Lendlease Communities (Figtree Hill) Pty Limited v Mount Gilead Pty Limited

1. [1]

   PAYNE JA: I agree with Griffiths AJA.

2. [2]

   HARRISON JA: I agree with Griffiths AJA.

3. [3]

   GRIFFITHS AJA: This is an appeal from a judgment and orders of Stevenson J in Lendlease Communities (Figtree Hill) Pty Ltd v Mount Gilead Pty Ltd (No 3) [2025] NSWSC 334 (PJ or primary judgment). His Honour dismissed proceedings brought by the now appellants, Lendlease Communities (Figtree Hill) Pty Limited and Lendlease Communities (Australia) Limited (together, Lendlease). Lendlease had sought declaratory relief and damages concerning an agreement between it and the respondents, Mount Gilead Pty Limited and Mount Gilead (Access) Pty Ltd (together, Landowners) for the sale and development of parcels of land owned by the Landowners. The agreement, which is dated 17 April 2015 (the Deed), is essentially a put and call option deed. Lendlease claimed that it had validly exercised purchase rights in relation to part of the land and could exercise further rights in the future. In contrast, the Landowners denied that the purchase rights had been validly exercised and claimed that Lendlease no longer had any rights to purchase the land.

4. [4]

   In broad terms, the Deed provided for the staged sale to Lendlease, by put and call options, of a large area of farmland. The properties were identified in the Deed as Properties 6 to 10. Properties 1 to 5 (referred to by the parties as the MDP Land) were the subject of a separate deed which was executed by the parties on the same date.

5. [5]

   For the following reasons, I propose that the appeal be dismissed with costs.

Structure of these reasons

1. [6]

   These reasons are structured as follows:

(a) Background to the Deed

1. [7]

   The land the subject of the Deed is located south of Campbelltown on the eastern side of the Hume Highway. The land, which is generally described as the “Balance Land”, is bounded on its western side by the Nepean River. Menangle Creek marks part of its northern boundary. The remainder of the northern boundary is adjacent to what is described as the “Homestead Lot”, which is controlled and is to be retained by the Landowners. The Balance Land is bisected by a canal owned by Sydney Water which does not form part of the Balance Land. To the east is a development known as “Figtree Hill”, which is land that is being developed by Lendlease from Properties 1 to 5 forming part of the MDP Land. As the primary judge noted at PJ[8], these matters, together with proposed access, are shown in the following diagram (while noting that this diagram does not show the proposed five subdivided lots comprising the Balance Land):

2. [8]

   By way of further background, on 18 December 2014, Lendlease sent a proposal to the Landowners, which was accepted by them on that day (Proposal). Under the Proposal, Lendlease would pay $200 million for the sale of both the MDP Land and the Balance Land. The price and timing for the sale of the land would occur by the making and acceptance of “Sale Offers” by the Landowners and “Purchase Offers” by Lendlease over 12 years. The Proposal did not specify the size of any of the lots within either the MDP Land or the Balance Land, but prices for each lot were specified. In the case of the Balance Land, the prices ranged from $10 million to $40 million for the five parcels. The Proposal stated that “[a] draft plan of subdivision for each parcel will be agreed between the parties prior to entering into agreements”.

3. [9]

   As noted above, the Deed was entered on 17 April 2015. Annexure 2 to the Deed is an important document, for reasons which will emerge. It is headed “Draft Plan of Subdivision (Balance Land)” and is dated 20 March 2015. It comprises a draft plan of subdivision of five parcels of land numbered 6 to 10 running generally from east to west (Annexure 2 Plan):

(b) The Deed summarised

1. [10]

   As noted by the primary judge at PJ[9], the Deed is “a lengthy and complicated document”, with numerous defined terms.

2. [11]

   For the purposes of the appeal, it is convenient to be guided by what Lendlease identifies as the key relevant provisions of the Deed.

3. [12]

   By cl 4, the Landowners’ land was to be first subdivided to create the land known as the Balance Land. That step occurred. The Balance Land was then to be further subdivided into Properties 6 to 10.

4. [13]

   The method of that further subdivision was governed by cll 5 and 7. As these provisions are at the heart of the appeal, they will be set out without alteration:

5. [14]

   Clauses 7.1 to 7.3 deal with how the Plan of Subdivision (Balance Land) is to be drawn. Clause 5 places obligations on the Landowners to pursue subdivision in accordance with the Plan of Subdivision (Balance Land) so determined. It is convenient to deal with these clauses in that order.

6. [15]

   Clause 7.1 requires Lendlease to provide to the Landowners, within 30 days of the satisfaction of the Condition in cl 3.1(e) (the rezoning of the Balance Land), “the form of Plan of Subdivision (Balance Land) which it requires to be submitted by the Landowners as part of the application for the Subdivision Development Consent (Balance Land)”. Lendlease claims to have carried out this step by the provision of a plan dated 12 July 2024 (12 July Plan).

7. [16]

   Clause 7.1 expressly contemplates that Lendlease can vary the Annexure 2 Plan in the manner provided in cl 7.3(a) in order to facilitate Lendlease’s development and staging of the Balance Land.

