Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: Gleeson CJ,Gummow,Heydon,Crennan JJ.,Kirby J.
• Judgment Date: 13 December 2007
• Neutral Citation: 2007-1213 HCA C,[2007] HCA 61
• Court: High Court
• Docket Number: S221/2007
• Date: 13 December 2007

Koompahtoo Local Aboriginal Land Council & Anor

Appellant

and

Sanpine Pty Limited & Anor

Respondents

[2007] HCA 61

Gleeson CJ, Gummow, Kirby, Heydon and Crennan JJ.

S221/2007

HIGH COURT OF AUSTRALIA

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited

Contract — Repudiation — First respondent was held by the trial judge to have grossly departed from the terms of a contract with the first appellant — First appellant purported to accept a repudiation of that contract — Difference between renunciation of a contract, where a party evinces an inability or unwillingness to render substantial performance of a contract, and repudiation, in the form of a breach justifying termination — Classification of contractual terms for the purpose of determining the consequences of a breach — Whether case was one of breach of a condition or sufficiently serious breach of an intermediate term — Whether breach went to root of contract — Relevance of adequacy of damages as a remedy — Relevance of failure to complain of breaches.

Contract — Termination for breach — Governing principles — Whether class of intermediate or innominate terms should be recognised.

Words and phrases — ‘repudiation’, ‘renunciation’, ‘condition’, ‘intermediate term’.

Representation

B A J Coles QC with G A Sirtes for the appellants (instructed by Bartier Perry Solicitors)

T S Hale SC with A M Mitchelmore for the first respondent (instructed by Solari Legal)

No appearance for the second respondent

1. Appeal allowed with costs.

2. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 2 November 2006 and, in their place, order that the appeal to that Court be dismissed with costs.

1 Gleeson CJ, Gummow, Heydon and Crennan JJ. This litigation arises from the termination, or purported termination, of a joint venture agreement for the commercial development of land.

2 On 14 July 1997, the first appellant, Koompahtoo Local Aboriginal Land Council (‘Koompahtoo’), and the first respondent, Sanpine Pty Limited (‘Sanpine’), entered into a joint venture agreement (‘the Agreement’) for the development and sale of a large area of land near Morisset, north of Sydney. The land had become vested in Koompahtoo as a result of claims made under the Aboriginal Land Rights Act 1983 (NSW). The development project, which was to be self-funded, was the first such project to be undertaken in New South Wales by a Local Aboriginal Land Council. Koompahtoo contributed the land. Sanpine, which had no other business, was the manager of the project. Each party had a 50% interest in the joint venture. Sanpine was also entitled to receive a management fee equal to 25% of the total project costs. The Agreement provided that it did not give rise to a partnership.

3 Although attempts were made to obtain the approval of the relevant authorities, including necessary rezoning of the land, and although liabilities in excess of $2 million were incurred on the security of mortgages over the land, the project, which was controversial within the Koompahtoo community, which involved sensitive environmental issues, and which evidently was unattractive to financiers, never proceeded even to the initial stage of obtaining rezoning of the land. In April 2002, a caveat was placed on the title to the land, which had the practical effect of impeding the prospects of further funding. In June 2002, the New South Wales Aboriginal Land Council (‘NSWALC’) appointed an investigator of Koompahtoo. On 25 February 2003, the second appellant, Mr Lawler, was appointed as administrator of Koompahtoo. On 10 April 2003, a mortgagee went into possession of the land. From February 2003 until December 2003, the administrator made attempts to obtain from Sanpine information as to the financial position of the joint venture. Proper books of account and financial records of the joint venture had never been kept by Sanpine. On 12 December 2003, the administrator, on behalf of Koompahtoo, terminated the Agreement. Sanpine commenced proceedings in the Supreme Court of New South Wales, seeking a declaration that the termination was invalid and that the Agreement was still on foot. There is other, presently irrelevant, litigation concerning the land.

4 Campbell J, at first instance, formulated a preliminary question as follows:

‘Whether, on the proper construction of the agreement entitled “Morisset Joint Venture Agreement” between [Sanpine] and [Koompahtoo], dated 14 July 1997, as amended by the “Morisset Joint Venture Supplemental Agreement” dated 17 October 2000 (“Agreement”), and in the events which have happened, the Agreement was validly terminated by [Koompahtoo] by its letter to [Sanpine] dated 12 December 2003.’

