Keswick Developments Pty Ltd v Kevroy Pty Ltd
[2011] QSC 190
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- Unreported Judgment
- Appeal Determined - Special Leave Refused (HCA)
- Keswick Developments Pty Ltd v Kevroy Pty Ltd[2011] QSC 190
- Add to List
Keswick Developments Pty Ltd v Kevroy Pty Ltd[2011] QSC 190
Keswick Developments Pty Ltd v Kevroy Pty Ltd[2011] QSC 190
SUPREME COURT OF QUEENSLAND
CITATION: | Keswick Developments Pty Ltd & Anor v Kevroy Pty Ltd & Ors [2011] QSC 190 |
PARTIES: | KESWICK DEVELOPMENTS PTY LTD ACN 129 203 363 QUEENSLAND MARINA DEVELOPMENTS PTY LTD v KEVROY PTY LTD ACN 076 485 115 KESWICK ISLAND PTY LTD ACN 009 998 841 VINCENT HARLEY ALEXANDER KESWICK ISLAND HOLDINGS PTY LTD ACN 010 442 175 JTM (QLD) PTY LTD ACN 104 530 118 CONNIE BAY DEVELOPMENTS PTY LTD JAMIE PAUL BROWN (AKA JAIME PAUL BROWN) DARRYL KEITH SYMONS |
FILE NO/S: | BS 12924/08 |
DIVISION: | Trial Division |
PROCEEDING: | Claim |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 27 June 2011 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 31 March 2011 |
JUDGE: | McMurdo J |
ORDER: |
|
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – APPLICATION TO LEASES – where the second defendant held a head lease from the Crown – where the second defendant granted a sublease to the sixth defendant – where the second defendant assigned the head lease to the first plaintiff – where three put and call options over the shares in the sixth defendant were entered into between the first plaintiff and the fourth defendant – where two of the put and call options had been exercised resulting in share sale contracts – whether the sixth defendant repudiated its obligations under the sublease – whether the first plaintiff was entitled to terminate the sublease for repudiation – whether the first plaintiff terminated the sublease by registering a document under s 339 of the Land Act 1994 (Qld) – whether the sixth defendant had accepted repudiation by the first plaintiff – whether the first plaintiff was entitled to terminate the share sale contracts Land Act 1994 (Qld), s 339 Property Law Act 1974 (Qld), s 124 Beard v Wratislaw [1993] 2 Qd R 494, cited Breskvar v Wall (1971) 126 CLR 376, cited Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394, cited Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, applied Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, cited Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447, cited Mersey Steel and Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434, cited Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, applied Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60, cited Shevill v Builders Licensing Board (1982) 149 CLR 620, cited Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245,cited |
COUNSEL: | FL Harrison QC with C Wilson for the plaintiff R Bain QC with K Kelso for the second, third, fourth and sixth defendants No appearance by the first, fifth or seventh defendants The eight defendant appeared on his own behalf |
SOLICITORS: | Kelly Legal for the plaintiff Michael Drummond Lawyer for the second, third, fourth and sixth defendants No appearance by the first, fifth or seventh defendants The eight defendant appeared on his own behalf |
- This judgment determines certain questions which were the subject of a separate trial. Those questions are determined between the first plaintiff and the second, third, fourth and sixth defendants.
- The first plaintiff, which I will call ‘KD’, holds a lease from the Crown over much of Keswick Island, which is situated off Mackay. That lease, which was granted originally to the second defendant, is for a term of 100 years ending on 15 February 2096. KD purchased the lease from the second defendant under a contract which was completed in early 2008.
- By then, subleases had been granted by the second defendant over some of the area held by it. Most relevantly here, there was a sublease granted to the sixth defendant, Connie Bay Developments Pty Ltd, which I will call ‘CBD’. It was granted for a term commencing on 1 July 2004 and ending on 14 February 2096. The land originally subleased comprised lots 1 and 5 on SP 153788 and lot 3 on CP 888692. However, lot 5 was removed by a partial surrender which was registered on 18 March 2008. The surrender was a requirement of the Minister administering the Land Act 1994 (Qld) in granting consent to the transfer of the head lease to KD. It appears to be common ground that the terms of the original sublease otherwise continued to apply. I will refer to it as ‘the Sublease’.
- Another part of the same transaction involved the grant of put and call options over the shares in CBD. The evident intent was to have KD purchase all of the shares in CBD, so that it could gain effective control of that part of the island which was subject to the Sublease. The shares were and are held by the fourth defendant, which I will call ‘Holdings’. There were three relevant contracts, each in the form of a deed relating to one-third of the shares in CBD and providing for a call option, under which KD could elect to purchase the parcel of shares, and a put option, under which Holdings could elect to sell the parcel to KD. The agreed price for each (one-third) parcel was $3 million. Under the first deed, the date by which either option had to be exercised was 15 July 2009. Under the second deed, that date was 15 July 2010 and under the third deed it is 15 July 2011. The option deeds are otherwise in relevantly the same terms.
- On 6 July 2009, Holdings exercised its (first) put option. According to each deed,[1] KD was then to deliver to Holdings two copies of a contract of sale, duly executed by KD. Holdings was then to execute both copies within three business days of receiving them. An agreed form of contract of sale was annexed to the option deed. It provided for a “Completion Date” as “thirty-three (33) days from the date of this Contract”. The date of the sale contract was deemed to be the date of the exercise of the call or put option as the case may be. KD signed sale contracts as required but they were not signed, or at least not signed and returned, by Holdings. Nevertheless, it is apparently common ground that a contract for the sale by Holdings to KD of a one-third parcel of shares in CBD was formed on 6 July 2009 in consequence of the exercise of the put option. The sale contract has not been performed: the shares have not been transferred and nothing has been paid for them.
- On 12 July 2010, KD exercised its call option under the second option deed and forwarded two copies of a contract of sale executed by it. On 29 July 2010, the solicitor for Holdings emailed KD’s solicitor, saying that his client had signed these agreements and that KD’s copy would be returned, which it was under cover of a letter of 6 August 2010. Again, it appears to be common ground that a sale contract was concluded upon the exercise of that second option. But again the sale contract has not been performed.
