if Harris Farm were to assign the Lease. Accordingly, he said, it is impossible to know the extent of the loss that could be caused to Woolworths.
In early June 2017, Mr Kemmler gave a direction to the acting general counsel of Woolworths, confirming that Woolworths would enter into a contract with About Life on the terms of the Sale Contract, if Woolworths succeeded in these proceedings. On 27 June 2017, the acting general counsel wrote to About Life confirming that, if an order were to be made compelling About Life to assign the Lease to Woolworths pursuant to cl 2.5 of the Deed of Agreement, Woolworths accepted that it would be required to, and would, take the Lease on the terms contained in the Sale Contract. In cross-examination, Mr Kemmler said that, at the time of giving the direction to the acting general counsel, his understanding was that Woolworths would be required to pay $10 million to About Life under any proposed agreement and that that would include the acquisition of the Lease.
In the course of cross-examination, Mr Kemmler accepted that there are shops on each side of Kiaora Lane in the new buildings constructed pursuant to the Development Deed. He accepted that there are some retail shops in the Stage One part of the development on Woolworths' side of Kiaora Lane and that there are some shops on the ground floor in the Stage Two part of the development on the other side of Kiaora Lane.
Mr Kemmler accepted in cross-examination that Woolworths faces competition from specialist retailers, as well as from other supermarket operators, in the product categories referred to in the Woolworths Inquiry Submission. He also accepted that there is some overlap between the products sold by Harris Farm and those sold in the Woolworths supermarket and that there was a possibility that some customers who would have shopped at the Woolworths supermarket may do some of their grocery shopping at a Harris Farm store if Harris Farm were to go into Subject Premises. He said that it depended on what offering Harris Farm put into the space. He also accepted that, if Harris Farm went into the Subject Premises, that could have an adverse effect on the trading of the Woolworths supermarket. He also accepted that there would be a possibility that one of the down sides from Woolworths' point of view, if Harris Farm obtained the Lease, was that Woolworths would lose control over future assignments of the Lease and the identity of any party who might come into the Subject Premises.
When asked why there was no first right of refusal in relation to the Surry Hills premises in the arrangements with About Life, Mr Kemmler said that his recollection was that at the time Woolworths was trying to exit the Surry Hills premises and had no further interest in those premises. On the other hand, the Subject Premises had been built as part of an extensive major development that had taken over 20 years to develop. He said that Woolworths considered it to be good real estate and, at the time when Woolworths entered into the About Life arrangements, it was contemplated that, in the future, should there be a change in the circumstances, Woolworths would like the opportunity to re-enter the Subject Premises. He said that Thomas Dux had no commercial viability at Surry Hills and at the time its future was unclear. He said there was a debate at the time about the commercial viability of Thomas Dux in the Subject Premises and it was decided not to proceed with Thomas Dux in the Subject Premises. He said that he did not know whether the primary reason for not proceeding with Thomas Dux at Double Bay was that it was not commercially viable.
Mr Kemmler accepted in cross-examination that there was no indication in the 2013 Submission that one of the reasons for the About Life proposal was that Woolworths would keep hold of the possibility of going back into the Subject Premises at some future time through the first right of refusal. He accepted that the real decision-makers in relation to the assignment of the Lease to About Life were the members of the Property Committee and that he was a member of the Property Committee. He also said that the first right of refusal and the reasons for it may have been considered by the Woolworths property people involved and the business heads at the time. He agreed that he was the head of all of the property people at that time and by referring to the heads of business, he was referring to the people who were either running Thomas Dux or running the supermarket business. He said that there was no written communication between the property people on the one hand and the heads of business on the other about the first right of refusal and the reasons why Woolworths wanted it.
Mr Kemmler also said in cross-examination that he did not know whether any consideration was given to putting some obligation upon About Life into the Deed of Agreement. He said that he did not give any consideration himself to putting in the Lease a reference to the first right of refusal. When asked whether it occurred to him, in negotiating with About Life, to ask the Council to include a clause in the Lease that made reference to the first right of refusal, he said that the transaction was carried out in great detail by Woolworths' internal lawyers and external lawyers and he was comfortable with Woolworths' position. He accepted that he personally did not give any consideration to the possibility of having the Council agree to put into the Lease a reference to the first right of refusal.
Woolworths was directed to provide discovery of documents recording or evidencing any consideration given by it as to whether or not to include a first right of refusal in the Deed of Agreement or to include a first right of refusal or a reference to such a right in the Lease. No documents were produced in response to that direction. It can be concluded, therefore, that there was no document recording or evidencing any such consideration on the part of Woolworths.

[8]

The Proceedings

By its amended summons filed on 18 July 2017, Woolworths claims, primarily, an order that About Life assign, transfer or otherwise dispose of its interest in the Lease to Woolworths on the same terms as those proposed for the assignment of the Lease to Harris Farm under the Sale Contract or, alternatively, on fair and reasonable terms. Woolworths also claims an order restraining About Life from assigning, transferring or otherwise disposing of its interest in the Lease to Harris Farm.
Alternatively, Woolworths claims an order that About Life offer to assign, transfer or otherwise dispose of its interest in the Lease to Woolworths on the same terms as those proposed for the assignment of the Lease to Harris Farm under the Sale Contract or on fair and reasonable terms. Woolworths also claims an order restraining About Life from assigning, transferring or otherwise disposing of its interest in the Lease to Harris Farm unless and until About Life has made an offer to Woolworths in the terms above and Woolworths has elected to refuse the said offer. Woolworths also claims equitable damages.
By its cross-claim filed on 16 June 2017, Harris Farm claims declarations that it has an equitable interest in the Lease and that Woolworths has no interest in the Lease. Alternatively, Harris Farm claims a declaration that its equitable interest in the Lease ranks in priority to any interest that Woolworths has in the Lease. Harris Farm also claims an order for specific performance by About Life of the Sale Contract and an injunction restraining About Life from taking any steps to offer, assign, transfer or otherwise dispose of its interest in the Lease to Woolworths. In the alternative, Harris Farm claims damages against About Life for breach of contract.
It is common ground as between Woolworths and Harris Farm that damages would not be an adequate remedy for breach by About Life of cl 2.5 of the Deed of Agreement or breach by About Life of the Sale Contract. That is to say, each of Woolworths and Harris Farm accepts that, if the other is successful, appropriate orders for specific performance should be made against About Life. The question of damages that the unsuccessful party as between Woolworths and Harris Farm would be entitled to recover from About Life has been deferred.
The first broad issue raised in the proceedings is whether Woolworths has a relevant interest in the Lease. Harris Farm contends that Woolworths does not have a relevant interest by reason of the following: (a) Clause 2.5 of the Deed of Agreement was entered into by Woolworths in breach of the Enforceable Undertaking and is therefore void or unenforceable for illegality or as being contrary to public policy; (b) Clause 2.5 of the Deed of Agreement is void for uncertainty; (c) Clause 2.5 of the Deed of Agreement is void or unenforceable as being contrary to the public policy in favour of the free alienability of land; and (d) if, contrary to the above contentions, cl 2.5 of the Deed of Agreement is not void or unenforceable, it confers no more than a contractual right in personam as against About Life.
The second broad issue is whether Harris Farm has an equitable interest in the Lease. Harris Farm contends that, by the Sale Contract, About Life agreed to assign the Lease to Harris Farm, that Harris Farm is entitled to have the Sale Contract specifically performed and that, accordingly, Harris Farm has an equitable interest in the Lease.
The third broad issue is whether, if each of Woolworths and Harris Farm has a relevant interest in the Lease, whether the interest of Woolworths takes priority over the interest of Harris Farm or the interest of Harris Farm takes priority over the interest of Woolworths. That raises questions concerning the point of time at which the respective interests came into existence or arose and whether Woolworths or Harris Farm has "the better equity". In that regard, Harris Farm contends that, if Woolworths' interest preceded Harris Farm's interest in time, Woolworths has been guilty of postponing conduct because: (a) Woolworths armed About Life with the indicia of title to the Lease, despite options being available to Woolworths that would have put a potential assignee of the Lease on notice of the first right of refusal; and (b) Woolworths' interest was obtained in breach of the Enforceable Undertaking.
Having considered the issues in the light of the very detailed and helpful submissions made on behalf of Woolworths and Harris Farm, I have formed the view that the outcome does not necessarily depend upon whether Woolworths and Harris Farm have claims in rem in relation to the Lease. Rather, the outcome depends upon resolving the conflict between competing claims in personam against About Life.
I shall deal with the issues argued by Woolworths and Harris Farm under the following headings: (a) The proper construction and effect of cl 2.5 of the Deed of Agreement; (b) The Enforceable Undertaking; (c) Restriction on Alienation of Land; (d) Woolworths' claim in relation to the Lease; (e) Harris Farm's claim in relation to the Lease; (f) Timing of respective interests; and (g) Postponing conduct.
In its reply to Harris Farm's points of defence and cross-claim, which was filed on 23 June 2017, Woolworths asserted that, if Harris Farm has an equitable interest in the Lease, that interest is postponed to Woolworths' interest by reason of the conduct of Harris Farm constituted by its entry into the Sale Contract with actual or constructive knowledge or notice of the Deed of Agreement and with actual or constructive knowledge or notice that About Life had not performed its obligations to Woolworths under cl 2.5 of the Deed of Agreement. Evidence was adduced by both Woolworths and Harris Farm as to that question. However, after the evidence was completed, Woolworths abandoned its contention that Harris Farm had actual or constructive notice of its first right of refusal under cl 2.5 of the Deed of Agreement.