8. [17]

   Clause 7.3 contains a broad power of variation for Lendlease. The power of variation expressly permits “the variation of the boundaries and dimensions of any proposed lot” subject to (at least) the following three constraints:

9. [18]

   Lendlease emphasised the breadth of its variation power under cl 7.3 when contrasted with cl 7.2. The latter provision states that the Landowners cannot “amend” the Plan of Subdivision (Balance Land) without Lendlease’s approval, other than amendments that are required by an Authority to grant consent, do not adversely affect the ability to develop the land and do not “reduce the area of any individual lot by more than 10%”.

10. [19]

    Clause 5 requires the Landowners to seek subdivision consent for the Plan of Subdivision (Balance Land) drawn up in accordance with cll 7.1 to 7.3. Clause 5.1(a) requires the Landowners, upon receipt of the Plan of Subdivision (Balance Land) provided in accordance with cl 7.1, to “use their best endeavours” to obtain and diligently pursue development consent for the proposed subdivision within four months. More particularly, cl 5.2(a) requires the Landowners to lodge an application for such approval with the relevant Authority within ten Business Days of being provided with the form of such Plan. Under cl 5.2(b), if the Landowners fail to comply with cl 5.2(a), the first appellant can itself lodge an application for a Subdivision (Balance Land) with the Authority responsible for approving it. The Landowners are required, within ten Business Days of a written request by the first appellant (cl 5.2(b)(i)), to provide the appellants with all documents and consents reasonably required by the first appellant to lodge, pursue and obtain a Subdivision Development Consent (Balance Land) (cl 5.2(b)(ii)).

11. [20]

    Clause 8 concerns the Sale and Purchase Offers. Clause 8.1 provides:

12. [21]

    For the purposes of this clause, the following definitions in cl 1.2 are relevant:

13. [22]

    The Key Items Schedule sets out the Sale Offer Period, the Purchase Offer Period, the Price, the Sale Offer Fee and the Completion Date for each of Properties 6 to 10.

14. [23]

    For Property 6:

15. [24]

    The Sale Offer Period for Properties 7 to 10 also commences on the date which is five days after the date on which the Conditions are satisfied or waived in accordance with cl 3 (i.e., the same as for Property 6), but expires on the date which is 11, 35, 59 and 83 months after the completion of Contract 6, respectively, or alternatively (on the appellants’ construction) on the date which is 11, 35, 59 and 83 months after the date Contract 6 could have completed.

16. [25]

    Ground 2 of the appeal is concerned with the consequences of the fact that Contract 6 was not formed and, as is common ground, cannot now be formed. The primary judge’s conclusion was that if Contract 6 was not formed, the Sale Offers for Contracts 7 to 10 could not be accepted (PJ[245]–[246]). Indeed, his Honour concluded that, on the proper construction of the Deed, Lendlease was required to purchase each of Properties 6 to 10, in sequential order (PJ[195]–[197] and [239]).

17. [26]

    Clause 8.3 of the Deed sets out how a Sale Offer in relation to a Property can be accepted by the provision to the Landowners during the Sale Offer Period (which is the period specified in the Key Items Schedule) of specified documents, including a notice and executed counterparts of a contract of sale.

18. [27]

    By cl 8.4, each Sale Offer is expressed to be “irrevocable” unless the Deed is validly terminated. And by cl 8.5, the acceptance of an Offer by any Offeree does not affect any of the other Sale Offers contained in the Deed, or the first appellant’s obligations under the Deed, or the Landowners’ rights and remedies.

19. [28]

    Clauses 8.6 to 8.8 and cl 8.10 deal with Purchase Offers (i.e., the Landowners’ put options). Clause 8.6 states:

20. [29]

    Clause 8.9 deals with the acceptance of both Sale and Purchase Offers. Relevantly, under cl 8.9(b), the Offer Periods start on the first day in the stated periods and end at 5:00 pm on the “last day in the stated periods” in the Key Items Schedule. Under cl 8.9(c), the time limits for exercising the Offers are strictly to apply, and an Acceptance Notice served outside the relevant Offer Period is ineffective and no contract will be formed.

21. [30]

    Clause 8.10 provides that the Purchase Offer in respect of a Property lapses upon acceptance of the corresponding Sale Offer.

22. [31]

    Clause 12 is headed “Sale Contract”. Clause 12.1 provides that, upon the acceptance of an Offer, a contract for sale for the Property is formed on the terms of the Sale Contract. Clause 12.2 deals with the mechanics of the execution of the Sale Contracts (and specifies that if a party fails to execute the contract, the other party can rely on the terms of the Deed as sufficient to form the contract for sale). Clause 12.3 deals with amendments to a Sale Contract.

23. [32]

    Clause 19 concerns Powers of Attorney. By cl 19.1, the Landowners are required to execute Powers of Attorney in the form attached at Sch 6. That occurred on 17 April 2015. The Powers of Attorney authorise the second appellant to execute and deliver on behalf of the Landowners certain documents including, relevantly, an application for a subdivision approval under cl 5.2(a) of the Deed.

24. [33]

    Clause 21 provides that the Landowners must not make any objection to an Authority or court in relation to any development application or other planning activity by or on behalf of the first appellant in relation to the Balance Land, subject to the first appellant complying with its obligations under the Deed and any Law (as defined in cl 1.2).