- The completion of each of these contracts for the sale of shares in CBD has been complicated by another sublease, which became binding upon KD as the assignee of the head lease. That is a sublease granted by the second defendant to Kevroy Pty Ltd, which was the first defendant in these proceedings. Under the contract by which KD acquired the head lease, there was a warranty by the second defendant as to the extent to which the head lease was affected by subleases and other interests. The relevant lease to Kevroy Pty Ltd was not disclosed in the contract and in an earlier judgment, I held that the second defendant was in breach of that warranty.[2]
- The breach of warranty had consequences for Holdings, particularly in the event that any of the options in relation to CBD shares was exercised. By a deed, dated simply 2009, between KD, the second defendant and Holdings, it was agreed that KD could “offset its loss and damage [for breach of warranty] against moneys it owes to [Holdings] under the Put and Call Option agreements …”. By another deed between the same parties, it was agreed that in the event that KD suffered any loss and damage as a consequence of that breach of warranty (amongst others), then KD would be entitled to retain “the value of such loss and damage from the moneys due to be paid by [KD] to [Holdings] under the contracts to be entered into pursuant to the … [CBD] Put and Call Options”. In an earlier hearing I was asked to declare that KD was not obliged to pay to Holdings any part of the purchase price under a contract for the purchase of CBD’s shares “until after the amount of such compensation … has been determined by adjudication or agreement”. I declined to make that declaration, concluding that upon the agreed date for completion of any contract from the exercise of an option over the CBD shares, KD was obliged to complete notwithstanding that its damages had not been fixed by adjudication or agreement and that it was entitled to set off only an amount which had been by then so fixed.[3] In that respect, I was in error. Upon appeal, in November 2009 the Court of Appeal declared that “…on the completion of each contract of sale of shares … (the Share Sale Contracts) under Put and Call Options over those shares … [KD] may retain the value of its loss and damage … by way of offset against the amounts payable to [Holdings] under the Share Sale Contracts, notwithstanding that that value may not have been agreed, or determined by a court of competent jurisdiction, before the date for payment of the price for the shares”.[4] The case was held to be analogous to a purchaser claiming an abatement of the purchase price, so that “…it would fall to the purchaser to make the relevant estimate and tender on that basis” and that “[w]ere the vendor to reject the tender, then its adequacy would fall to be assessed by the court in the course of any consequent proceedings for a decree for specific performance…”.[5] By that stage, the first option had been exercised. But no amount has been tendered by KD for that first parcel of shares. Nor has any amount been tendered for the second parcel. There are at least two explanations for that. One is that KD claims to have suffered damage to the extent of $21.1 million, well exceeding the $6 million as the agreed price for two-thirds of the CBD shares. The second is that KD claims that it is not obliged to complete those sale contracts, or any contract which might arise from the exercise of the third option, because of what it claims has occurred in relation to the (CBD) Sublease.
- KD claims that CBD repudiated its obligations under the Sublease, entitling KD to terminate the Sublease which it says it duly did in May 2010. I directed that the issue of the alleged repudiation and certain other related issues, together with the consequential claims for relief within paragraph 45(dc) of the Statement of Claim and in paragraph 4 of the Amended Claim, be decided separately.[6] The relief there sought is a declaration that KD is entitled to terminate the sale contracts from the exercise of the first and second options and any sale contract which would otherwise be made from the exercise of the third option.
- According to the form of contract of sale attached to each option deed, Holdings gave warranties to KD to the effect that statements set out in a schedule to the contract were “true, complete and accurate” and would be so “…both at the date of this Contract and at the Completion Date”.[7] It was provided that should that not be the case, KD could terminate the contract.[8] Amongst the matters warranted to be true was that the Sublease “…is a valid, legal and binding obligation in accordance with its terms” with which CBD had duly complied and that “[n]o event has occurred which may be grounds for termination of the lease”.[9]
- KD argued that by any one of three ways, the Sublease was now at an end. Firstly, it had been duly terminated by KD for CBD’s alleged repudiation, or alternatively for its alleged breach. Secondly, it argued that the registration of a document under the Land Act 1994 (Qld), which had been lodged by it and purported to record the Sublease, had the effect of determining the lease according to s 339(2) of the Act. Thirdly, it argued that if its own purported termination of the Sublease was ineffective, then it was a repudiation which CBD had accepted, by CBD’s counterclaiming for damages for loss of the Sublease. Each of those arguments is disputed by the defendants.
The Sublease
- By cl 2.4 of the Sublease, the rent was to be an amount representing a certain proportion of that paid under the head lease. But that was subject to the proviso that while CBD was the sublessee, the rent was to be $1.00 per annum, payable on demand.
- Nevertheless, CBD was obliged to pay substantial sums for outgoings and rates. It is necessary to set out these provisions in full:
“Outgoings
2.5The Outgoings are calculated using this formula:
O= 3 x(SLO – CAO)
TRL
where:
CAO=the total amount of Charges and Taxes recoverable by us for the Head Lease Year under leases of non-residential lots on the Island.
O=the annual Outgoings payable under this sub-lease.
SLO=the total of the Charges and Taxes payable by us for the Head Lease Year which includes that Rent Payment Date.
TRL=the total number of residential lots on the Island as at the last preceding Rent Payment Date.
However, you do not have to pay Outgoings to the extent that the relevant costs are recovered from you through the Association. For example, if you pay levies to cover costs payable by the Association for the provision of Declared Facilities, then your share of these costs will not be recovered from you as Outgoings.
…
Rates
2.9You acknowledge that Rates may be assessed directly on the Property, in which case all Rates assessed are payable by you, or on a larger area such as the Island, in which case you must pay us a contribution to the Rates. The way Rates are assessed may change during the Term.
2.10If Rates are assessed in respect of the Property only, you must:
(a)pay these to the assessing authority (if the assessing authority has sent the invoice to you); or
(b)pay these to us (if the assessing authority has sent the invoice to us),
within seven days of receiving an invoice.
2.11If Rates are assessed in respect of any area other than the Property only, you must pay us a Rates contribution within seven days of receiving an invoice. Your Rates contribution will be calculated using this formula:
RC=358 xR
TRL
where:
RC=your Rate contribution
R=the amount of the Rates assessed
TRL=1,000, or where the total number of residential lots on the Island as at the last preceding Rent Payment Date exceeds 1,000, then, that total number.
…
Estimates and Adjustments
2.15We may give you an estimate notice stating our reasonable estimate of the Rent and/or Outgoings payable for any year of the Term. You must pay the estimated amounts to us on the relevant Rent Payment Date. We must notify you of the actual amounts of Rent and Outgoings promptly after we ascertain these.
2.16If we have not calculated the Rent or Outgoings for a particular year of the Term, and we have not given you an estimate notice under clause 2.15, you must continue to pay us Rent or Outgoings for the previous year of the Term, until we notify you of the changed Rent or Outgoings.
2.17When we notify you of the changed Rent or Outgoings, an appropriate adjustment of the Rent and Outgoings must be made within 28 days so that we have received and you have paid the correct Rent and Outgoings for that year of the Term. You must pay us any amount of Rent or Outgoings owing to us, in the same way the Rent or Outgoings must be paid. We may choose to pay or credit you for any amount of Rent or Outgoings owing by us.”