[10]

Content of Clause 2.5 and Uncertainty

No binding and enforceable contractual obligation can arise unless at least the essential or critical terms of the bargain have been agreed upon, such that the contract may be considered "certain" and "complete". Accordingly, there will be no concluded contractual obligation where an essential or critical term is left to be settled by future negotiation and agreement between the parties. [3] If the parties have not agreed on all of the essential terms and at least one essential term remains to be settled by future negotiation and agreement, without an adequate mechanism for resolving any disagreement being included, [4] a contract will be incomplete and unenforceable, no matter what the parties themselves may think. That will be the case, notwithstanding that one of the parties might have commenced performance of its obligations under the putative contract. While restitutionary principles may be applicable in relation to the performance, the contract itself will be incomplete and therefore unenforceable. [5]
More particularly, an option to purchase will be unenforceable and void by reason of uncertainty if no purchase price is agreed. [6] For example, a clause in a joint venture agreement that purports to give one party pre-emptive rights to acquire the interest of the other, upon a change of control, will be void for uncertainty if it does not provide the terms, particularly as to price, on which the interest is to be acquired. [7] Again, where the owner of the whole of a building grants a right of first refusal to purchase a part of the building at a price and upon terms and conditions that the grantor is willing to sell to an unrelated third party, and the owner proposes to sell the whole of the building, it will not be possible to enforce the right in relation to the part because the terms upon which the sale of the part is to be offered to the grantee are undetermined. It may be that the grantee would have the right to require the grantor to offer to sell the whole of the building to the grantee on the terms on which it proposes to sell to a third party. However, the right could not require the grantor to offer to sell the part only to the grantee because there is no mechanism for determining the price of the part. [8]
Harris Farm contends that cl 2.5 is ineffective to create an enforceable obligation because it is silent as to what it is that is to be offered to Woolworths that Woolworths has the right to refuse and it is also silent on the terms on which the offer is to be made. In that regard, a right of first refusal in relation to property might be expressed in several different ways. For example, it might set out the price and all of the relevant terms and conditions, leaving only the trigger for the exercise of the right to occur. Alternatively, it may leave the price and other terms and conditions to be specified by the grantor, once the grantor decides to dispose of the relevant property. Again, the right might depend upon the receipt by the grantor of an offer from a third party, such that the grantor is then obliged to offer the relevant property to the grantee at a price and on terms and conditions no less favourable than those offered by the third party. [9] Such a right might be formulated with particular precision, outlining specific steps to be taken within specified timeframes. Reported cases demonstrate the variety of language that might be employed in order to create a valid first right of refusal. [10]
A phrase such as "first right of refusal" will depend upon its context for its true meaning. Such a phrase generally refers to a right of pre-emption. That is to say, it signifies a promise not to dispose of an interest in property until that interest has been offered to the grantee of the right and the grantee has refused it. [11] A right of first refusal might provide that the grantee has the opportunity of refusing a fair and reasonable offer by the grantor to sell the property to the grantee before it is alienated by the grantor. Alternatively, it might afford the grantee the opportunity of refusing the property at a price acceptable to the grantor that has been offered by some person other than the grantee. [12]
Harris Farm asserts that Woolworths' contention that it is to be offered an assignment of the Lease on the same terms as those offered by About Life to a third party assumes that the proposed transaction with the third party is aligned in some way with the right that Woolworths has to refuse, namely, to take an assignment of the Lease. Specifically, Harris Farm points to the fact that, under the Sale Contract, Harris Farm has agreed to acquire the assets of the business of About Life presently being conducted on the Subject Premises, including an assignment of the Lease. As indicated above, About Life's business is defined in the Sale Contract as including the chattels, fittings, fixtures and furniture, goodwill, licences, permits, plant together with other items referred to in the Sale Contract as forming part of the business. Harris Farm agrees to buy the business for the price of $10 million. No part of the price of $10 million is apportioned to the Lease.
Harris Farm asserts that the first right of refusal granted to Woolworths does not extend to the whole of any transaction of which About Life's assignment of the Lease is a part. In those circumstances, Harris Farm says, it is a matter for conjecture as to which terms of the Sale Contract apply to the first right of refusal granted to Woolworths and how the purchase price under the Sale Contract is to be apportioned between the Lease and other elements of About Life's business that is the subject of the Sale Contract. Woolworths contends, however, that the consideration payable for the assignment of the Lease is the agreement by the purchaser, contained in cl 20.5.2 of the Sale Contract, to take over the burden and benefit of the continuing agreements listed in the Sale Contract and to indemnify About Life against any liability under those agreements arising after completion. The Lease is one of those agreements.
Clearly, cl 2.5 of the Deed of Agreement contemplates some juridical act, that is to say, some expression of will intended to have legal consequences, on the part of About Life before it assigns the Lease or suffers a third party to occupy the Subject Premises. Clearly enough, also, the first right of refusal would be of no utility to Woolworths if the right, whatever its content might be, arose only upon About Life entering into an executory contract that might result in assignment of the Lease or some other dealing or action that might result in a third party occupying the Subject Premises.
Woolworths contends that, where cl 2.5(a) applies, About Life is required to make an offer to assign the Lease to Woolworths on the same terms as it had decided to assign the Lease to the third party. It says that, in the present circumstances, About Life was required to make an offer to Woolworths mirroring the terms of the Sale Contract and could not assign the Lease until Woolworths had had a reasonable opportunity to accept or reject that offer.
The language of cl 2.5 is not particularly felicitous. Thus, it refers to a "first right of refusal to lease" the Subject Premises. Of course, About Life had no right to grant a lease of the Subject Premises. The owner of the Subject Premises is the Council and only the Council had capacity to lease the Subject Premises to Woolworths. However, the phrase must be understood as meaning a first right of refusal to take an assignment of the Lease.
Harris Farm points to the difficulties of construction that might arise where About Life wished to surrender the Lease or where the Council proposed to exercise its right to terminate, as referred to in cl 2.5(d). Harris Farm asserts that, having regard to the difficulties as to the way in which the right would operate in those circumstances, the whole of cl 2.5 is void for uncertainty.
Clause 2.5 does not specify expressly what it is that Woolworths has the right to refuse. However, a natural reading of cl 2.5, in referring to a "right of refusal to lease" the Subject Premises, is that the terms that Woolworths has the option of accepting or refusing are the terms upon which About Life would alienate its interest in the Lease in the circumstances specified in paras (a) to (e) of cl 2.5. That would give cl 2.5 a businesslike interpretation and is the way in which a reasonable businessperson would understand the clause. [13]
In the case of cl 2.5(a), the terms upon which About Life would assign the Lease to Woolworths would be the terms of the Sale Contract. Thus, immediately prior to the exchange of counterparts of the Sale Contract, About Life had formed the wish to assign the Lease to Harris Farm on the terms of the Sale Contract. The whole of the terms of the Sale Contract constitute the terms on which About Life wished to assign the Lease. Insofar as About Life wished to assign the Lease as part of the sale of its business, as described in the Sale Contract, for a total consideration of $10 million, apportioned as indicated in the Sale Contract, and otherwise on the terms of the Sale Contract, the obligation of About Life was to offer to enter into an agreement with Woolworths on terms equivalent to the Sale Contract. The right of Woolworths was to accept that offer, if it so elected, within a reasonable time. If it did not do so, About Life would be free to enter into the Sale Contract with Harris Farm. Clause 2.5(a) could therefore be given effect. Woolworths contends that a similar analysis would be applicable in relation to each of paras (b) to (e) of cl 2.5.
Harris Farm points to the disconformity that would be involved in enforcing cl 2.5(b). Woolworths does not contend that that trigger would entitle it to take an assignment of the Lease but would entitle it to an offer to sub-lease part of the Subject Premises on the same terms as are proposed by About Life. Thus, if About Life wished to grant a sub-lease of more than 20% of the lettable area of the Subject Premises, before sub-letting to a third party it would be required to make an offer to sub-let that part to Woolworths on the terms on which it wished to sub-let to that third party.
If About Life wished to surrender the Lease, as contemplated by cl 2.5(c), it would be required, before doing so, to offer to assign the Lease to Woolworths on terms equivalent to the terms upon which it proposed to surrender. If About Life proposed a dealing or action that would result in a third party occupying the Subject Premises, as contemplated by cl 2.5(e), it would be required to make an offer to Woolworths that would enable Woolworths to occupy the Subject Premises on the same terms as were proposed for the third party.
Clause 2.5(d) is in a different category from cll 2.5 (a), (b), (c) and (e), insofar as it contemplates a state of affairs arising, under which About Life may be compelled to alienate its interest in the Lease, as distinct from the other paragraphs, which contemplate a consensual transaction. However, if circumstances arose such that the Council was entitled to terminate the Lease, About Life would be under an obligation to take steps to assign the Lease to Woolworths, in effect, without consideration, since, subject to any rights of relief against forfeiture to which About Life might be entitled, the Council would not be required to compensate for termination. The circumstances may be such that termination comes about because the terms of the Lease entitle the Council, as landlord, to forfeit the Lease in the case of insolvency or material breach. Be that as it may, and subject to a question of restraint on alienability referred to below, cl 2.5(d) can be given effect.
Thus, a provision of a contract is not void for uncertainty unless, applying the appropriate principles of construction, the language of the provision is so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention. The mere fact that a clause is open to multiple interpretations does not result in uncertainty and the Court should strive to avoid the conclusion that a provision is void for uncertainty. [14]
A right of first refusal or first right of refusal, without more, signifies that the grantor promises that it will not dispose of the property in question to a third party except on terms no less favourable than the terms on which the grantor has offered to dispose of the property to the grantee and the grantee has rejected that offer. Notwithstanding that there may be some difficulty in determining how, in certain of the circumstances contemplated by paras (b), (c) and (d) of cl 2.5, the right of first refusal or first right of refusal would operate, certainty can be afforded to the way in which the clause operates in the circumstances presently under consideration. Thus cl 2.5 is not void for uncertainty in the circumstances of this case.
Clause 2.5 must be understood as a promise by About Life that, if it forms the wish to assign the Lease, it will not assign the Lease to another person unless it has first offered to assign the Lease to Woolworths on terms no less favourable to Woolworths than the terms on which it proposes to assign to the other person and Woolworths has rejected that offer. Accordingly, in the present context, if About Life formed the wish to assign the Lease to Harris Farm on the terms of the Sale Contract, About Life had an obligation to offer to Woolworths the opportunity to enter into an agreement with About Life on the same terms as the Sale Contract before it entered into the Sale Contract with Harris Farm.