25. [34]

    Clause 27 provides inter alia for the first appellant to give Bank Guarantees to the Landowners in respect of Contracts 7 to 10 prior to the date of completion of Contract 6.

26. [35]

    Clause 29.8 obliges the parties upon request to do everything reasonably necessary to give effect to the Deed and the transactions it contemplates, including executing documents.

(c) Some further background facts

1. [36]

   The “Sunset Date” is defined in cl 1.2. By cl 3.5, Lendlease is entitled in its absolute discretion to extend the Sunset Date by a period of 1 year on the giving of notice and payment of $1.5 million to the Landowners. Lendlease exercised this power such that the Sunset Date was extended to 21 May 2024. Either party can terminate the Deed after that date unless the conditions precedent set out in cl 3.1 are either satisfied or waived by Lendlease.

2. [37]

   On 20 May 2024 (i.e., the day before the extended Sunset Date), Lendlease notified the Landowners that it had waived those conditions.

3. [38]

   The effect of the waiver was that the period for acceptance of the Sale Offer for Property 6 commenced on 25 May 2024 and expired on 9 June 2024.

4. [39]

   Lendlease then took steps in an attempt to acquire all of the Properties before the Sale Offer for Property 6 expired. Lendlease accepted below that its initial attempt was not contractually effective. So, on 23 May 2024, Lendlease provided the Landowners with a draft Plan of Subdivision (Balance Land), and on 27 May 2024, Lendlease sent a notice attempting to accept all of the Sale Offers for Properties 6 to 10 in a single block.

5. [40]

   On 9 June 2024, the time for acceptance of the Sale Offer for Property 6 lapsed.

6. [41]

   On 14 June 2024, the Balance Land was rezoned (PJ[153]).

7. [42]

   As noted above, on 12 July 2024, in a second attempt (which Lendlease says was effective), Lendlease sent the 12 July Plan to the Landowners as the Plan of Subdivision (Balance Land) (PJ[163]). By this step, Lendlease says it provided a Plan of Subdivision (Balance Land) under cl 7.1, and so cl 5 required the Landowners to use their best endeavours to obtain development consent for subdivision in accordance with the 12 July Plan (cl 5.1) and to lodge an application for that consent within 10 business days (cl 5.2(a)), failing which Lendlease could do so on the Landowners’ behalf (cl 5.2(b)).

8. [43]

   The 12 July Plan (which is to be contrasted with the Annexure 2 Plan as reproduced at [9] above) is as follows:

9. [44]

   It is notable that the numbering, location and size of the five parcels has changed, perhaps most notably in respect of Lot 1 on the 12 July Plan, which is coloured orange and is only 1.410 ha. The smallest sized parcel in the Annexure 2 Plan is 35.6 ha (i.e., both Lots 6 and 7). The primary judge described some other “striking differences” between the 12 July Plan and the Annexure 2 Plan at PJ[165] (see at [59(c)] and [59(d)] below).

10. [45]

    On 31 July 2024, the Landowners wrote to Campbelltown City Council foreshadowing that Lendlease might attempt to lodge a development application for subdivision consent. The Landowners notified the Council that they did not consent to any such application.

11. [46]

    Subsequently, when Lendlease lodged such an application on 17 September 2024 using the Power of Attorney, the Council rejected it because it was not signed by the Landowners.

12. [47]

    In the Court below, Lendlease claimed that the Landowners breached the Deed by their refusal to register the 12 July Plan and by their interference with Lendlease doing so.

(d) Primary judgment summarised

1. [48]

   In Ground 1 of the notice of appeal, Lendlease challenges the primary judge’s construction of cl 7.1 of the Deed, which underpinned his Honour’s finding that the 12 July Plan was not a Plan of Subdivision (Balance Land) within the meaning of the Deed. In brief, this was because his Honour considered that the 12 July Plan was not “based upon” the Annexure 2 Plan, whether as varied by Lendlease under cl 7.3 or at all.

2. [49]

   “Plan of Subdivision (Balance Land)” is defined in cl 1.2 of the Deed as follows:

3. [50]

   After noting the two references in this definition to “clause 7.2”, his Honour said that these were mistakes, and they should be read as referring to cl 7.3 of the Deed (see PJ[38]–[48]).

4. [51]

   His Honour then considered the provenance of the Annexure 2 Plan. He inferred that the Annexure 2 Plan was the “draft plan of subdivision for each parcel”, as referred to in, and contemplated by, the terms of the Proposal (PJ[63]). This inference was drawn, inter alia, on the basis of the “close temporal and textual relationship between the Proposal and the Deed” (PJ[60]).

5. [52]

   The primary judge rejected Lendlease’s submission that the words “based upon” should be read descriptively, as “meaning within or in exercise of Lendlease’s ‘limited power conferred by clauses 7.1 and 7.3’” (PJ[65]). His Honour considered that they should instead be read as words of constraint, such that the “plan of subdivision of the Balance Land” had to be “based upon” the Annexure 2 Plan (PJ[67]). This conclusion was said to follow from “the words the parties have used”, and to be consistent with “the mutually known fact … that the provenance of the Annexure 2 Plan was the Proposal” (PJ[68]–[69]).