- KD claims that CBD repudiated the Sublease by its response (or non-response) to KD’s demands for rent, outgoings and rates. It also claims that the repudiation was manifested by CBD’s breach of the Sublease’s requirement for insurance, which was as follows:
“Insurance
4.1You must have:
- the insurance required by law in respect of all persons employed in connection with the construction carried out on the Property (for example, WorkCover); and
- public liability insurance cover of ten million dollars ($I0,000,000) minimum; and
- contractors all risk policies for the construction work to be carried out on the Property to the value of the construction work; and
- any other insurances required by law or reasonably required by us,
with an insurer reasonably satisfactory to us.
4.2You must comply with all policy terms and give evidence of the policies to us on demand.
4.3You must not do anything that may affect our or the Association’s rights under any insurance policy.”
KD says that CBD failed to effect or maintain the required cover as well as failing to provide evidence of any policy as KD had demanded.
Remedies for breach of the Sublease
- KD’s principal argument is that it became entitled to terminate the Sublease by CBD’s repudiation, rather than by its breach of any of these covenants. That is explained by the terms of cl 8 of the Sublease, which prescribes the consequences of such a breach and which effectively precludes a termination by the sublessor for such a default. Again it is necessary to set out the clause in full:
“8Default and sale
Default by You
8.1An event of default (‘Event of Default’) occurs if you do not comply with an obligation under this sub-lease, and, if the non-compliance can be remedied, the non-compliance is not remedied within 28 days (or any longer time which we consider reasonable) after we give you a written notice to remedy it.
8.2You must ensure that no Event of Default occurs.
8.3We may enter into possession of the Property after giving any notice required by law, if an Event of Default occurs. Our rights are limited to our rights under this clause if an Event of Default occurs.
8.4We and you agree that entry into possession by us under clause 9.3 does not terminate this sub-lease.
8.5The acceptance of money under this sub-lease by us is not a waiver of a preceding breach or an acceptance of a repudiation by you. Any attempt by us to mitigate our loss is not a surrender by operation of law, waiver of your breach nor an acceptance of your repudiation of this sub-lease.
8.6We must promptly give notice to any registered mortgagee who (if human) has a place of residence in Australia, or who (if a body corporate) has a registered office in Australia, that we have entered into possession of the Property.
8.7If any registered mortgagee does not:
(a)cause the Event of Default to he remedied; or
(b)exercise any rights it may have under its registered mortgage,
then we may sell this sub-lease as attorney for you and procure the discharge of any registered mortgage of this sub-lease, no earlier than 42 days after the later of:
(c)the date of entry into possession of the Property by us under this clause; or
(d)if we must give a notice to a registered mortgagee under this clause, the date when that notice is given.
8.8We must take reasonable care to ensure that the sub-lease is sold for the market value.
8.9We must pay you the proceeds of sale within 7 days of the Sale Date. The ‘proceeds of sale’ means the consideration received from the sale minus (in this order):
(a)our costs, charges and expenses in connection with the sale, including, without limitation, government charges; and
(b)any money due to us under this sub-lease; and
(c)any money paid to the registered mortgagee of the sub-lease.
8.10If we validly sell this sub-lease:
(a)your liability for damages for not complying with the sub-lease is not affected; and
(b)you must compensate us for Rent and Outgoings and any other amounts that would have been payable if we had not exercised our rights under this clause; and
(c)you must immediately remove all of your property from the Property and leave the Property in the condition required under this sub-lease.
8.11If we enter into possession of the Property under this clause, then you indemnify us against any liability or loss arising from, and any cost incurred, whether before or after we enter into possession, because we will not receive the benefit of you performing your obligations under this sub-lease from the date of the entry into possession until the Expiry Date.”
As the arguments accept, the reference to “clause 9.3” in cl 8.4 is an intended reference to cl 8.3.
- The evident intent of cl 8 was to provide the sublessor with a remedy analogous to a mortgagee’s power of sale, in order to recover money owing under the Sublease. To that end, the sublessor is given a right to enter into possession (cl 8.3). But that was not an entry into possession which terminates the Sublease (cl 8.4).
- Clause 8.3 provided that the sublessor’s rights were limited to those under cl 8 if an “Event of Default” occurred. Accordingly, cl 8 prevented the sublessor terminating the lease for an Event of Default. Consistently with that provision, cl 11.4 provided that “[t]he terms implied in sub-leases because of sections 105, 107, 109 and 112 of the Property Law Act 1974 do not apply to this sub-lease”. Section 107(d) would have given the sublessor implied powers to re-enter and determine the estate of the sublessee for non-payment of rent or some other default.
- A breach of an obligation under the Sublease, if it could be remedied, was not an Event of Default unless that non-compliance remained unremedied for 28 days after a notice to remedy it.[10] A breach which could not be remedied was, without more, an Event of Default. In either of those circumstances, the sale of the sublessee’s interest was the sublessor’s only remedy. It cannot be thought that the sublessor also had the right to terminate the Sublease, but limited to the circumstance of a breach capable of being remedied, which had not been the subject of a notice to remedy. Accordingly, cl 8’s interpretation limits the sublessor’s remedy for any breach of the Sublease to the power of sale, apart from preserving the sublessor’s right to damages for that breach. In any case, each of the breaches upon which KD relies is one with which, if it occurred, was capable of remedy and was not remedied within 28 days of the notices which KD gave. The result is that, by cl 8.3, KD’s rights did not include the right to terminate the Sublease for breach of any of its terms. Accordingly, KD’s case must be one of a termination of the Sublease for a repudiation by CBD, rather than for a breach of its terms.
- Ultimately the defendants conceded that it was open to KD to terminate the Sublease if there had been a repudiation by CBD. Their plea that the right to terminate even for repudiation was ousted by cl 8 of the Sublease was abandoned.[11] The ordinary principles of contract, including that of termination for repudiation, apply to leases: Progressive Mailing House Pty Ltd v Tabali Pty Ltd.[12] As was there recognised, it is open to the parties to a contract to regulate the exercise of the common law right to determine for repudiation or fundamental breach.[13] But in view of the concession by counsel for the defendants, it is unnecessary to consider whether cl 8 of the Sublease should be construed as having that effect.