[11]

Formation of the Wish

Even if there may be some doubt about the outer limits of a relevant "wish" or "proposal", those concepts encompass at least a situation where About Life decides to enter into a formal agreement with a third party on defined terms, including terms as to price. That must have occurred at some time prior to the entry by About Life into the Sale Contract. That About Life formed a wish to assign the Lease is evidenced by an email chain of 21 April 2017 that preceded the entry into the Sale Contract.
As at 21 April 2017, the only directors of About Life were Mr Thomas Beecroft, Ms Tammie Phillips and Mr Michael Green. On that day, Ms Bronwyn Badcock of Maddocks Lawyers was acting for About Life in relation to the proposed transaction with Harris Farm. At 5.19 pm on 21 April 2017, Ms Badcock sent an email to Mr Beecroft, Ms Phillips and Mr Green headed "About Life sale to Harris Farm". Ms Badcock referred to "final changes" to the proposed contract that were required by Harris Farm and requested confirmation as to whether those changes were agreed. Ms Badcock said that her colleague was on her way to the office of the solicitors for Harris Farm to exchange contracts but that, before exchanging, her colleague would wait to receive confirmation from her that the changes had been authorised. At 5.26 pm Mr Beecroft replied to Ms Badcock saying, relevantly, "I confirm those are agreed". At 5.38 pm Ms Phillips responded saying "AlI agreed - thanks". At 5.53 pm Mr Green responded saying "Nice work guys!". At 7.30 pm on 21 April 2017, counterparts of the Sale Contract were exchanged and Harris Farm and About Life thereby became bound by the Sale Contract.
It is clear that, before 7.30 pm on 21 April 2017, About Life had either formed a wish to assign the Lease to Harris Farm, on the terms of the Sale Contract, or alternatively proposed a dealing with the Lease, namely the Sale Contract, that would result in Harris Farm being entitled to occupy the Subject Premises. Accordingly, cl 2.5 of the Deed of Agreement was triggered. It is common ground that About Life did not, prior to the exchange of counterparts of the Sale Contract, make any offer to Woolworths that would involve Woolworths taking an assignment of the Lease or entering into a dealing or other action that would result in Woolworths occupying the Subject Premises.

[13]

Whether Clause 2.5 breached the Enforceable Undertaking

Harris Farm contends that cl 2.5 of the Deed of Agreement is a restrictive provision within the meaning of cl 7(e) of the Enforceable Undertaking. It places emphasis on the definition of shopping centre as including a shopping centre "as expanded and/or reconfigured". It contends that a purposive construction of the Enforceable Undertaking would not permit Woolworths to avoid engagement of the Enforceable Undertaking by reason of the reconfiguration of the Development Site and the relocation of Woolworths' operations from the Old Supermarket Premises to the New Supermarket Premises in June 2014.
Thus, Harris Farm says that the relevant shopping centre is a complex that includes both the buildings in New South Head Road, where Woolworths operated prior to 5 June 2014, and the new Kiaora Lane Building, where Woolworths operated after 4 June 2014. It says that the two sites were part of the one development and that Woolworths moved from the New South Head Road premises to the Kiaora Lane Building without a break. It describes the two as a "composite shopping centre".
Harris Farm asserts that Woolworths was a relevant supermarket located in the composite shopping centre prior to 5 June 2014 in the New South Head Road premises. Those New South Head Road premises constituted supermarket space as defined because they were "retail premises" within the ordinary meaning of that phrase and they were "for the purpose of operating a supermarket".
Harris Farm says that it is not necessary to look beyond the objective uses or purposes that are permitted because the Enforceable Undertaking is concerned with the unavailability of supermarket space as a barrier to entry in relevant markets. It asserts that the mere potentiality for space to be used for the purpose of a supermarket serves the pro-competitive purpose of lowering barriers to entry, which engages the Enforceable Undertaking whether or not the space is in fact later used as a supermarket. Alternatively, Harris Farm says, the purpose is demonstrated by the actual uses or contemplated uses as follows:

the original contemplated use of the Subject Premises as a Thomas Dux store;
the actual use of the Subject Premises by About Life as an About Life store;
the contemplated use of the Subject Premises by Harris Farm as a Harris Farm store; and
Woolworths' asserted potential uses of the Subject Premises as either a "Woolworths Food Quarter", similar to About Life, or an expansion of Woolworths' e-commerce offering.