6. [53]

   As to the work done by the words “as varied” in the definition of “Plan of Subdivision (Balance Land)”, the primary judge considered that these words required the Plan of Subdivision (Balance Land) to be “based upon” a “permissibly varied state of the Annexure 2 Plan following the exercise by Lendlease of its power of variation, which is found in cl 7.3 of the Deed, as qualified by the chaussure to cl 7.1” (PJ[71]). Crucially, however, his Honour considered that the product of any permissible variation still needed to be “based upon” the Annexure 2 Plan (PJ[73]). He reasoned as follows (at PJ[74], footnote omitted):

7. [54]

   The primary judge returned to this issue at PJ[86] (after explaining, at PJ[78]–[83], why reading the definition of “Plan of Subdivision (Balance Land)” into cl 7.1 did not alter his construction). His Honour rejected the proposition that cl 7.3 should be read as allowing Lendlease to vary a plan already “based upon” a permissible variation to the Annexure 2 Plan (PJ[86]–[87]). Nor did he accept that a plan varied under cl 7.3 “need not in any way be tethered to the Annexure 2 Plan”. The latter proposition was rejected on the basis that it would “subsume within cll 7.1 and 7.3 the definition of Plan of Subdivision (Balance Land) without giving any effect to the words ‘based upon’ in the definition and the parties’ obvious intention, in using those words, that there be some relationship between the plan ultimately submitted … under cl 7.1 and the Annexure 2 Plan”.

8. [55]

   As to the required relationship, his Honour said at PJ[93]:

9. [56]

   The primary judge considered that there were good reasons why the parties would have required the plan ultimately submitted by Lendlease to have some relationship with the Annexure 2 Plan, including that: (1) the Key Items Schedule of the Deed specified the prices at which Lendlease could acquire Properties 6 to 10, which closely resembled the figures in the Proposal; and (2) Annexure 2 Plan had its provenance in the Proposal (PJ[95]–[97]).

10. [57]

    His Honour further considered that there were indications, particularly in the terms of cl 7.6(a)(ii), that the parties intended Properties 6 to 10 to remain contiguous for the purposes of any variation to the Annexure 2 Plan, while noting that this was “not a dispositive conclusion” (PJ[102]).

11. [58]

    The primary judge ultimately concluded that the 12 July Plan was not “based upon” the Annexure 2 Plan (PJ[175]). This was primarily because the 12 July Plan provided in substance for a subdivision of the Balance Land into only four Lots (corresponding to Properties 7 to 10 and excluding Property 6), as opposed to the five Lots contemplated by the Annexure 2 Plan.

12. [59]

    It followed that Lendlease “did not timeously comply with its obligation under cl 7.1 of the Deed to provide the Landowners with a Plan of Subdivision (Balance Land), with the result that the Landowners came under no obligation to lodge any Plan of Subdivision” (PJ[176]). In reaching this conclusion, the following matters were emphasised by the primary judge:

13. [60]

    Ground 2 of the appeal concerns the primary judge’s finding that Lendlease was not entitled to acquire Properties 7 to 10, having lost its right under the Deed to acquire Property 6.

14. [61]

    As noted above, cl 8 of the Deed effectively creates call and put options in favour of Lendlease and the Landowners, the latter only to be exercised if the former was not. In determining whether Lendlease retained its rights to acquire Properties 7 to 10 in circumstances where the right to acquire Property 6 had been lost, the primary judge identified the dispositive question as “the meaning to be given to the word ‘each’ in cll 8.1 and 8.6” (PJ[193]).

15. [62]

    The primary judge rejected Lendlease’s submission that the reference to “each” in both these clauses (which are set at [20] and [28] above) meant “any of”, or “any one or more of” the Properties, such that Lendlease was entitled to “pick and choose” which of the remaining Properties it wished to acquire having lost the right to acquire Property 6. When cll 8.1 and 8.6 were read together with the Key Items Schedule, his Honour was satisfied that “each” meant “every one of” the Properties referred to in the Schedule (PJ[195]). His Honour did not regard this conclusion as inconsistent with the terms of cll 8.4 and 8.8, which provide respectively that “each Sale Offer” and “each Purchase Offer” are “irrevocable unless this deed is validly terminated” (PJ[198]).

16. [63]

    In reaching this conclusion, the primary judge emphasised the precise sequencing of the completion dates provided for in the Key Items Schedule. This was said to bespeak “the parties’ intention, consistently with the Proposal, that there would be sale of each, that is every one of, Properties 6 to 10; and in that order” (PJ[200]).

17. [64]

    Several other provisions were said to point to “the fact that performance of these clauses was conditional upon completion of Contract 6”, and to bespeak a “common understanding as to the centrality of the completion of Contract 6 to their ongoing performance of the Deed” (PJ[221]). The primary judge referred to the following clauses:

18. [65]

    His Honour’s core reasoning as to why “each” meant “every one of” is set out at PJ[239]–[242] (emphasis added):

(e) The parties’ primary submissions summarised

1. [66]

   I shall now summarise the parties’ primary submissions concerning Grounds 1 and 2 respectively.

2. [67]

   Lendlease’s central contention in relation to Ground 1 is that the primary judge erred in reading the words “based upon” in the definition of “Plan of Subdivision (Balance Land)” in cl 1.2 as imposing a limitation on Lendlease’s power of variation under cl 7.3. A number of points are made in support of this contention.