The repudiation case
- A repudiation may occur when a party to a contract manifests an inability or unwillingness to perform it.[14] The statement of claim does not plead a repudiation KD pleads that only in the reply, where it alleges that there was a repudiation “by the matters alleged in paragraph 34BE [of the statement of claim]”.[15] That paragraph pleads that CBD breached its obligations under cl 2 and cl 4 of the Sublease. The argument for KD was that this was a repudiation, either in the sense of an evinced unwillingness to perform or, in an alternative sense, of a serious breach of non-essential terms of the Sublease.[16] As already discussed, this Sublease was not terminable for a breach itself, however serious. Accordingly, the case is limited to by what is described as a renunciation in the joint judgment in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd.[17] This is “conduct which evinces an unwillingness or an inability to render substantial performance of the contract … [and is] sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations”.[18] In the joint judgment in that case, the test was said to be:
“… whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.”[19]
This was distinguished from a different sense in which the term repudiation has been used, which is as a reference to any breach of contract justifying termination by the other party.[20] Their Honours said of that distinction:
“There may be cases where a failure to perform, even if not a breach of an essential term … manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.”[21]
- Although contractual principles, including the right to terminate a contract for repudiation apply to leases, the application of those principles is affected by the circumstance that it is a lease which is said to have been repudiated. In Progressive Mailing House Pty Ltd, Mason J said:
“Repudiation or fundamental breach of a lease involves considerations which are not present in the case of an ordinary contract. First, the lease vests an estate or interest in land in the lessee and a complex relationship between the parties centres upon that interest in property. Secondly, this relationship has been shaped historically in very large measure by the law of property, though in recent times the relationship has been refined and developed by means of contractual arrangements. Thus, traditionally at common law a breach of a covenant by a lessee, even breach of the covenant to pay rent, conferred no right on the lessor to re-enter unless the lease reserved a right of re-entry (Lane v Dixon (1847) 3 CB 776; [136 ER 311]; Doe d Dixon v Roe (1849) 7 CB 134; [137 ER 55]). And in equity the proviso for re-entry was treated as a security for the payment of the rent (Howard v Fanshawe [1895] 2 Ch 581 at 588; Ezekiel v Orakpo [1977] QB 260 at 268 [1977] QB 260–9), so that on payment of the rent Equity would relieve against the forfeiture (Dendy v Evans [1910] 1 KB 263). The object and effect of s 129 of the Conveyancing Act was to give further protection to the lessee and to preclude forfeiture of his interest in property within the sphere of the section’s operation, except in accordance with its terms.
These incidents of the law of landlord and tenant indicate that mere breaches of covenant on the part of the lessee do not amount to a repudiation or fundamental breach. Indeed, it is of some significance that the instances in which courts have held that a lessee has repudiated his lease are cases in which the lessee has abandoned possession of the leased property. But too much should not be made of this as very few cases of repudiation by lessees have come before the courts. I would therefore specifically reject the appellant’s submission that abandonment of possession is necessary to constitute a case of repudiation by a lessee. On the other hand, it should be acknowledged that it would be rare indeed that facts which fell short of abandonment would properly be seen as constituting repudiation by the lessee in the case of a long lease at a rental which was either nominal or but a fraction of the amount which could be obtained in the market place.”[22]
(emphasis added)
In the present case, there is no suggested abandonment of the Sublease. And this is a very long lease, on terms which, whilst CBD was the sublessee, were favourable to it: the rent was nominal and CBD had to pay only for a share of the outgoings and rates.
- The events relied upon by KD commenced in August 2009. By then KD had been the sublessor for about 17 months. The timing of these events can be related to the broader dispute which by then had developed between the two sides in this case. In particular, the events followed soon after my judgment of 6 July 2009 in relation to the Kevroy sublease issues and the exercise by Holdings on the same day of the first of its put options. As matters then stood, KD had become bound to purchase one-third of the CBD shares, under a contract to be completed within a month or so, by the payment of the price of $3 million without any setoff for what was then KD’s unquantified claim for damages for breach of warranty. Of course, none of that justified any breach by CBD of the Sublease but it is of some relevance in assessing whether CBD’s conduct was repudiatory.
- On 7 August 2009, the solicitors for KD sent two letters to the solicitor for the presently relevant defendants. One enclosed a notice requiring payment of rent, outgoings and rates. The notice which was signed by KD and also dated 7 August 2009, demanded that CBD pay rental of $2.00 (for the two years from 16 February 2008), outgoings of $8,454 and $8,680.65 (respectively for the years commencing 16 February 2008 and 16 February 2009) and rates totalling $51,958.08 for the period from 1 January 2008 to 30 June 2009. The other letter asked for evidence of policies of insurance, pursuant to cl 4.2 of the Sublease.
- On 10 August 2009, the defendants’ solicitor replied that CBD had never received an invoice from KD and that it could not pay moneys said to be owed to KD until it “particularizes same in the proper form (ie tax invoice)”. As to insurance, he wrote that “[CBD] has been covered under Keswick Island Pty Ltd’s umbrella policy for the public liability insurance (evidence of same is being obtained)”.
- On the same day, KD responded with two tax invoices: one totalling $18,848.12 for the outgoings (in the same amounts but with GST added) and the other for $51,960.28, for what had been demanded for rent and rates. At the foot of each invoice was the notation: “Payment must be received strictly 30 days from invoice date”.
- Notwithstanding that notation, on the next day (11 August 2009) KD’s solicitors sent notices to remedy breaches of covenant, purportedly pursuant to s 124 of the Property Law Act 1974 (Qld). One notice required payment of the sum of $18,850.32, for rent and outgoings. Another required payment of the sum of $17,319.36 “as per invoice 84 issued on 10 August 2009”. That was a reference to the tax invoice which had claimed $2.20 for rental and a total of $51,958.08 for rates. Therefore, there was some tension, at least in relation to rates, between the tax invoice and this notice to remedy breach of covenant. A third notice to remedy breach of covenant required the provision of evidence of insurance policies. In each notice, the default was required to be remedied within 28 days.
- On 7 September 2009, which was just within that period of 28 days, the defendants’ solicitor wrote two letters in response to the notices. In the first, he enclosed a copy of a document issued by insurance brokers headed “Confirmation of Cover”. On its face, it was evidence that CBD (and Keswick Island Pty Ltd) were covered by a public liability policy, to a limit of $10 million, for 12 months from 24 August 2009. An insurer was identified and a policy number was given. As is now clear, such a policy did issue but it was later cancelled by the insurer, on or about 9 December 2009, for non-payment of the premium of $6,886.88. After some requests by the broker for payment, Mr McCann, the Chief Financial Officer of CBD, wrote to the broker on 6 December 2009 saying that “we are in the midst of a bit of a dispute with the new head leaseholders of the Island and one of the by products of which is the nature and type of the insurance cover required. I have sort (sic) clarification of the specifics when there was a question about the cover note but since then I have not been able to get a reasonable response. I am in the process of again seeking to sort it out”. That seems to have been untrue, because CBD had made no enquiry as to what insurance was required by KD and indeed there had been no communication by CBD to KD on the matter of insurance after it provided that “Confirmation of Cover” on 7 September 2009. After being told by the broker that the policy would be cancelled from its inception, Mr McCann emailed to say that the broker would have to “let it go” and that “we will come back for a new policy when this is sorted”.