Harris Farm asserts that each of the Thomas Dux, About Life or Harris Farm uses would, and do, constitute the operation of a supermarket within the meaning of the Enforceable Undertaking, in circumstances where the term supermarket includes a grocery retailer that supplies grocery offerings in competition with major supermarket chains. Harris Farm then says that the Subject Premises, being supermarket space for the reasons indicated above, are, and were, additional supermarket space because they are and were separate from and not adjoining the New Supermarket Premises, which, Harris Farm says, are the relevant supermarket. The New Supermarket Premises are on the middle of three floors of the Kiaora Lane Building, and the Subject Premises are on the lowest of the three levels of the Kiaora Lane Building.
Next, Harris Farm says, the Deed of Agreement is a lease agreement within the meaning of the Enforceable Undertaking, because it is a contract relating to proprietary rights in respect of supermarket space. The relevant "proprietary right" is said to be the right of exclusive possession of the Subject Premises to which the Deed of Agreement relates because it gives effect to the wish of Woolworths to be released from its obligations to the Council to enter into a lease of the Subject Premises so that About Life could take a lease the Subject Premises. In particular, Harris Farm says, cl 2.5 relates to proprietary rights in the Subject Premises because it operates by reference to the date on which About Life enters into a lease of the Subject Premises and purports to grant to Woolworths a first right of refusal "to lease" the Subject Premises.
Harris Farm asserts that the expanded connotation of lease agreement requires that the cognate word lessee be given a correspondingly expanded connotation, with the consequence that Woolworths, as the party to the relevant lease agreement, who receives the benefit of the right of refusal is a lessee. Thus, it is said, cl 2.5 gave Woolworths, a lessee, a first right of refusal in relation to additional supermarket space in the composite shopping centre in which Woolworths was located.
The grant of the first right of refusal was not conditional upon Woolworths surrendering the supermarket space on which it was located. Accordingly, Harris Farm says, cl 2.5 was a restrictive provision within the meaning of the Enforceable Undertaking and was therefore entered into in contravention of the Enforceable Undertaking.
Alternatively, Harris Farm says that the relevant shopping centre is simply the Kiaora Lane Building, which it describes as a "standalone shopping centre". It contends that the consequence is the same in relation to the Kiaora Lane Building as a standalone shopping centre. Thus, it says, from the time of the Development Deed, in December 2011, it was always contemplated that Woolworths would be located in the standalone shopping centre when it was completed. The standalone shopping centre is therefore one in which the relevant supermarket, namely, the Woolworths supermarket, was located, at latest on and from 5 June 2014, when it was actually located there. In addition, for the purposes of the Enforceable Undertaking, having regard to the expanded definition of shopping centre, the standalone shopping centre was one in which the relevant supermarket, namely, the Woolworths supermarket, was located at all times before 5 June 2014, when it was contemplated to be located there as part of the expanded or re-configured shopping centre. For the reasons indicated above, Harris Farm says cl 2.5 was a restrictive provision within the meaning of the Enforceable Undertaking and was therefore entered into in breach of cl 15.

[14]

Consequences of Breach of the Enforceable Undertaking

In light of the conclusion reached above, it is not strictly necessary to deal with this question. However, in the circumstances, it is desirable to do so.
There are three categories of case in which an agreement may be unenforceable by reason of statutory illegality. The first case is where the making of the agreement, or the doing of an act that is central to the formation of the agreement, is expressly prohibited by the statute, either absolutely or conditionally. The second is where the making of the agreement, or the doing of the act, is impliedly prohibited by the statute, for example, where the agreement is to do an act, the doing of which is prohibited by the statute. The third case is where the making of the agreement is not expressly or impliedly prohibited by a statute but is treated by the courts as unenforceable because it is a contract associated with or in the furtherance of illegal purposes. [15]
When a statute expressly prohibits the making of a particular contract, a contract made in breach of the prohibition will be illegal, void and unenforceable, unless the statute otherwise provides, either expressly or by implication from its language. [16] The Competition Act does not otherwise provide, either expressly or by implication, that an agreement entered into in breach of an undertaking under s 87B is illegal, void or unenforceable. Section 87B is not a provision of the kind for which all consequences of breach are necessarily to be found expressly in the statute itself. However, it is arguable that breach of an undertaking is an unlawful act for the purpose of the tort of conspiracy by unlawful means. [17] Even if that be so, that is not the case presently before the Court.
An agreement may be unenforceable, even if it is not expressly or impliedly prohibited by a statute, if it is an agreement associated with or in the furtherance of illegal purposes, as indicated above. In that case, the Court acts to uphold the policy of the law, which may, but does not necessarily, make the agreement unenforceable. That policy does not impose the sanction of unenforceability on every agreement associated with or made in furtherance of illegal purposes. It is necessary for the Court to discern from the scope and purpose of the relevant statute whether the legislative purpose will be fulfilled without regarding the agreement as void and unenforceable. The central policy consideration at stake is the coherence of the law. [18]
Whether an agreement falls within the third category is a question of statutory construction. For example, where a statute prohibits the leasing or sub-leasing of part of premises without the approval of a particular statutory authority, it is necessary to have regard to the role assigned by the statute to that authority in relation to the supervision and management of the premises in question. Where, under the statute, a contravention of the prohibition on leasing or sub-leasing gives rise to a power in the authority to impose a sanction such as the cancellation or suspension of a licence, the conclusion that a breach of the prohibition automatically avoids the lease or sub-lease would pre-empt the authority's decision. That would be inconsistent with the supervisory role conferred on the authority under the statute. [19]
Harris Farm contends that, if cl 2.5 of the Deed of Agreement constituted a breach of the Enforceable Undertaking, it was expressly prohibited by the Enforceable Undertaking. It contends that the Enforceable Undertaking is a statutory instrument given statutory force by s 87B of the Competition Act and that a consequence of breach of it is liability to proceedings at the suit of the Commission, under s 87B(3). Harris Farm asserts that a further consequence is that an agreement entered into in breach of the Enforceable Undertaking is void or unenforceable, at least by the contravening party, being Woolworths in the present case.
Harris Farm contends that the intended statutory consequence of voidness is strengthened in the present case because Woolworths undertook not to enter into a lease agreement that includes a restrictive provision. That is to say, it undertook not to enter into agreements having a certain character in the context of the investigation by the Commission of lease agreements that could have the purpose or effect of substantially lessening competition. An agreement that had that effect may contravene Pt IV of the Competition Act, and s 45 in particular. Section 45 proscribes agreements made for the purpose of, or having the effect of, substantially lessening competition in a market.
Harris Farm contends that the Enforceable Undertaking is cognate with the overriding statutory duty of Woolworths not to enter into agreements having the purpose or effect of substantially lessening competition. A contract that contravened Pt IV, by reason of the inclusion of a particular provision in the contract, is expressly rendered unenforceable, at least to the extent of the particular provision, by s 4L of the Competition Act. [20] Thus, Harris Farm asserts, where the Commission chooses to secure compliance with Pt IV by means of an undertaking pursuant to s 87B, rather than by commencing proceedings, the party giving the undertaking should not be understood to avoid the statutory consequences of unenforceability if it enters into a contract in breach of its undertaking. Harris Farm asserts that it would not serve the purposes of the Competition Act, and would, in fact, contradict those purposes, if Woolworths were permitted to enforce the very agreement that it undertook not to enter into, thereby acquiring the Lease, to which Harris Farm, a competitor of Woolworths, would otherwise have been entitled.
Harris Farm points to the fact that the right conferred by cl 2.5 extends only to the Subject Premises. It does not extend to the Surry Hills premises that were also the subject of the Deed of Agreement. The difference between the two, Harris Farm asserts, is that only the Subject Premises was located near a Woolworths supermarket.
Further, Harris Farm contends, even if the Competition Act does not have the immediate statutory consequence of rendering cl 2.5 of the Deed of Agreement void, the Court should nonetheless decline to lend its assistance to Woolworths in enforcing cl 2.5 because it is associated with or is in the furtherance of illegal purposes. Harris Farm asserts that cl 2.5 of the Deed of Agreement benefits only Woolworths and was entered into in breach of the Enforceable Undertaking. It says that Woolworths is in effect seeking the Court's assistance in enforcing it to the prejudice of Harris Farm, a bona fide purchaser, About Life, as vendor entitled to the purchase price for its business, and the Council, as landlord under the Lease, having rights to control the identity of its tenants. Accordingly, Harris Farm asserts, enforcement of the Enforceable Undertaking would be unjust and contrary to the purposes of the Competition Act, namely, the proscription of anti-competitive conduct.
Harris Farm says that the basis for its contention is that a person ought not to be assisted by law to benefit from an immoral or illegal act, especially where the person stands to gain far more by enforcement of rights gained through an illegal activity than the person stands to lose as a result of the prescribed penalty. [21] In this case, Harris Farm asserts that Woolworths stands to gain exclusive occupation of the Subject Premises for up to 80 years but, in order for that to occur, the Court must enforce Woolworths' first right of refusal, which Harris Farm characterises as "illegal".
Harris Farm suggests that the provisions of cl 2.5 of the Deed of Agreement came to the attention of the Commission only as a consequence of these proceedings. Therefore, it says, it cannot be assumed that the remedies available to the Commission under s 87B of the Competition Act are sufficient to deal with the mischief of cl 2.5. It asserts that, if this Court were to enforce the provisions of cl 2.5 in favour of Woolworths, with the consequence that Woolworths acquired the Lease, it is far from clear that the powers of the Federal Court under s 87B(4) would extend to extinguishing the proprietary interest so obtained, much less to confer it upon Harris Farm.
However, even if the Deed of Agreement, and cl 2.5 in particular, were prohibited by the Competition Act, it does not follow that they were void. That is a question of statutory construction. [22] Section 87B neither expressly nor impliedly prohibits the breach of an undertaking given under s 87B. Rather, it confers power on the Commission, where it considers that there has been such a breach, to apply to the Federal Court for an order under s 87B(4). Even if the Federal Court is satisfied that an undertaking has been breached, no consequences necessarily follow, since the Federal Court has a discretion whether to make an order at all and, if so, on what terms. In the present circumstances, therefore, s 87B does not prohibit the making of lease agreements with restrictive provisions. Further, the making of such an agreement does not contravene any express or implied prohibition in s 87B. It follows that cl 2.5 is not illegal.
Even if s 87B were to be construed as prohibiting the making of a lease agreement containing a restrictive provision insofar as the making of such an agreement constituted a breach of an undertaking under s 87B, it does not follow that any such agreement would be void or unenforceable. The Federal Court has a discretion as to what orders it should make in consequence of a breach. Those orders may or may not touch the enforceability of an agreement entered into in breach of an undertaking. It is clear enough that s 87B(4)(a) assumes that the agreement could remain on foot. If an agreement was rendered void by the operation of s 87B, there would be no need for an order directing compliance with the undertaking. The possibility that compensation might be ordered under s 87B(4)(b) and s 87B(4)(c) is consistent with the agreement being valid and enforceable.
It is tolerably clear that the object of s 87B is the furtherance of the objects of provisions of Pt IV of the Competition Act, including s 45. However, not all breaches of an undertaking under s 87B will be a breach of s 45. The Enforceable Undertaking does no more than acknowledge that restrictive provisions may have the effect of lessening competition. A contravention of s 45 is not necessarily easy to establish and requires an examination of the effect of identified conduct, being an effect in a market. Neither is a straightforward concept. The object of s 87B is to enable the Commission to accept an undertaking not to engage in conduct that may constitute a contravention of s 45. The mere fact of contravening an undertaking does not establish a contravention of s 45. The Commission seeks undertakings under s 87B in order to avoid litigation and its associated risks. [23]
In the present case, breach of the Enforceable Undertaking would entitle the Commission to seek orders from the Federal Court in respect of the breach. That of itself involves the exercise of discretion. The Federal Court then has a further discretion as to what, if any, orders should be made. The clear policy of s 87B is to entrust to the Commission and to the Federal Court, on the Commission's application, a supervisory role in respect of breach of an undertaking. That may reflect the fact that undertakings are capable of covering a very broad range of subject matter and are not limited to preventing contracts or agreements that have the effect of lessening competition. An undertaking may be entered into for a range of reasons following negotiations between the Commission and the person giving the undertaking. It would not be consistent with the supervisory role given to the Commission and the Federal Court to hold that an agreement entered into in breach of an undertaking is void or unenforceable simply by reason of the breach.
Even if an agreement is not rendered unenforceable by statute, it could in some circumstances be rendered unenforceable under the common law as being contrary to public policy, such as where a person stands to benefit from an illegal or immoral act. In determining whether such public policy has an application to the enforcement of an agreement made in breach of a statutory prohibition, the Court will examine the intention of a person in entering into the agreement and in seeking to enforce the agreement. In the absence of a person being knowingly concerned in a breach, or of any other circumstances suggesting wrong doing, neither the common law nor equity will stand in the way of a remedy to enforce the contract. [24]
In the present case, there is no evidence that Woolworths entered into the Deed of Agreement knowing that cl 2.5 was a breach of the Enforceable Undertaking. Having regard to the somewhat difficult questions of construction presented by the Enforceable Undertaking, it is unlikely that Woolworths would have entered into the Deed of Agreement knowing or believing that cl 2.5 constituted a contravention of the Enforceable Undertaking.