3. [68]

   First, Lendlease emphasises that cl 7.1 includes the words “may vary the form of the Plan of Subdivision (Balance Land) from the version in Annexure 2”, and that cl 7.3 is addressed to “variations to the Plan of Subdivision (Balance Land)”. From this, it is said to be clear that the parties contemplated that the Plan of Subdivision (Balance Land) could depart from the Annexure 2 Plan. Lendlease submits in its written submissions that the only constraints on its ability to vary the Annexure 2 Plan were those expressly provided for in cl 7.3 (see at [17] above). It also emphasises that the parties did not provide in cl 7.3 for a lower limit on the size of the subdivided lots that Lendlease could create, whereas cl 7.2 did impose such a constraint.

4. [69]

   Secondly, Lendlease accepts that the definition of “Plan of Subdivision (Balance Land)” must be read into each clause in which the expression appears, but submits that those clauses must then be construed “harmoniously” and not according to “a slavish rule that the defined term inevitably bear every aspect of the defined meaning” (citing Perpetual Custodians Ltd v IOOF Investment Management Ltd [2013] NSWCA 231; 304 ALR 436 at [86]). It emphasises that the definition appears several times throughout cll 5 and 7 and submits that the words “based upon” are therefore best understood descriptively, as referring to the Annexure 2 Plan or any variation thereto, and not as imposing a further constraint on the variation power in cl 7.3.

5. [70]

   In oral submissions, Mr Giles SC (who appeared with Mr Hughes and Ms Carr for Lendlease) submitted, apparently in the alternative, that the words “based upon” may in fact have some work to do at a later stage of performance, “after the application for the subdivision approval had been lodged, and if the council or any other authority placed conditions on it”. He referred to cl 7.2(a) of the Deed (see at [13] above), commenting:

6. [71]

   Thirdly, it is said by Lendlease to be objectively unlikely that the parties would have intended the words “based upon” to impose an additional constraint on the power of variation in cl 7.3, the parties having already included other express constraints on the power of variation. This view is said to be strengthened by the intrinsic vagueness of the concept of a variation “based upon” the Annexure 2 Plan. In oral submissions, Mr Giles SC developed this argument as follows:

7. [72]

   Fourthly, Lendlease rejects the proposition that the provenance of the Annexure 2 Plan in the Proposal supports the primary judge’s construction. It submits that the significant feature of the Proposal is that it does not specify the size of the proposed lots, but simply sets out the price for each and the timing of the sales. This is said to reflect the fact that, at the time the Proposal was agreed in 2014, there was considerable uncertainty as to how the site would ultimately be developed, particularly regarding the stages to be sold in later years.

8. [73]

   Fifthly, Lendlease emphasises that the Deed did not expressly require the lots to be contiguous and adds that they were not in fact contiguous, even in the Annexure 2 Plan where Lots 8 and 10 are bisected by a Sydney Water canal.

9. [74]

   Finally, Lendlease takes issue with the primary judge’s finding, at PJ[167], that the 12 July Plan “in substance provided for a subdivision of the Balance Land only into four ‘Lots’”. It notes that the 12 July Plan in fact contained five Lots and submits that the primary judge’s use of the words “in substance” is simply reflective of the fact that, by 12 July, Lendlease had lost the right to acquire Property 6. However, Lendlease emphasises that “there was always a possibility that not all of the lots would be acquired by Lendlease”.

10. [75]

    The Landowners’ central submission is that the 12 July Plan cannot have been a Plan of Subdivision (Balance Land), since it was not referable to the whole of the “Balance Land”. That phrase is defined in cl 1.2 of the Deed:

11. [76]

    The 12 July Plan was not referable to the whole of the “Balance Land”, in the Landowners’ submission, because it did not include one of the Properties comprising the Balance Land, Lendlease having at this point lost the right to acquire Property 6. That a Plan of Subdivision (Balance Land) is required to encompass all of the Properties is said by the Landowners to have been the “common understanding which the parties shared”. As Mr Coles KC (who appeared with Ms Castle and Mr Haines) put it:

12. [77]

    In support of its contention that Property 6 was central to the overall scheme of the Deed, the Landowners refer to cl 7.3(a)(i)(A) (see at [13] above), which provides that there must be a “lot corresponding to Contract 6” in any Plan of Subdivision (Balance Land), a requirement, they say, which was not provided for in the 12 July Plan. The importance of Property 6 is also said to be demonstrated by the purchase price of $7.4 million for that Lot, this being a “significant component” of the total consideration agreed to for the Balance Land. In the Landowners’ submission, a deduction of this amount from the Landowners’ payment rights cannot have been the intention of the parties, as manifested in the provisions of the Deed, which were “plainly the result of very careful and methodical working out”.