- Returning to 7 September 2009, the other letter from the defendants’ solicitor concerned the claims for rates and outgoings. He argued that the notices to remedy breaches of covenant should be withdrawn, because they required payment within 28 days of 11 August, which was before the expiry of the period for payment according to the notation upon the tax invoices (30 days from 10 August). He also sought particulars of how the amounts demanded for rates and outgoings had been calculated, requesting copies of rates notices and detail of “the Charges and Taxes and other source documents your client has relied on in calculating these Outgoings”.
- On 18 September 2009, the solicitors for KD sent copies of the rate notices for, respectively, the half years to 31 December 2008 and 30 June 2009. Those rates were levied against land which included the premises, the subject of the Sublease. KD had purported to apply cl 2.11 of the Sublease in apportioning a liability to CBD, as was apparent from the notice sent on 7 August 2009. However, no rates notice for a period prior to 1 July 2008 was provided, although rates had been demanded also for the first half of 2008. (A probable explanation was that this notice had not been received by KD, but instead had been received by its predecessor, the second defendant.)
- On 25 September 2009, the solicitors for KD wrote to provide particulars of the outgoings. They did so by reference to documents which were said to contain “…information as to the current outgoings calculations and the budgeted outgoings for July 2009 to June 2010”. But each was in the form of a budget. One was headed “Levy Assessment – Outgoings – July 2009 – June 2010”, showing a budgeted total of $439,425 apparently for the entire area demised under the head lease. The other, which at least as copied to the defendants, did not refer to a specific period. It was headed simply “Levy Assessment – Service Charges”. Against (for the most part) the same items of expenditure specified in the first document, were amounts, in all cases expressed in round figures, under the heading “Budget”. On its face, this document provided no details of the outgoings which had been incurred, except if it was to be inferred that the amounts of actual outgoings had been those which had been anticipated.
- Also on 25 September 2009, KD’s solicitors asked for a copy of the policy referred to in the “Confirmation of Cover”. There was no response to that request.
- There are a further two tax invoices, each dated 5 February 2010, which are said to have been issued by KD to CBD. One claimed a total of $34,639.82, made up of $1.10 for rent for the year commencing 16 February 2010 and $17,319.36 for rates for each of the half years commencing 1 July 2009 and 1 January 2010. The second invoice claimed $9,548.72 for outgoings for the year commencing 16 February 2010. According to the KD’s witness, Mr Dawson-Damer, those invoices were posted to the registered office of CBD on or about the date that they bear. However, that is disputed by evidence for CBD.[23] These invoices are not pleaded in the statement of claim. I am not persuaded that they were sent.
- On 29 April 2010, KD’s solicitors wrote to CBD’s solicitor referring to the various invoices and notices to which I have referred, including those invoices dated in February 2010, and claiming that CBD by then owed $114,996.94. They wrote that KD could only infer that CBD was “…unable to pay the rent for the foreseeable future” and that it was also unable to pay for the insurance required by the Sublease. There was no reply.
- On 13 May 2010, KD’s solicitors wrote to CBD enclosing a document entitled “Notice of Acceptance of Repudiation and Termination”. That alleged that CBD had repudiated the Sublease as evidenced by its failure to respond to the various invoices, notices and letters to which I have referred, its failure to pay that sum of $114,996.94 and its failure to provide a copy of the insurance policy referred to in the “Confirmation of Cover” document of September 2009. The notice concluded that KD accepted CBD’s repudiation of the Sublease which was thereby terminated.
- Before discussing whether there had been a repudiation by CBD, I will refer to some subsequent events. At about the same time as this purported termination of the Sublease, KD issued a statutory demand for that sum of $114,996.94. On 3 June 2010, the solicitor for CBD emailed KD’s solicitor, asking for confirmation that the statutory demand had been served on 17 May 2010, because, he said, he was instructed to apply to have it set aside. He apparently received no response. An application to set aside the demand was filed on 7 June 2010. However, as was conceded when the application came on for hearing, that was outside the period of 21 days from the true date of service of the demand and, accordingly, the application was dismissed on 23 June 2010. On 1 July 2010, CBD paid in full the amount which had been demanded.
- In the meantime, on 20 May 2010, KD by its solicitors lodged for registration under the Land Act 1994 (Qld) a document described as a “request to record determination of sublease”. The document contained this:
“I hereby request that: Sublease No. 708181009 be determined for common law repudiation and cancelled from the above title in accordance with the attached statutory declaration.”
That declaration, made by a director of KD, annexed copies of the correspondence, notices and invoices to which I have referred and then simply asserted that there had been a repudiation which KD had accepted. The document was recorded in the Register on the same day. However, it was not until 7 June 2010 that CBD or its solicitor were informed of the lodging and registration of the document.
- On 9 June 2010, KD’s solicitors wrote to assert that KD was entitled to terminate the “sale arrangements for the shares in [CBD]” on account of the termination of the Sublease. Nevertheless, as already noted, KD exercised its call option under the second option deed on 12 July 2010, purportedly on the basis that this would not constitute an election by KD by which it would become precluded from terminating the contract of sale (for the second parcel of CBD shares).
- The conduct which post dates the purported termination of the Sublease is not relevant in considering whether there had been a repudiation. The question then is whether the conduct of CBD until 13 May 2010 (or alternatively 20 May 2010 when the document was lodged with the Department of Lands) was such as to convey to a reasonable person, in the situation of KD, renunciation either of the contract as a whole or of a fundamental obligation under it.
- As to the obligation to maintain insurance, this was performed from August to December 2009, after which plainly CBD was in breach. In KD’s argument, there was a particular criticism of CBD’s conduct in this respect, by its representing that it had done all that was necessary to procure that insurance, when at the same time and unknown to KD, it had not paid the premium. There was also criticism of CBD’s failure to disclose that the insurance had been cancelled. They are valid criticisms. CBD was also in breach for not providing a copy of the policy after it was requested on 25 September 2009.
- CBD was in breach of the obligation to contribute towards the rates. There was no apparent basis for declining to pay the proportion of the rates as fixed by cl 2.11. That clause was engaged because rates had been assessed “…in respect of any area other than the Property only…”, which is to say that the rates had been assessed on land which included but was not limited to that which was the subject of the Sublease. However, in favour of CBD, on the question of repudiation rather than breach, were the inconsistencies in the demands and the material which KD was sending to it about rates. This did not excuse CBD’s breach, but the question is whether there is a repudiation. On the face of the correspondence, CBD had sought copies of the relevant notices which was consistent with an intention to perform its contract.