[15]

Restriction on Alienability of Land

It is a principle of the law that private property should be freely alienable and that a contractual restriction upon the alienation of an interest in property, if unqualified, should be considered void. Further, a fetter on alienation may be imposed by a covenant that is as effective over a very long period of time to prevent alienation of land as a condition subsequent had it been valid. [25] However, a restraint on alienation will be void only if it is total and is not imposed for the protection of a valid collateral object. [26]
A right of first refusal can attract the operation of the principle in some circumstances. It will be necessary to consider the scope of the prohibition imposed by the right of refusal, the period for which the right operates, whether the grantor of the right must extract a similar promise from a subsequent purchaser and whether the right is to be exercised by reference to a fixed price. [27] Thus, a right of first refusal that confers on the grantee the right to acquire property at a significant under-value if the grantor wishes to alienate the property, may well constitute a restraint on alienability in contravention of the principle. [28] The principle will apply to the alienation of a leasehold interest as well as to the alienation of a freehold interest.
Harris Farm contends that the principle is offended in the present case by the operation of cl 2.5(d) of the Deed of Agreement. Under that provision, the first right of refusal to lease the Subject Premises arises if About Life becomes insolvent or is otherwise in material breach of the Lease, such that the Council is entitled to terminate the Lease. Woolworths contends that, under cl 2.5, it would be entitled to acquire the Lease from About Life on the same terms as the Council would acquire the Lease upon its termination or forfeiture. In those circumstances, the Council would not be required to pay any consideration to About Life for the termination or forfeiture of the Lease. Accordingly, Woolworths would be entitled to take the Lease for no consideration. On the other hand, the Lease may have substantial intrinsic or inherent value. There would therefore, de facto, be a restraint on alienation by About Life.
Harris Farm does not contend that a first right of refusal, of itself, would contravene the principle against inalienability, in circumstances where the right of the grantee were to acquire property on terms no more favourable than the terms on which the grantor proposes to dispose of the property to a third party. Thus, in the present circumstances, cl 2.5 operates to prohibit About Life from assigning the Lease unless it has first offered to assign the Lease to Woolworths on terms that are no less favourable than the terms upon which About Life proposes to assign to a third party and Woolworths has refused the offer.
It may be that there are elements of cl 2.5 that impose a restraint on alienability that may contravene the principle in question. However, cl 13.5 of the Deed of Agreement relevantly provides that, if a provision of the Deed of Agreement is illegal, invalid or unenforceable, the provision is to be read down to the extent necessary to give it a valid operation. If a provision or part of it cannot be read down, the provision or part is to be deemed void and severable and the remainder of the Deed of Agreement is to be valid and enforceable. In the circumstances, the principle against inalienability of interests in property would not render unenforceable the right now asserted by Woolworths to be entitled to restrain About Life from assigning the Lease on the terms of the Sale Contract until About Life has first offered to assign the Lease to Woolworths on terms equivalent to those of the Sale Contract and Woolworths has declined that offer. Neither cl 2.5(a) nor cl 2.5(e) would offend the principle if it operates in the way contended for by Woolworths. By reason of cl 13.5 of the Deed of Agreement, even if cl 2.5(d) offended the principle, it could be severed and therefore ignored.

[16]