13. [78]

    In oral submissions, Mr Coles KC also contended that unreasonable commercial consequences would follow if the Deed were construed so that a valid Plan of Subdivision (Balance Land) could include only Properties 7, 8, 9 and 10. Referring to the Landowners’ obligation to lodge a valid Plan of Subdivision (Balance Land) for approval with the Council, Mr Coles KC submitted that:

14. [79]

    Finally, the Landowners defend the primary judge’s findings regarding the central importance of the Annexure 2 Plan to the construction of the Deed. Noting that commercial agreements are to be construed from the perspective of a reasonable businessperson, the Landowners emphasise that there was, in this case, evidence demonstrating how reasonable commercial people approached the Deed. In the Landowners’ submission, this evidence demonstrated that the Annexure 2 Plan was regarded as essential. Thus, Mr Coles KC highlighted that “the first thing most of [the witnesses] ever did when any topic came up is produce annexure 2 plan and give it to their advisers and so forth”.

15. [80]

    In its written submissions in reply, Lendlease rejects the Landowners’ submission that the 12 July Plan “no longer included one of the five parcels of land”. It submits that, as the primary judge recognised at PJ[168], the 12 July Plan plainly shows five lots. In these circumstances, the real issue is said by Lendlease to be whether Property 6, as depicted in the 12 July Plan, was impermissibly small, not whether it was excluded entirely. Lendlease also rejects the Landowners’ submission that the 12 July Plan was “not referable to the whole of the Balance Land”. It submits that this point was not argued before the primary judge and is not supported by any findings of the primary judge nor the evidence.

16. [81]

    Lendlease submits that the primary judge’s construction of the Deed, which required Lendlease to purchase each of Properties 6 to 10 in sequential order, essentially “obliterates” its character as a put and call option deed and reconfigures the character of the arrangement from “an option agreement to a straight sale agreement”. Lendlease says that this is supported by the language of the Deed as contained in the following provisions:

17. [82]

    Lendlease concedes that parts of the Key Items Schedule do evince an expectation by the parties that Property 6 would complete. This is demonstrated by the fact that the “Sale Offer Periods” for Properties 7 to 10 are to end on fixed dates after “the completion of Contract 6”. Read literally, if Contract 6 did not complete (as here) then the Sale Offer Periods for Properties 7 to 10 would never end, with the improbable result that Lendlease would have a never-ending call option, and the Landowners’ put option would never arise. Lendlease submits that, to avoid this impracticality, the words “after the completion of Contract 6” should be read as “after the last date on which Contract 6 could complete” (emphasis added). The primary judge rejected this construction because it would amount to “rewriting the clause” and be “inconsistent with the intention of the parties as manifested by the language they have used” (see PJ[208]).

18. [83]

    The Landowners are generally content to support the reasoning of the primary judge in relation to Ground 2.

(f) Consideration and disposition

1. [84]

   There is no disagreement as to the relevant principles of construction. They are described by the primary judge at PJ[30]–[34] and are adequately reflected in the following extracts from the reasons of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]–[49] (footnotes omitted):

2. [85]

   I will now explain why I reject both Grounds 1 and 2.

3. [86]

   For the following reasons, I do not accept that the primary judge erred in his construction of the Deed or in his finding that the 12 July Plan was not a plan that was “based upon” the Annexure 2 Plan. I consider that the primary judge’s construction of the relevant provisions of the Deed and ultimate finding was correct, substantially for the reasons given by his Honour.

4. [87]

   Lendlease ultimately contended that the primary judge erred in not construing cll 7.1 and 7.3 so as to enable Lendlease to “vary” the form of the Annexure 2 Plan and effectively to replace that plan with a new plan, subject only to the following conditions:

5. [88]

   Lendlease went so far as to say that, on its preferred construction, it could elect to acquire, say, only one of the five proposed lots in relation to the Balance Land and that, in that event, the Landowners could exercise their right to put the remaining lots to Lendlease within the specified periods.

6. [89]

   For the following reasons, I reject Lendlease’s preferred construction.

7. [90]

   First, I agree with the primary judge that, properly construed, the Deed contemplates that Lendlease will acquire, sequentially, all the land depicted in the Annexure 2 Plan (save of course for the Sydney Water Canal). This accords with the provenance of the Annexure 2 Plan in the Proposal, which contemplated that the parties would enter into put and call option agreements which, subject to the satisfaction of conditions precedent described in cll 13 and 14, would see Lendlease purchase “the Property” under several “Interdependent Contracts for Sale”. Significantly, the “Property” was defined in the Proposal so as to include all the “Balance Land”, being approximately 487 ha and comprising Lot 2 DP 249393 and Lot 1 DP 603675. The conditions precedent relating to the Balance Land related to the exercise of the put and call option for Contract 6 and its completion. It is also expressly acknowledged in cl 7.1 of the Deed that Lendlease’s power to vary the form of the Annexure 2 Plan in the manner provided in cl 7.3(a) is “in order to facilitate Lendlease’s development and staging of the Balance Land”. That is a reference to the development and staging of the Balance Land in its entirety, not merely some part of it.