- The position of KD in relation to outgoings is not as strong. As I have said, the particulars provided were of budgets, not particulars of costs actually incurred. KD was entitled to rely upon budgeted outgoings, in so far as it was asking for payment for a period which had just commenced, because cl 2.1(a) provided that CBD was to pay the rent and outgoings “annually in advance on each Rent Payment Date” (which was 16 February). It seems that no outgoings were demanded until 7 August 2009. The demand was then for two years, the first ending on 15 February 2009. Clause 2.15 of the Sublease provided that KD could give an estimate of rent and/or outgoings payable for any year, but it also obliged KD to notify CBD “of the actual amounts of rent and outgoings promptly after we ascertain these”. There is no explanation in the evidence for the provision of figures which were apparently budgeted rather than actual figures for the year ending 15 February 2009. Clause 2.16 of the Sublease provided that if there had not been a calculation of rent or outgoings for a particular year, CBD was obliged to pay what had been claimed for the preceding year. But there is no evidence that there had been such a claim for the preceding year. It is unlikely that such a claim was made, given that the sublessor and sublessee were then under effectively the same ownership. Accordingly, it is not demonstrated that there was a breach for failure to pay the outgoings at least for the year ending 15 February 2009. As to the outgoings for the following year, KD was obliged by cl 2.15 to notify CBD of the actual figures once they were known. It did not do so, although almost three months passed between the end of that year and the purported termination of the Sublease.
- The rent was a nominal $1.00 per year and the non-payment of this adds nothing to the strength or otherwise of KD’s case.
- Clearly the extent and seriousness of a party’s breach of a contract is relevant in assessing whether it has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with its obligations. CBD’s defaults had more than one possible explanation. One was that it had decided not to make any payments to KD, at least at that time, in the context of the broader dispute between the two sides to this litigation. Another is that those controlling CBD believed that there was no commercial purpose to be served by raising funds to meet these various commitments under the Sublease, if their shares in CBD were then to pass to KD without any commensurate increase in the price for them. Yet another is that which was inferred by KD, according to its solicitors’ letter of 29 April 2010, which was that CBD was then unable to make the required payments. But in all of this, there was nothing written or said by or on behalf of CBD that it would not comply with the terms of the Sublease. To the extent that CBD did respond to the various demands and correspondence, it was in terms which were consistent only with the Sublease remaining on foot and with a purported intention to comply with its terms. And there was no abandonment or threat to abandon the premises.
- In the passage cited above from Progressive Mailing House Pty Ltd v Tabali Pty Ltd, Mason J said that it would be rare indeed that facts which fell short of abandonment would properly be seen as constituting repudiation by the lessee in a case of a lease such as this. In my conclusion this is not that rare case. One important circumstance here is the critical importance of the Sublease to the operation of the put and call options. CBD was under the same control as Holdings, the interests of which would obviously be put at further risk were the Sublease to be terminated. On an objective view, there was every reason for those who controlled CBD to avoid the termination of the Sublease. This was not a case, such as Marshall v Council of the Shire of Snowy River,[24] where the circumstances had made the lease, if performed according to its terms, commercially unattractive. Here there were compelling commercial reasons to keep it in place. And even apart from the potential operation of the option deeds, there was the fact that, as acknowledged within the terms of the Sublease, CBD had the advantage of paying but a nominal rent rather than what cl 2.4 indicated would have been a reasonable rental between parties at arms length.
- CBD’s conduct in obtaining insurance is evidence of an intention to perform the contract. Its subsequent failure to pay the premium, allowing the policy to lapse, does not evidence a change in intention. Rather, it indicates at least a difficulty in performing the contract at that time, which CBD was not minded to overcome then because it believed that there would be no immediate consequence from its failure to do so. The same may be said of its failure to pay something for rates. On the other hand, little can be made of its conduct in relation to outgoings, in the circumstance of KD’s apparent failure to comply with the Sublease in that respect.
- Given what, on an objective view, was the importance of CBD holding the Sublease, its conduct could not have reasonably conveyed the impression that it wished to give up that interest. Nor had it demonstrated an intention to continue to claim that interest but upon terms substantially different from the covenants in the Sublease. A breach of the lease, whether serious or not, does not of itself constitute repudiation. As Wilson J said in Shevill v Builders Licensing Board, “[r]epudiation of a contract is a serious matter and is not to be lightly found or inferred” and that “[i]n considering it, one must look to all the circumstances of the case to see whether the conduct ‘amounts to a renunciation, to an absolute refusal to perform the contract’”.[25] In short, there was no repudiation by renunciation.
- As I have said, there was no alternative argument of a repudiation based upon an inability to perform the obligations under the Sublease, either in the sense of an actual inability or an inability to be inferred from CBD’s conduct. As to the former, there was no attempt to prove CBD’s financial position. As to the second alternative, it was not argued that CBD’s conduct was such as to demonstrate an inability to substantially perform the contract in the required sense. Its conduct provided some evidence of an inability to perform at that time, but it did not demonstrate an inability to make good any default and to perform in the future. In Sunbird Plaza Pty Ltd v Maloney, Mason CJ, with whom Deane, Dawson and Toohey JJ agreed, said that what must be shown was that the party had become “wholly and finally disabled” from performance.[26]
- The outcome is that KD has failed to prove a repudiation by CBD. Accordingly, it has failed to prove that it was entitled to terminate the Sublease, as it purported to do in May 2010.
Land Act 1994 (Qld), s 339
- Section 339 of the Land Act 1994 (Qld) provides as follows:
“339Re-entry by sublessor
(1)If a sublessor under a registered sublease lawfully re-enters and takes possession under the sublease, the sublessor may lodge a request for the chief executive to register the re-entry.
(2)The interest of the sublessee ends on the registration of the request for the re-entry.”
- Paragraph 2(d) of the Reply and Answer to CBD’s Defence and Counterclaim filed 16 December 2010 pleads that the interest of CBD under the Sublease ended on 27 May 2010 on registration of KD’s document lodged with the Department of Lands. That case was only faintly argued[27] but it is necessary to consider it.
- In Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd,[28] I held that the system of registration under the Land Act 1994 (Qld) did not introduce a Torrens system of title. I adopted what had been said by McPherson SPJ, in relation to the Land Act 1962 (Qld), in Beard v Wratislaw which was as follows:
“Nothing like that state of things prevails in relation to leases and transfers of leases under the Land Act. In practice something resembling the same procedure is evidently followed in recording dealings under both systems; but the ‘historical register sheet’ has nothing like the status of the Torrens system register on which, by ss 33 and 44, the Real Property Act confers qualities of conclusiveness and indefeasibility. Under the Land Act particulars of leases under that Act, and of transfers ‘and other dealings therewith’, are by ss 226 and 227 to be recorded in a register or registers; and in the course of these records ‘priority of registration of the dealing’ is to be maintained … Nowhere, however, does the Act ascribe to such registers or the entities in the any of the legal character or consequences of a register or registration under the Torrens system.”[29]
I remain of that view. This is a system of registration of title, not title by registration, to adapt what was said by Barwick CJ in Breskvar v Wall.[30] Ultimately, I did not understand KD’s argument to be otherwise.