5 Campbell J answered that question in the affirmative and dismissed Sanpine's proceedings 1. The Court of Appeal of the Supreme Court of New South Wales, by majority (Giles and Tobias JJA, Bryson JA dissenting), allowed an appeal by Sanpine 2. The basis of Campbell J's decision was that there had been ‘gross and repeated’ departures by Sanpine from its obligations under the Agreement, including a ‘total failure to adhere to the accounting obligations’, and that, having regard to the nature of the Agreement and the consequences of the breaches, the breaches were ‘sufficiently serious’ to give Koompahtoo a right to terminate. For the reasons that follow, the conclusion of Campbell J was correct.

The Agreement

6 Clause 1.1 of the Agreement defined ‘Development’ to mean the rezoning of the joint venture site by the relevant local government authority to permit residential development, the application for and obtaining of approvals for its subdivision, the carrying out of subdivision and other works required to prepare the residential lots for sale, the registration of the plan of subdivision, the marketing and sale of the lots, and incidental matters. Clauses 2.2 and 2.3 of the Agreement provided:

‘2.2 Objects

The objects and extent of the Joint Venture are:

(a) to undertake the Development;

(b) to determine the scope of the Development;

(c) to carry out the design of the Development;

(d) to apply for and obtain consents, approvals and authorisations from the Council and all other relevant statutory and regulatory authorities for the Development to the extent that this has not been done prior to the date of this Agreement;

(e) to arrange funding for the Development at the most commercially advantageous terms;

(f) to engage all such architects, town planners, valuers, environmental experts, engineers, excavators, civil works contractors, builders, tradesmen, consultants, real estate agents and all other relevant persons that may be necessary to carry out the Development in the most economic, efficient, workmanlike and professional manner;

(g) to carry out the Development to the best commercial advantage of the Venturers and within the shortest practicable time;

(h) to identify and procure purchasers for the Residential Lots;

(i) to sell the Residential Lots upon commercial terms and at not less than market value … on the terms and subject to the conditions provided for in this Agreement;

(j) to do all such things as shall be incidental or conducive to the attainment of the foregoing but only as shall be determined by the Management Committee.

2.3 Achievement of Objects

The Venturers agree and acknowledge that they will take all steps and do all things necessary to achieve the objects of the Joint Venture on arms' length terms and to the commercial advantage of the Joint Venture …’

7 As noted above, Koompahtoo and Sanpine each held a 50% interest in the joint venture. While liabilities incurred in relation to the development were to be borne by the parties in proportion to their percentage interests, cl 13.1(c) limited the liability of Koompahtoo to recourse against the land to be developed. Clause 13.3(a) further recorded the parties' intention that Koompahtoo's obligation to contribute to the joint venture be limited to making the land available and not extend to making any cash payment to fund the development. Sanpine's obligation to contribute to the joint venture was also limited, under cl 13.3(b), to providing expertise as development manager and, in its discretion, limited funding to enable preliminary negotiations to take place. The consequence of these provisions was that the development was to be funded by external finance. Clause 13.5 provided that each joint venturer would be solely responsible for, and pay, project costs incurred by that joint venturer before the date of the Agreement.

8 As noted above, under cl 6.1 of the Agreement, Sanpine was appointed as the manager of the development. Clause 6.2 provided:

‘6.2 Obligations of Sanpine

Sanpine agrees to:

(a) co-ordinate the overall Development;

…

(c) seek funding for the Development from recognised, reputable and experienced project financiers including preparation of all applications, information memorandums and supporting documents required and negotiating the finance facility offered by a project financier which the Management Committee agrees to accept;

…

(e) engage bookkeeping and accounting services for the Joint Venture and the Development and maintain all records and documents of the Joint Venture to the extent that the Management Committee does not require the records or documents for the purposes of the Works and prepare tax returns for the Joint Venture if tax returns are required to be lodged;

…

(i) formulation of a Development Program showing the manner in which Sanpine expects the Development to proceed including a timetable for the completion of each of the stages of the Development and the envisaged cost to complete each of the stages of the Development;

(j) regular updating of the Development Program to take account of events or circumstances which...