8. [91]

   Secondly, acceptance of Lendlease’s construction would create several uncommercial outcomes which could scarcely have been intended by reasonable businesspeople. Under the Deed, the Landowners have obligations of a substantial and onerous nature, which presumably reflects the bargain which the parties struck in entering into the Deed. For example, the Landowners are obliged by cl 11 to do all things reasonably necessary to transfer what is described as the “Utility Land” to the Authority nominated by Lendlease for consideration of $1.00. “Utility Land” is defined in cl 1.2 to mean one lot with an area not greater than 2.5 ha identified as such in the Plan of Subdivision (Balance Land). As Mr Giles SC acknowledged, no Utility Land is actually identified in the Annexure 2 Plan. But that does not derogate from the fact that the definition of “Utility Land” operates by reference to the Plan of Subdivision (Balance Land), which is defined in cl 1.2 to mean, relevantly, a plan of subdivision of the Balance Land which is based upon the Annexure 2 Plan etc.

9. [92]

   The simple point is that the Landowners are burdened by the requirement imposed by cl 11 to transfer a parcel of land up to 2.5 ha in size for the consideration of only $1.00. It would be a remarkable construction of the Deed for the Landowners to be burdened with this obligation even in circumstances where Lendlease elected simply to acquire one small lot somewhere within the Balance Land (noting that while the Deed imposes maximum size limits, there is no limitation on the minimum size of any lot).

10. [93]

    Thirdly, under cl 18.1(d), Lendlease has the power to require the Landowners to transfer Biodiversity Credits to Lendlease on and from the date of completion of Contract 6. It seems most improbable from a commercial perspective that the Deed should be construed in the way advanced by Lendlease as imposing that burden on the Landowners even in circumstances where Lendlease chooses to acquire only one possibly small lot within the Balance Land.

11. [94]

    Fourthly, these matters are not avoided by the fact that the burdens imposed on the Landowners under both cll 11 and 18 operate from the date of completion of Contract 6 where, in the events that have occurred, there was no such completion. Lendlease contends that the reference in both those provisions to either “upon” or “on and from” the date of completion of Contract 6 should be read as referring to the last possible date for completion of Contract 6 to cover the contingency that in fact there has been no actual completion, as occurred here. Even if that construction were adopted (and I will explain later why I do not accept that construction), the burdens referred to above would still obtain.

12. [95]

    Fifthly, I reject Lendlease’s contention that, if it elected to acquire only one of the five Lots, the Landowners’ remedy is to exercise put options under cl 8.6. Mr Giles SC contended that while Lendlease had “a considerable degree of flexibility, our flexibility is hedged around by, if we don't exercise our call, the landowners can exercise their put”. He then added that this meant that Lendlease could not “act in a manner which leaves the landowners vulnerable to our choices, perhaps other than the oddity of timing that I'm about to come to”. The “oddity of timing” relates to the fact that, in the events that occurred, Lendlease did not acquire Lot 6 as contemplated by the Deed. This inevitably presented a major difficulty having regard to the way in which so many of the items relating to Properties 7 to 10 in the Key Items Schedule operated by reference to the date constituting the date of completion of Contract 6.

13. [96]

    As stated at PJ[199], the Key Items Schedule set out the order for various events to occur (footnote omitted):

14. [97]

    I respectfully agree with the primary judge’s conclusion at PJ[200] that such precise sequencing of the completion dates evinces the parties’ intention that each and all of Properties 6 to 10 would not only be acquired by Lendlease but also in that sequential order.

15. [98]

    In circumstances where completion of Contract 6 could not now occur, as is common ground, I respectfully agree with the primary judge that Lendlease lost the right to acquire Properties 7 to 10 because Property 6 did not sell.

16. [99]

    The difficulty is not overcome by Lendlease’s suggestion that it was open to the Landowners to exercise their put option in relation to those Properties. That is because the “Purchase Offer Period” for each of those Properties, as specified in the Key Items Schedule, cannot commence because Contract 6 has not been completed.

17. [100]

    Nor is this difficulty overcome by reading the “Sale Offer Period” in the second column of the Key Items Schedule as though it is a reference to the periods ending 11, 35, 59 and 83 months after the dates on which completion of Contract 6 could have occurred. I am not persuaded that there was any error in the primary judge’s rejection of this construction which, as his Honour pointed out at PJ[208], involves rewriting the Deed by adding new words, but also because that rewriting is inconsistent with the parties’ intention that there would be an orderly sequencing of completion dates, involving the sale of each and all of Properties 6 to 10.

18. [101]

    Sixthly, I also accept the Landowners’ submission that Lendlease’s construction exposes the Landowners to other substantial detriments which could hardly have been intended by reasonable businesspeople. As Mr Coles KC pointed out, in approving a plan of subdivision, the Council could impose a range of potentially onerous conditions on the Landowners. Where the Deed provides a framework for the orderly and sequential acquisition by Lendlease of all the Balance Land upon payment of significant sums to the Landowners, it may be appreciated that a reasonable business person in the position of the Landowners might regard that risk as commercially acceptable. But the position is very different if the Deed is construed, as urged by Lendlease, so as to permit it to acquire only a small part of the Balance Land and leave the remainder of it in the Landowners’ ownership and subject to conditions imposed by the Council as part of the subdivision approval and registration process. The point is captured in the oral submissions made by Mr Coles KC which are set out at [78] above.

19. [102]

    Seventhly, I respectfully agree with the primary judge’s conclusion and reasons for holding that the expression “based upon” is not merely descriptive but imposes a constraint. This not only accords with the text of the definition of “Plan of Subdivision (Balance Land)” in cl 1.2, but also with the terms of the Proposal which provides the provenance for the Annexure 2 Plan. Merely because the Proposal does not specify the size of the proposed five lots comprising the Balance Land and nominates the price and timing of each transaction does not displace the primary judge’s finding that the Annexure 2 Plan has its provenance in the Proposal.