Woolworths' Claim in Relation to the Lease

Harris Farm contends that, assuming that cl 2.5(a) is enforceable and is not void for any of the reasons advanced above, it confers upon Woolworths no more than a contractual right against About Life and does not confer upon Woolworths any equitable interest in the Lease or the Subject Premises. Harris Farm asserts that the first right of refusal is merely a matter of contract and is not capable of constituting an interest in the subject matter of the right, in this case, the Lease or the Subject Premises. Secondly, it says, as a matter of construction, the right conferred by cl 2.5 did not "fructify" or mature into an interest in the Lease or the Subject Premises.
Woolworths accepts that the grant of a right of first refusal or first right of refusal in relation to an estate or interest in land does not, of itself, immediately upon grant, confer any interest in land upon the grantee of the right. [29] It says, however, that once events have occurred that trigger the operation of the right to receive an offer before alienation to a third party, the right of first refusal may confer on the grantee of the right an interest in the relevant property. [30]
It is common ground that a contractual promise does not of itself create an equitable interest in the subject matter of a right of refusal. Harris Farm says that nothing in cl 2.5 of the Deed of Agreement indicates that the right conferred on Woolworths is anything other than a promise by About Life that it will not assign the Lease to a third party without first offering to Woolworths the right to refuse an assignment to it. Thus, Harris Farm says, nothing in the language of cl 2.5 would entitle Woolworths to call for a conveyance or assignment of the Lease or any interest in the Subject Premises that would be a proprietary right. Harris Farm asserts that, as a matter of principle, even though the trigger for the exercise of the first right of refusal may have been pulled, that of itself does not give rise to a proprietary right or interest in the subject matter of the right. [31]
Woolworths, on the other hand, contends that where, in the events that transpire, the grantor of a right of refusal in relation to property can be deprived of the relevant interest in that property without any further action on the part of the grantor or where the grantee is entitled to an order for specific performance requiring the grantor to perform the agreement, the purely contractual right will "fructify" or mature into a proprietary right in relation to the relevant property. [32]
It is possible to discern separate and distinct stages in the operation of a first right of refusal such as that created by cl 2.5 of the Deed of Agreement. The first stage is where nothing but a bare contractual right exists. The next stage is when a relevant trigger is pulled, requiring the grantor to make an offer to the grantee. A third stage is where an offer has been made by the grantor to the grantee. The second and third stages may be a single stage. That is to say, the making of the offer by the grantor is the performance of the contractual obligation that arises by reason of the trigger being pulled. The final stage is where a contract between the grantor and the grantee comes into existence by reason of the acceptance of that offer. There would be no doubt that, at the final stage, the grantee of the right has an interest in the subject matter to the extent that any purchaser under an unconditional contract for sale and purchase that will be specifically enforced acquires such an interest. [33]
The critical question arises at the second stage. That is to say, at that point the trigger has been pulled, such that an obligation arises on the part of the grantor. That obligation may be a positive one to make an offer to the grantee. Alternatively, it may be no more than a negative obligation, being an obligation not to dispose of the property without first offering to dispose of it to the grantee. Both obligations are capable of being enforced by an order of the Court.
In the first case, the order might require the grantor to make an offer. In the second case, the order might be to restrain the grantor from disposing of the property without first offering the property to the grantee. The first case is analogous to the existence of a call option granted by the grantor of the first right of refusal to the grantee of that right. The terms of the call option would be the terms upon which the grantor has decided to dispose of the property to a third party. That is to say, the language of the contract may be such that, upon a specific trigger being pulled, the obligation to make the offer to the grantee arises. For example, the contract may, on its proper construction, provide that once the desire or wish to sell on identifiable terms arises, the grantor must offer to dispose of the interest to the grantee on those terms.
In the second case, it would not necessarily follow that, because the trigger had been pulled, the grantor would be obliged to make an offer to the grantee. That would depend upon the language of the contract conferring the first right of refusal. That is to say, the contract may, on its proper construction, be no more than a promise not to dispose of the relevant interest without first offering to dispose of the interest to the grantee. Thus, even if the grantor formed the desire to dispose of the interest to a third party, it would not be bound to offer the interest to the grantee. However, the Court will intervene to restrain the grantor from disposing of the relevant interest to a third party if that would have the effect of defeating the right of the grantee to accept the offer that the grantor has become bound to make.
Woolworths contends that, on the proper construction of cl 2.5, once About Life formed the wish to assign the Lease on defined terms, it was required to offer to assign the Lease to Woolworths on the same terms. Thus, under the language of cl 2.5, the first right of refusal arises if, at any time during the term of the Lease, Harris Farm wishes to assign the Lease to a third party. That wish existed, Woolworths says, no later than 5.53 pm on 21 April 2017, when the three directors of About Life had agreed to the final form of the Sale Contract that was about to be exchanged with Harris Farm. Woolworths contends that, as from that time, About Life was under a contractual obligation to make an offer to Woolworths in terms equivalent to the terms of the Sale Contract that existed at that time. It was also under an obligation not to assign the Lease until Woolworths had had a reasonable opportunity either to accept or to refuse that offer. Thus, it would have been open for About Life to enter into a conditional contract with Harris Farm in the terms of the Sale Contract, the condition being that an offer be made to and refused by Woolworths within a fixed time. By entering into the Sale Contract unconditionally, About Life has clearly evinced an intention not to perform its obligation under cl 2.5, however that obligation is properly characterised.
Harris Farm says that there has not yet been a breach of cl 2.5 by About Life because it has not yet assigned the Lease. That is to say, the Sale Contract is still executory and there would be no breach of cl 2.5 until completion of the Sale Contract when the assignment of the Lease would occur. That is the second case described above.
Harris Farm contends that cl 2.5 lacks a mechanism for determining the terms of an assignment, including terms as to price, which are necessary to establish a complete contract for the assignment of the Lease. It contends that the lack of appropriate mechanisms within cl 2.5 bespeaks a purely contractual right against About Life rather than a proprietary interest in the Lease or the Subject Premises.
Some caution must be exercised where it is sought to convert a right in personam into a form of right in rem enforceable against third parties. [34] Harris Farm points out that a right of pre-emption may, upon its proper construction, amount to a conditional option such that, when the condition is satisfied, there will be a standing and, at that time, an unconditional offer by the grantor to sell to the grantee. While that may amount to an equitable interest, before that situation can exist, the price and other terms necessary to establish a complete contract to buy and sell must be agreed upon and expressed within the provisions conferring the pre-emptive right. [35]
In the present case, however, the price and other terms are fixed by reference to the Sale Contract. There has been no suggestion that the Sale Contract does not constitute a complete contract as between About Life and Harris Farm, containing all necessary terms, including price. Woolworths says that its entitlement is to enter into a contract with About Life in the same terms as the Sale Contract, whereby it would be required to purchase the business, which would include an assignment of the Lease, for a total consideration of $10 million. Woolworths claims to be entitled to have an offer in those terms made to it by About Life.

[18]

Timing of Respective Claims

Harris Farm contends that its interest preceded any relevant interest of Woolworths. It asserts that any relevant interest that Woolworths might have obtained under cl 2.5 of the Deed of Agreement could only have arisen, if it arose at all, when the conditions for the exercise of the first right of refusal arose. Relevantly, they were that About Life:

formed the wish to assign the Lease to a third party; and
proposed a dealing or action that would result in a third party occupying the Subject Premises.

Thus, cl 2.5 is engaged by a "wish" to assign or a "proposal" to deal or act and not by an assignment or dealing or action of itself. Harris Farm contends that About Life's "wish" or "proposal" could only trigger the first right of refusal when it was given content that was sufficiently binding on About Life. As noted above, it contends that Woolworths' relevant interest arose only as a consequence of the Sale Contract being entered into and that it must, therefore, be second in time. Alternatively, Harris Farm contends, it is possible that the respective interests of Harris Farm and Woolworths arose simultaneously, namely, at the point when the Sale Contract came into existence, which occurred when counterparts were exchanged at 7.30 pm on 21 April 2017. Woolworths, on the other hand, contends that its interest came into existence no later than 5.53 pm on 21 April 2017 and, therefore, preceded any interest of Harris Farm.
It is clear that each of Woolworths and Harris Farm has, subject to the claims of the other, an enforceable contractual right against About Life and About Life owes a contractual obligation to each of them. It is also clear that the right of Woolworths and the obligation of About Life under cl 2.5 came into existence before the right of Harris Farm and the obligation of About Life under the Sale Contract. The rights of both Woolworths and Harris Farm are contractual and About Life continues to be the beneficial owner of the leasehold interest under the Lease, subject to its contractual obligations to both Woolworths and Harris Farm that may or may not be enforced by order of this Court. However, by performance on the part of About Life, either voluntarily or under compulsion by a court order, the rights of Woolworths or the rights of Harris Farm will be converted into proprietary interests in the Lease.
The essential question that now arises, in circumstances where About Life cannot perform the contractual obligations that it owes both to Woolworths and to Harris Farm, is which obligations have priority. The general principle must be qui prior est tempore, potior est iure. That is to say, the right created first in time takes priority over a right created subsequently, although such priority can be affected by the conduct of the holder of the right created first in time. Putting it another way, the question is whether Harris Farm, as the second interest holder, has a "better equity" than Woolworths, as the first interest holder: where the equities are equal, the first in time must prevail. [37]

[19]

Postponing Conduct

In determining whether Harris Farm has a better equity than Woolworths, all of the circumstances in which their respective interests were acquired must be explored. In equity, merit consists in those matters that impinge on the conscience of those who seek its aid or are otherwise subject to its jurisdiction. Accordingly, priority is to be resolved against the holder of the prior interest only if the later party can establish the first holder's want of merit or comparative lack of merit. That will require an inquiry into the behaviour on the part of both claimants as to whether the interest of a claimant can be shown to have been obtained or enforced in a manner that is unconscionable or inequitable, so as to deprive the holder of the earlier interest of the priority to which it would otherwise be afforded. That behaviour might consist of fraud, unfairness, negligence, wrongful creation of assumptions and the like. [38]
Harris Farm did not have actual or constructive knowledge of the first right of refusal granted to Woolworths under cl 2.5 of the Deed of Agreement. Harris Farm conducted a range of suitable inquiries in relation to the Lease. Clearly enough, there is nothing in the Lease itself to give any hint of the existence of the right granted by cl 2.5 of the Deed of Agreement. Mr Angus Harris, the Chief Executive Officer of Harris Farm, reviewed the Lease and twice asked Mr Green, the Chairman of Directors of About Life whether there were any restrictions on About Life selling its interest in the Subject Premises to Harris Farm. He was assured on both occasions that there were no restrictions. Those assurances were passed onto the solicitors acting for Harris Farm. The question, of course, is not concerned with the conduct of Harris Farm, but with the conduct of Woolworths.
Harris Farm claims to have the better equity in relation to the Lease on two bases. The first is that Woolworths' interest was obtained in connection with its breach of the Enforceable Undertaking. That, it says, was an inequity that had immediate and necessary relation to the interest that Woolworths now seeks to assert. [39] The second basis advanced on behalf of Harris Farm is that Woolworths armed About Life with the indicia of title to the Lease and failed to take steps that were available to put a potential assignee of the Lease on notice of the right granted by cl 2.5 of the Deed of Agreement.