What then is the effect to be given to the terms of s 339(2)? That subsection is engaged only where a request is lodged according to s 339(1). That occurs only if a sublessor has lawfully re-entered and taken possession. In this case the Sublease had been purportedly determined. But that termination was not valid. The necessary condition under s 339(1) was not satisfied. In consequence, this was not a document the registration of which could have the effect prescribed by s 339(2). In any case, the evidence far from demonstrates that there was a purported re-entry and taking of possession by KD.
A termination by CBD?
- At the hearing, it was submitted that upon any view, the Sublease had been terminated, because if KD had not been entitled to do so, CBD had terminated the lease by the terms of its Counterclaim filed on 3 December 2010.
- It follows from my conclusion that KD was not entitled to terminate the Sublease, but that KD itself had repudiated, entitling CBD to terminate. The question then is whether CBD should be understood to have done so by the terms of its pleading.
- The difficulty in this argument made by KD is that an election to terminate a contract, or in this instance an acceptance of the other party’s repudiation, must be unequivocal. Paragraph 5 of the Defence denies the allegations in paragraph 34BE of the Statement of Claim, which allege that CBD breached the Sublease. The bases pleaded to justify this denial included the following:
“5.1The Sixth Defendant had not breached its obligations as alleged or at all;
5.2…
5.3…
5.4The Plaintiff is not entitled to terminate the Sub-Lease as alleged or at all. The Plaintiff’s rights (arising from any breach of the Sub-Lease by the Sixth Defendant) are restricted to the Plaintiff entering into possession of the Sub-Lease pursuant to Part 8 of the Sub-Lease;
5.5The Sixth Defendant has not committed an Event of Default as defined in the Sub-Lease. Accordingly the Plaintiff is not entitled to terminate the lease;
5.6Alternatively, if the Sixth Defendant did commit an Event of Default (which is denied) the Plaintiff has not given any notice required by law as required by clause 8.3 of the Sub-Lease and, therefore, is not entitled to terminate the Sub-Lease;
5.7Before the Plaintiff can take any action (including but not limited to termination of the Sub-Lease) against the Sixth Defendant for alleged breach of the Sub-Lease, it must participate in arbitration with the Sixth Defendant (clause 10.3);
5.8As the dispute between the Plaintiff and the Sixth Defendant have not been referred to arbitration in accordance with the terms of the Sub-Lease, the Plaintiff is not entitled to terminate the Sub-Lease as alleged or at all.”
- But then there is the plea in response to paragraphs 34BF, 34BG and 34BH of the Statement of Claim filed 23 December 2010 which are as follows:
“34BF.On 20 May 2010, KD lodged a request to the chief executive to register the re-entry in accordance with s 339 of the Land Act 1994.
34BG.On 27 May 2010, the chief executive duly registered the request to register the re-entry.
34BH.Accordingly, on 27 May 2010, the interest of CBD in the CBD subleased land under the CBD sublease ended.”
- In response CBD pleaded as follows:
“6.The sixth defendant admits the allegations in paragraphs 34BF, 34BG and 34[B]H and says further that for the reasons referred to in the preceding paragraphs the Plaintiff was not entitled to take the steps to re-enter (including registering the re-entry) the Sub-Lease as alleged or at all.”[31]
That paragraph must then be read with the counterclaim for damages which is as follows:
“1.The Sixth Defendant repeats and replies (sic) on the paragraphs of its Defence.
- The First Plaintiff unlawfully terminated the Sub-Lease so as to avoid paying fair and reasonable consideration for the acquisition of the Sub-Lease.
- The Sixth Defendant has suffered loss and damage as a result of the First Plaintiff’s unlawful termination of the Sub-Lease.
Particulars
2.1The Sixth Defendant’s only asset was the Sub-Lease;
2.2The First Plaintiff had entered into a contract to purchase all of the shares in the Sixth Defendant for the sum of $9,000,000.00 for the sole purpose of acquiring the Sub-Lease;
2.3Accordingly, the value of the Sub-Lease was $9,000,000.00;
2.4The First Plaintiff no longer intends purchasing the shares in the Sixth Defendant because it has terminated the Sub-Lease.”
- The counterclaim is for damages for loss of the Sublease, apparently upon the premise that it has been terminated. But that premise is not accepted, or at least consistently accepted, within the Defence. The paragraphs which I have set out above at [54] plead, in the present tense, that KD has no entitlement to terminate the Sublease. They are consistent only with the Sublease being on foot. There is no reference in the Defence or Counterclaim to any entitlement of CBD to then elect to terminate the Sublease. There is a tension between those paragraphs which treat the Sublease as being in existence and the admission of paragraph 34BH. But an election must be clear and unequivocal. During the hearing, counsel applied to withdraw that admission saying that it was pleaded (not by them) by mistake. However, the pleading in the terms in which it was filed must be considered.
- Upon at least one interpretation, the effect of the pleading was to assert that the Sublease was still in existence and that KD was not entitled to terminate it, but to plead also, in the alternative, that the Sublease it had been terminated, CBD was entitled to damages. That was not an unequivocal election to terminate the Sublease. There is no reference in this pleading to any right of CBD to elect. It cannot be understood as being an election to terminate the Sublease in the event that registration of that document had not put paid to the Sublease.
- The result is that the Sublease has not been terminated.
The share sales
- The form of contract to be signed by each party upon the exercise of a put or call option contains a cl 7.1 in these terms:
“7.1Vendor’s Warranties
The Vendor warrants and represents to the Purchaser that each of the statements set out in Schedule 9 is true, complete and accurate and will be true, complete and accurate both at the date of this Contract and at the Completion Date. Should that not be the case, the Purchaser may terminate this Contract by notice in writing to the Vendor.”
The warranties contained in schedule 9 include:
“8.Real Property
(a)…
(b)…
(c)Where the interest of the Company in a property disclosed in Schedule 12 is a leasehold:
(i)The lease is a valid, legal and binding obligation in accordance with its terms;
(ii)The Company has duly complied with and fulfilled all its obligations and duties under the lease;
(iii)No event has occurred with may be grounds for termination of the lease;
…”
The property described in schedule 12 is as follows:
“1.Holdings
(a)The interest of [CBD] as Sublessee in [the CBD Sublease] relating to Lots 1 and 5 on SP 153788 and Lot 3 on CP 888692.
(b)…
(c)All improvements made to or constructed upon the Land the subject of the sublease referred to in this Schedule 12.”
- The principal argument for KD was based upon the Sublease being at an end with the result that the warrant in cl 8(c)(i) of schedule 9 could not be true at the completion date of any of the contracts. I have rejected that argument. In particular, the Sublease remains “valid, legal and binding” in accordance with its terms, notwithstanding the registration of the request lodged by KD.