20. [103]

    True it is that in late December 2014, when the Proposal was accepted, doubt and uncertainty existed as to how the development would proceed (as is reflected in Sch 2 to the Proposal). It is provided, however, in cl 7 of the Proposal that the Balance Land would be subdivided and purchased in five tranches under five interdependent Contracts for Sale and that a draft plan of subdivision would be agreed in respect of each parcel prior to any particular parcel being acquired. Furthermore, although the Proposal did not specify the size of any of the parcels the subject of Contracts 6 to 10, the parties plainly contemplated that those parcels would not be de minimis, as is reflected in the fact that the lowest nominated price for any parcel was $10 million (in respect of both Contracts 6 and 7).

21. [104]

    Eighthly, I also respectfully agree with his Honour’s reasoning for rejecting Lendlease’s contention that cl 7.3 should be read as permitting Lendlease to vary a plan already “based upon” a permissible variation to the Annexure 2 Plan, as summarised at [54]–[56] above.

22. [105]

    Ninthly, I do not accept Lendlease’s contention that the primary judge’s approach necessarily requires a difficult and uncertain evaluative judgment to be made in comparing the Annexure 2 Plan and the 12 July Plan. While the contention may have some force at a theoretical level, the evaluative judgment involved in this particular case admits of only one answer having regard to the striking differences between the Annexure 2 Plan and the 12 July Plan (see at [59] above).

23. [106]

    Finally, I reject Lendlease’s claim that the only constraints on its power to vary the form of the Plan of Subdivision (Balance Land) from the version contained in the Annexure 2 Plan are those imposed by cl 7.3. Without doubt, cl 7.3 imposes several constraints on Lendlease’s power of variation, but I do not regard them as being exhaustive. The definition in cl 1.2 of the phrase “Plan of Subdivision (Balance Land)” necessarily requires the plan to be based upon the Annexure 2 Plan, while contemplating that the plan may be varied under cl 7.3. This constitutes an additional constraint.

24. [107]

    It is strictly unnecessary to determine Ground 2 in circumstances where Mr Giles SC properly conceded that the appellants needed to win on both Grounds 1 and 2 for the appeal to succeed.

25. [108]

    I respectfully agree, however, with the primary judge’s reasons for concluding that Lendlease’s failure to be able to exercise its option to call for the sale of Property 6 means that it can no longer acquire Properties 7 to 10. I shall highlight the primary matters.

26. [109]

    First, as is reflected in the Annexure 2 Plan and in the Key Items Schedule, Property 6 played a pivotal role in the sequential disposal by the Landowners (or sequential acquisition by Lendlease) of Properties 6 to 10. Subclauses 8.1 and 8.6 refer respectively to the Landowners irrevocably offering to sell to Lendlease “each relevant Property” for the Price and on the other terms set out in the Sale Contract in the Deed and the first appellant irrevocably offering to buy “each Property” for the Price and on the other terms set out in both the Sale Contract and the Deed. “Price” is defined in cl 1.2 to mean “in relation to each Property, the purchase price to be paid under the Sale Contract, which is the amount specified for that Property in the Key Items Schedule”. Thus, the Key Items Schedule forms an essential part of the bargain. As noted at [96]–[100] above, it defines the Sale Offer Period, the Purchase Offer Period, the Price, the Sale Offer Fee and the Completion Date for each of Properties 6 to 10. The completion of the contract relating to Property 6 is an essential prerequisite to the exercise of any put or call in respect of the remaining Properties making up the Balance Land.

27. [110]

    Secondly, I have explained above why Lendlease has failed to establish any error in the primary judge’s rejection of Lendlease’s construction that the references in the Key Items Schedule to “after the date of completion of Contract 6” should be read as meaning the date on which completion of Contract 6 could have occurred.

28. [111]

    Thirdly, the actual date of completion of Contract 6 is critical to the operation of several provisions in the Deed. As noted above, cll 11 and 18 are two such provisions, but the primary judge was correct also to refer to cll 20.2 and 27. The former provision states that the “Balance Licence” which the Landowners are obliged to give to Lendlease commences on the date of the Deed in respect of certain activities, but in relation to all other activities commencement is from “the date of completion of Contract 6”. Clause 27 relates to bank guarantees. It is provided in cl 27.1 that Lendlease must deliver to the Landowners various bank guarantees in respect of Contracts 7 to 10 “[o]n or before the date of completion of Contract 6”. All these provisions highlight the practical significance of identifying the actual date on which Contract 6 was completed.

29. [112]

    Fourthly, Lendlease’s complaint that the primary judge’s approach converts the Deed into a straight sale agreement is not persuasive. The Deed retains its essential character as conferring put and call options but the exercise of those options has been stymied because of Lendlease’s actions, which have resulted in Contract 6 not being completed in accordance with the Deed. There is no dispute that, in the events that have occurred, Contract 6 can never be completed.

(g) Conclusion

1. [113]

   For all these reasons, I propose that the appeal be dismissed with costs.