[20]

The Enforceable Undertaking

Harris Farm contends that any interest that Woolworths has arose from the very type of clause that it had undertaken to the Commission not to include in an agreement to which it was a party. On the other hand, there was no suggestion that Harris Farm's interest arose from any such iniquitous conduct. Therefore, Harris Farm says, it has the better equity and the circumstances concerning the Enforceable Undertaking give good cause for this Court not to grant discretionary relief to Woolworths in relation to its claimed interest. Harris Farm also contends that, even if a breach or contravention of the Enforceable Undertaking did not lead to voidness or invalidity of cl 2.5, it would be sufficient to deny Woolworths' entitlement to discretionary equitable relief. That basis of postponement, however, falls away if cl 2.5 of the Deed of Agreement did not involve a contravention or breach of the Enforceable Undertaking.
Further, that consequence would not follow unless the breach of the Enforceable Undertaking contributed in some way to Harris Farm's entering into the Sale Contract. Harris Farm contends that it entered into the Sale Contract on the assumption that About Life was not breaching an obligation to a third party by doing so. If that assumption were induced by Woolworths, as Harris Farm contends, there may be postponing conduct. However, there is no causal relationship between a breach of the Enforceable Undertaking and Harris Farm's decision to enter into the Sale Contract.
The focus must be on the position of the earlier interest holder and, in particular, whether that interest holder has contributed to the later interest holder acquiring its interest without notice of the earlier interest. The question is whether, if cl 2.5 constituted a breach of the Enforceable Undertaking, the breach in any way facilitated the creation of Harris Farm's interest or led Harris Farm into acquiring its interest without notice of the earlier interest of Woolworths.
The breach by an earlier interest holder of an obligation it owes to a third party is not a basis for postponing the earlier interest to the later one. The question of whether the Enforceable Undertaking should be the subject of a court order is a matter for, first, the Commission, and then the Federal Court. It is not a matter for this Court, assuming that there was no consequence of voidness or unenforceability of cl 2.5 by reason of the breach. The fact that the breach may provide a basis for legal action by a third party, such as the Commission, does not affect the question of what is fair as between the earlier interest holder and the later interest holder. [40] The conduct or behaviour of the interest holder must have in some way contributed to the assumption on which the subsequent interest holder acted when acquiring its interest. Breach of the Enforceable Undertaking would not constitute postponing conduct.

[21]

Indicia of Title

Harris Farm asserts that Woolworths could have taken steps to ensure that the interest created by cl 2.5 of the Deed of Agreement could have been protected by lodging a caveat against any dealing affecting that interest. Alternatively, it says, Woolworths could have taken steps to ensure that the right granted by cl 2.5 was referred to in some way in the Lease by, for example, insisting upon a term in the Deed of Agreement that required About Life not to enter into a lease with the Council that did not make reference to the right conferred by cl 2.5. Harris Farm says that Woolworths could have suggested to About Life that the Lease be drafted in a way that required notice to be given to Woolworths before any assignment of the Lease could be effected.
Harris Farm asserts that no explanation has been given as to why Woolworths took none of those steps. It says that the way in which the transaction evidenced by the Deed of Agreement was structured contributed to the assumption upon which Harris Farm acted when entering into the Sale Contract, that there was no restriction imposed on About Life preventing it from entering into the Sale Contract insofar as it entailed the assignment of the Lease. Thus, Harris Farm asserts that it was reasonably foreseeable by Woolworths that About Life could act in breach of the right conferred by cl 2.5 by entering into an agreement to assign the Lease to a third party, or otherwise deal with the Lease, without first offering to Woolworths the right of refusal to take such an assignment or enter such a dealing.
Further, Harris Farm says, it was reasonably foreseeable by Woolworths that a third party would assume, from the face of the public record, including the Lease, which was registered under the Real Property Act 1900 (NSW), that there was no restraint such as the first right of refusal reportedly granted by cl 2.5. [41] Harris Farm contends that, since Woolworths chose to structure its transaction with About Life in a manner that gave rise to that foreseeable risk, it should suffer the consequences of that risk eventuating and not the innocent third party, Harris Farm. Those circumstances, Harris Farm asserts, make Harris Farm's "equity" better than Woolworths' "equity".
Woolworths denies that there has been any behaviour or conduct on its part that could result in the postponement of its rights under cl 2.5 to the rights of Harris Farm under the Sale Contract. It says that there is no basis for assuming that, had Woolworths sought to include in the Deed of Agreement the kinds of provisions referred to by Harris Farm, About Life and the Council would have accepted those terms. The contention also assumes that a reasonably prudent assignor in the position of Woolworths, in negotiating the Deed of Agreement, would have sought to include such terms. There was no evidence that such a practice existed. There is no basis for making an assumption from the terms of the Lease that, because no reference is made to a right such as that granted by cl 2.5, that no such right existed. There was no suggestion that it is the general practice of competent persons in the position of Woolworths, or its solicitors, to seek the inclusion of such terms.
Further, Woolworths says, there is no basis for concluding that Woolworths should reasonably have foreseen that About Life would act in breach of the provisions of cl 2.5. There is no general rule that obliges one to assume that every person with whom one deals "is likely to be a knave". [42] There was nothing to suggest to Woolworths that About Life would not abide by the promise that it made in cl 2.5.
The Lease did not constitute a representation that there was no other contractual arrangement restraining the ability of About Life to assign the Lease. It is for that reason that it is common practice for warranties to be obtained from a vendor. Thus, the Sale Contract contained promises, in cl 10, that, to the best of the knowledge of About Life, About Life had full authority and capacity to enter into the Sale Contract and sell the business, that About Life had absolute title to the business and that the business and the Lease were not subject to any charge, encumbrance or other liability or security. As indicated above, the sale of the business carried with it the benefit of an assignment of the Lease. The fact that such promises are, as a matter of course, contained in agreements like the Sale Contract confirms that the Lease, of itself, does not constitute a representation that no right such as that granted by cl 2.5 exists. The fact that Mr Harris made inquiries of Mr Green confirms that he was not relying upon the absence of any reference to cl 2.5 in the Lease.
The failure by Woolworths to take steps of the kind suggested by Harris Farm did not constitute conduct that would postpone Woolworths' prior rights in relation to the Lease to Harris Farm's subsequent rights in relation to the Lease. To the extent that Woolworths acquired enforceable rights in relation to the Lease, those rights take priority over those of Harris Farm.

[22]