- According to the oral argument for KD, that would dispose of KD’s claim for declaratory relief. And according to KD’s written submissions the question for determination was expressed in this way:
“… is KD entitled to terminate;
(i)the first CBD share sale contract;
(ii)the second CBD option or, alternatively the second CBD share sale contract; and
(iii)the third CBD option
on grounds of anticipatory repudiation or breach because warranties in cll 7.1 and 8(c)(i)(ii)(iii) of the CBD share sale contracts will be false at the dates for completion …?”[32]
(emphasis added)
- As already discussed,[33] according to the agreed form of contract of sale, the “Completion Date” was to be 33 days from the date of the contract, which according to the option deed, was to be the date of the exercise of the option. That date has passed in relation to the first and second sale contracts. However, KD argues that for the purposes of the vendor’s warranty within cl 7.1, the Completion Date should be understood as the date upon which, in the events which have happened, the parties will be obliged to complete (subject to KD’s right to terminate the contract). I will consider KD’s case upon that premise, there being no contrary argument by Holdings as the vendor. Counsel for KD did not argue, in the alternative, for a finding that there was a breach of warranty as at the date which was 33 days from the exercise of an option.[34]
- Nor did KD argue that there was a breach of warranty by the relevant statement being false as at the date of the exercise of the option. That was consistent with KD’s pleading which alleges that the warranty would not be “true, complete and accurate at the date for completion of the first CBD share sale contract”.[35] No finding was sought about whether there was a breach of warranty as at the date of the share sale contract which could be the basis for a termination of that contract. Thus it is unnecessary to consider whether, by reason of the passage of time and all that has occurred since July 2009 or July 2010 (in the case of the second contract), KD would now be not entitled to rely upon that breach of warranty.
- KD’s case was that it was entitled to terminate the contracts for the sale of shares on the grounds of what are described as anticipatory repudiation or breach. It was argued that it was “…now so clear that [Holdings] will be unable to comply with its obligations under any share sale contracts that … an entitlement to terminate has arisen now and that one doesn’t have to, as it were, leave them hanging until such time as the defendants seek to comply with all their obligations in relation to settlement of the share sale agreement because we know that they simply can’t provide us with shares in a company that owns the property that was vital to the whole transaction”.[36]
- That submission effectively depended upon the Sublease being at an end. However, once it is seen that the Sublease is on foot, there is no basis for terminating the share sale contract, as was argued. Instead, it remains to be seen whether, when completion will otherwise have to occur, there is some circumstance such as a breach of the Sublease, which then entitles KD to terminate the contract.
Relief
- By my Order of 17 December 2010, the issues for determination were those raised by the allegations at paragraphs 34BB to 34BN of the Fifth Amended Statement of Claim. Prior to the hearing, a Sixth Amended Statement of Claim was filed but without amendment to these paragraphs. Counsel for KD suggested that there were three questions raised by this part of its pleading. The first was whether CBD had repudiated the Sublease. The second, which did not have to be answered because of a concession by the defendants at the hearing, was whether the Sublease was determinable for a repudiation notwithstanding cl 8. The third was, as already mentioned, whether the contracts for the sale of shares could be terminated for “anticipatory repudiation or breach”. There were other questions as appear from these reasons, going to whether the Sublease had been terminated by one side or the other.
- In the circumstances, the appropriate relief is a declaration as to the status of the Sublease, the striking out of those paragraphs of the Sixth Amended Statement of Claim and the dismissal of the corresponding claims for relief within the Statement of Claim and the Amended Claim. There will be a declaration that the Sublease No. 708181009 from the first plaintiff as sublessor to the sixth defendant as sublessee is valid and enforceable according to its terms, as they have been since March 2008. It will be ordered that paragraphs 34B through 34BN of the Sixth Amended Statement of Claim filed 23 December 2010 be struck out and that the claims for relief within paragraph 45(dc) of the Sixth Amended Statement of Claim and paragraph 4 of the Further Amended Claim be dismissed.
- I expect that consistently with this judgment the register kept under the Land Act 1994 (Qld) will be rectified. In case some further order is required, there will be liberty to apply.
Footnotes
[1] Clause 3(c).
[2] Keswick Developments Pty Ltd v Kevroy Pty Ltd & Ors; Keswick Developments Pty Ltd v Keswick Island Pty Ltd & Ors [2009] QSC 176.
[3] Ibid.
[4] Keswick Developments Pty Ltd v Keswick Island Pty Ltd & Ors [2009] QCA 340 at [31] per de Jersey CJ with whom Holmes JA and A Lyons J agreed.
[5] Ibid at [23].
[6] Order made 17 December 2010.
[7] Clause 7.1.
[8] Ibid.
[9] Schedule 9, clause 8(c).
[10] Clause 8.1.
[11] Paragraph 5.4 of the Defence and Counterclaim of CBD filed 3 December 2010.
[12] (1985) 157 CLR 17.
[13] Ibid at p 30 per Mason J and at pp 55-56 per Deane J.
[14] Sneddon NC and Ellinghaus MP, Cheshire and Fifoot’s Law of Contract, 7th Australian Edition, Butterworths, NSW, 1997 at [21.11].
[15] Paragraph 2(e)(i) of the Reply and Answer to the Defence and Counterclaim filed 16 December 2010.
[16] See the plaintiff’s written argument at paragraph 28 and in particular, footnote 47.
[17] (2007) 233 CLR 115 at 135.
[18] Ibid per Gleeson CJ, Gummow, Heydon and Creenan JJ citing Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634 per Mason CJ.
[19] Ibid.
[20] Ibid at 135-136.
[21] Ibid at 136.
[22] (1985) 157 CLR 17 at 33-34.
[23] Paragraph 12 of an Affidavit of R C McCann filed in other proceedings, but included here as exhibit RCM11 to his Affidavit filed 8 March 2011 in these proceedings.
[24] (1994) 7 BPR 14,447; BC 9403420.
[25] (1982) 149 CLR 620 at 633 citing Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 at 71 and Mersey Steel and Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434 at 438-439.
[26] (1988) 166 CLR 245 at 264. To the same effect see Gaudron J at 278.
[27] There appears to be no reference to it in the extensive written submissions.
[28] [2007] QSC 394.
[29] [1993] 2 Qd R 494 at 500.
[30] (1971) 126 CLR 376 at 385.
[31] Paragraph 6 of the Defence and Counterclaim filed 3 December 2010.
[32] Plaintiff’s written argument at paragraph 16(c).
[33] At [5].
[34] That was disavowed at T 1-39.
[35] Paragraph 34BJ of the Sixth Amended Statement of Claim filed 23 December 2010.
[36] T 1-37.