Priority

Priority should be determined according to when value is given. Woolworths gave value for the right granted by cl 2.5 of the Deed of Agreement when it entered into the Deed of Variation and performed its obligations under cl 2.3 of the Deed of Agreement. Clause 2.2 of the Deed of Variation provided for the variation of the Development Deed to provide that the Council was no longer required to grant to Woolworths a lease of the Subject Premises. The effect was that the Council was then free to enter into the Deed of Agreement for lease with About Life on 16 May 2014. Under cl 2.3 of the Deed of Agreement, Woolworths promised to do all things reasonably required by the Council in considering About Life's request to lease the Subject Premises.
On the other hand, the Sale Contract is still fully executory, except insofar as Harris Farm has paid the deposit to the stakeholder and the parties have taken steps to satisfy the condition precedent of obtaining the Council's consent to the assignment of the Lease. At this stage, while it has paid the deposit, Harris Farm has not yet finally parted with the deposit, which is held by the stakeholder, and it has not paid the balance of the purchase price.
Thus, cl 2.1 of the Sale Contract provided that Harris Farm must pay the deposit to About Life's solicitor, Maddocks, as stakeholder on the making of the contract. Clause 20.3 provided that, on completion, About Life must cause the legal title to the business to pass to Harris Farm and, clause 20.5 provided that Harris Farm must pay the price, less any deposit paid, as well as take over the burden and benefit of the continuing agreements listed and indemnify About Life against any liability under those agreements arising after completion. Under cl 20.7, Harris Farm is required, on completion, to give to About Life an order signed by Harris Farm authorising the deposit holder to account to About Life for the deposit. Under cl 20.8, the deposit belongs to About Life on completion.
If the Sale Contract were to be terminated by reason of the failure of About Life to perform, the deposit would be returned to Harris Farm. It is only on completion of the Sale Contract, when About Life gives title to Harris Farm in exchange for the payment of the balance of the purchase price of $9 million that the deposit would become the property of About Life.
If the Sale Contract is not completed, Harris Farm will lose the benefit of the bargain that it made with About Life. It may therefore have a claim for damages against About Life, although that claim would be an unsecured claim. That is part of the relief that it seeks in the cross-claim against About Life. The determination of that claim has been deferred pending the resolution of the principal dispute between Harris Farm and Woolworths. However, the Sale Contract remains relevantly executory.
If About Life were to be restrained from completing the Sale Contract, the deposit would be returned to Harris Farm. So long as the Sale Contract is on foot and it remains executory, the deposit belongs to Harris Farm, subject to any lien that About Life may have against the possibility that Harris Farm defaults in the performance of its obligations under the Sale Contract. However, where the Sale Contract is not performed by reason of default on the part of About Life, as seller, the deposit remains the property of Harris Farm.
I consider that, in the present circumstances, the equities as between Woolworths and Harris Farm are equal. That is to say, neither has acted unconscionably or inequitably and neither has been guilty of fraud, unfairness, negligence or wrongful creation of assumptions. However, Woolworths has parted with the benefit of the right to have the Lease granted to it by the Council in consideration for, amongst other things, the promise by About Life contained in cl 2.5 of the Deed of Agreement. Harris Farm, on the other hand, has not yet parted with the price that was to be payable by it under the Sale Contract. It may well be entitled to damages from About Life for the loss of its bargain. Whether it is and whether About Life would be in a position to meet any judgment is not an issue in the proceedings. I consider that, in the circumstances, the rights of Woolworths in relation to the Lease under cl 2.5 of the Deed of Agreement take priority over the rights of Harris Farm in relation to the Lease under the Sale Contract.

[24]

Endnotes

See Macquarie Dictionary.
See Oxford English Dictionary online.
See Thorby v Goldberg (1964) 112 CLR 597 at 607; [1964] HCA 41.
See Booker Industries v Wilson Parking (Qld) (1982) 149 CLR 600; [1982] HCA 53.
See Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [61]-[63].
See Hall v Busst (1960) 104 CLR 206; [1960] HCA 84.
See Goldus Pty Ltd v Australian Mining Pty Ltd [2015] SASC 32.
See Transfield Properties (Kent St) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321 at 336.
See Witham v Witham [2000] WASC 236 at [109]; Woodroffe v Box (1954) 92 CLR 245 at 251; [1954] HCA 22.
See Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510; Transfield Properties (Kent St) v Amos Aked Swift (1994) 36 NSWLR 321; THL Robina Pty Ltd v The Glades Golf Club Pty Ltd [2005] 2 Qd R 186; [2004] QSC 461; Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; [1993] HCA 45; Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149; [2004] NSWSC 512; Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365; Woodroffe v Box (1954) 92 CLR 245; [1954] HCA 22; Esso Australia Ltd v Air Ride Transportation Pty Ltd, John Holmes, Ken Stevenson And Mobil Oil Australia Ltd (Supreme Court (Vic), Marks J, 28 September 1988, unrep); John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334; [2004] SASC 128; Walker Corporation Pty Ltd v WR Pateman Pty Ltd (1990) 20 NSWLR 624; Warren v Lawton (No 3) [2016] WASC 285.
See Mackay v Wilson (1947) 47 SR (NSW) 315 at 324-325; Woodroffe v Box (1954) 92 CLR 245; [1954] HCA 22 at 257.
See Manchester Ship Canal Company v Manchester Racecourse Company [1901] 2 Ch 37 at 46-47.
See Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]; [2015] HCA 37.
See Upper Hunter County DC v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 436-437; [1968] HCA 8.
See Gnych v Polish Club Ltd (2015) 255 CLR 414 at [35]; [2015] HCA 23.
See SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [34]; [2006] HCA 31.
See Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169 at [18]-[19].
See Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at [23]; [2012] HCA 7.
See Gnych v Polish Club Ltd at [36] and [54].
See SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; [2006] HCA 31.
See Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 429; [1978] HCA 42.
See Gnych v Polish Club Ltd at [37].
See ACCC v Signature Security Group Pty Ltd [2003] FCA 2 at [41].
See Gnych v Polish Club Ltd at [75] and [76].
See Hall v Busst (1960) 104 CLR 206 at 218; [1960] HCA 84.
See Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 82 NSWLR 665 at [214] and [218]; [2011] NSWCA 396.
See John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334 at [122]; [2004] SASC 128.
See Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327.
See Mackay v Wilson (1947) SR (NSW) 315 at 325; Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149 at [41]; [2004] NSWSC 512.
See Pritchard v Briggs [1980] Ch 338 at 418 and 423; Sahade v BP Australia Pty Ltd at [41]-[46].
Harris Farm relies on Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510 at 522-526, referring to Mackay v Wilson (1947) 47 SR (NSW) 315 at 325; Woodroffe v Box (1954) 92 CLR 245 at 254; [1954] HCA 22; Walker Corporation Pty Ltd v WR Pateman Pty Ltd (1990) 20 NSWLR 624 at 630.
Citing Sahade v BP Australia Pty Ltd at [41]; Rasch Nominees Pty Ltd v Bartholomaeus (2012) 114 SASR 448 at [45]; [2012] SASC 70.
See Motor Works Limited v Westminster Auto Services Limited [1997] 1 NZLR 762 at 765.
See Octra Nominees Pty Ltd v Chipper [2007] FCAFC 92 at [56].
See Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365 at 372.
See Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [52]-[54]; [2003] HCA 57.
See Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265 at 276; 1965] HCA 17; Australian Capital Finance Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99 at [229]-[231].
See Australian Capital Finance Management Pty Ltd v Linfield Developments Pty Ltd at [176]; Moffett v Dillon [1999] 2 VR 480 at [77]; [1999] VSCA 32.
See Carantinos v Magafas [2008] NSWCA 304 at [58].
See Lapin v Abigail (1930) 44 CLR 166 at 204; [1930] HCA 6.
See Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 342; [1983] HCA 30; Lapin v Abigail (1930) 44 CLR 166 at 204; [1930] HCA 6; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 554-555; [1971] HCA 57.
See Heid v Reliance Finance Corporation Pty Ltd at 343. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 August 2017

Parties

Applicant/Plaintiff:

Woolworths Limited

Respondent/Defendant:

About Life Pty Ltd

Legislation Cited (5)

Pt IV Personal Property Securities Act 2009(Cth)

Trade Practices Act 1974(Cth)

Competition and Consumer Act 2010(Cth)

Real Property Act 1900(NSW)

Personal Property Securities Act 2009(Cth)

Cases Cited (54)

Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; [1993] HCA 45 Octra Nominees Pty Ltd v Chipper [2007] FCAFC 92 Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365 Pritchard v Briggs [1980] Ch 338 Rasch Nominees Pty Ltd v Bartholomaeus (2012) 114 SASR 448; [2012] SASC 70 Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149; [2004] NSWSC 512 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; [2006] HCA 31 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 THL Robina Pty Ltd v The Glades Golf Club Pty Ltd [2005] 2 Qd R 186; [2004] QSC 461 Thorby v Goldberg (1964) 112 CLR 597; [1964] HCA 41 Transfield Properties (Kent St) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321 Upper Hunter County DC v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429; [1968] HCA 8 Walker Corporation Pty Ltd v WR Pateman Pty Ltd (1990) 20 NSWLR 624 Warren v Lawton (No 3) [2016] WASC 285 Witham v Witham [2000] WASC 236 Woodroffe v Box (1954) 92 CLR 245; [1954] HCA 22 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; [1978] HCA 42 Texts Cited: Nil Category: Principal judgment Parties: Woolworths Limited (Plaintiff) About Life Pty Ltd (First Defendant) Harris Farm Markets Double Bay Pty Ltd (Second Defendant) Council of the Municipality of Woollahra t/as Woollahra Municipal Council (Third Defendant) Representation: Counsel: M Darke SC with Z Heger (Plaintiff) T A Atkins (First Defendant) P M Wood, B K Lim, T E O'Brien (Second Defendant)

[2015] SASC 32

[2004] SASC 128

[1999] VSCA 32

[2015] HCA 37

[2012] SASC 70

[2004] QSC 461

[2016] WASC 285

[2000] WASC 236

(1995) 36 NSWLR 510

(2011) 82 NSWLR 665

(1982) 149 CLR 600

(2012) 246 CLR 498