Alamdo Holdings Pty Ltd v Reece Australia Pty Ltd

This proceeding concerns a commercial lease between the Plaintiff, Alamdo Holdings Pty Ltd, and the Defendant, Reece Australia Pty Ltd (the Lease). The principal issue for determination is whether the Lease was validly terminated on 27 June 2023 or whether it remains on foot.

The Lease was executed on 23 December 2022 and is expressed to be for a period of ten years, with a number of options to renew. The Premises which are the subject of the Lease are Unit 4, 6-8 Hudson Avenue, Castle Hill, being one of four units in a commercial warehouse building.

Reece contends that it terminated the Lease on 27 June 2023, pursuant to Article 29(9), which provided that “either party may terminate this lease if an Occupation Certificate is not obtained within the period ending six (6) months from the Commencement Date”. It is common ground that an Occupation Certificate was not obtained by the relevant date (namely, 23 June 2023).

Alamdo contends that Reece was unable to rely on the express right to terminate in Article 29(9) of the Lease, as it was Reece’s own default that caused the delay in obtaining an occupation certificate. In particular, Alamdo contends that the delay resulted from Reece’s breaches of:

The claim brought by Alamdo is for rent and outgoings said to have fallen due following 27 June 2023. If Reece validly terminated the Lease, then this claim must fail. If not, then Reece did not advance any other ground for asserting that the Lease had come to an end, or for disputing the sum claimed by Alamdo.

Reece has brought a cross claim against Alamdo, which will rise or fall depending on the outcome of Alamdo’s claim against Reece. The cross claim relates to a bank guarantee in the amount of $149,640 which was provided by Reece on 7 March 2023 as security for the performance of its obligations under the Lease (the Bank Guarantee). On 14 September 2023, Alamdo called on the Bank Guarantee and, on 21 September 2023, funds totalling $149,640.00 were transferred by the National Australia Bank (NAB) to Alamdo. It was common ground that:

Accordingly, the main issues that arise for determination are:

Each of the parties called a single lay witness.

Alamdo called its principal, Mr Anthony Maurici.

Reece called Ms Aranka Young of Novatec Design Pty Ltd, who was engaged by Reece to manage Reece’s development application.

There was no challenge to the credit of either witness.

In its closing written submissions, Alamdo submitted that Reece had, without explanation, failed to call:

Alamdo submitted that it should be inferred that the evidence of any such witness would not have assisted Reece’s case.

However, for the most part, the factual background was uncontentious. The findings set out below are principally based on the contemporaneous documentary record. In setting out the relevant events, I address any factual matters of significance which were in dispute (and any particular inferences sought by Alamdo regarding such events, which Alamdo contended could be more confidently drawn in the absence of Mr Williams or any employee of Reece).

The previous tenant of the Premises was Flip Out Australia Pty Ltd, which operated an indoor trampoline facility. Flip Out vacated the Premises in 2021.

In around April 2021, Alamdo and Reece commenced negotiations in respect of a lease of the Premises. On 21 June 2021, Alamdo and Reece entered into a non-binding Heads of Agreement, which granted Reece an exclusive due diligence period for 30 days.

The Heads of Agreement contemplated that Reece would undertake fit-out works “required to enable Reece to operate its business from the [Premises]”. By around this time, Reece had already prepared fit-out plans for the Premises, which were provided to Alamdo.

On 19 August 2021, the Council issued Alamdo with “Fire Safety Order Number 1”, pursuant to section 9.34(1)(b) of the Environmental Planning and Assessment Act 1979 (NSW) (the Fire Safety Order).

The Fire Safety Order directed Alamdo to undertake certain fire safety works to the commercial warehouse building within which the Premises were located. The Fire Safety Order identified 17 separate items in respect of which works were required to be undertaken, namely:

The reasons for the making of the Fire Safety Order were stated to be as follows:

The Fire Safety Order stated that compliance with the order “must be achieved by 15 February 2022” (emphasis in original). The Fire Safety Order further stated that non-compliance was an offence, for which substantial penalties could be imposed.

The Fire Safety Order was signed on behalf of the Council by Mr Charbel Gittany, whose title was “Senior Building Surveyor – Fire Safety”.

Although Alamdo sent a number of emails to the Council requesting an extension of this deadline, there was no evidence that any such extension was formally granted.

Alamdo did not provide Reece with a copy of this Fire Safety Order during the negotiations in respect of the Lease. Reece only learned of the existence of the Fire Safety Order, as the result of a search conducted by its solicitors, shortly prior to entry into the Lease.

As outlined below, the works that were necessary in order to bring the building into compliance with the Fire Safety Order had not been completed by the time that the Lease was entered.

In September 2021, Reece engaged Novatec to prepare an initial plan or concept drawing for the Premises. Ms Young was responsible for managing this project.

Ms Young has been a director of Novatec since 1993. In that period:

Shortly after Novatec was retained by Reece, Novatec in turn engaged Mr Brent Williams of BW&A National Building Consultants. Mr Williams’ initial engagement was to ascertain, amongst other things, the building’s type of construction, in order to determine whether a fire-rated wall would be required between the Premises and the adjoining unit in the building (Unit 5).

On 1 October 2021, Mr Maurici informed the Council that Flip Out had vacated the Premises, and that the Premises were to be leased to another tenant who would be using them for “storage, distribution and sales of hardware, building and landscaping supplies”. On 5 October 2021, the Council informed Mr Maurici that it would be necessary for the new tenant to lodge a development application for the change in use and for any building works which were proposed.

Subsequently, Mr Maurici provided Reece with various documents relating to Flip Out’s tenancy of the Premises, including the development consent obtained by Flip Out from the Council, and a report which had been prepared for Flip Out by BuildCert Consultants, dated 9 December 2013. This report contained the following statements in a section headed “Purpose of Building Report”:

The BuildCert report identified the building as being of “Type A” construction. The report contained a section headed “Building Code of Australia Assessment” which set out, on a clause-by-clause basis, the deemed-to-satisfy provisions in the Building Code of Australia (BCA), and which stated whether each provision was applicable or not (and, if it was, indicated whether there was compliance, non-compliance or “capable of compliance with design”).

On 20 October 2021, Mr Mitchell Howes, an engineer who was engaged by Reece, inspected the Premises. On 22 October 2021, Mr Howes provided a report to Reece which raised various “Fire Rating Issues”, including that the intertenancy wall between the Premises and Unit 5 did not meet the requirements for a fire wall.

On 26 October 2021, Reece forwarded Mr Howes’ report to Alamdo. Several hours later, Mr Maurici wrote to Reece, disputing the conclusions of Mr Howes and stating that there was “no requirement for a fire wall” as the building was of “Type A construction”. (It should be noted that the experts in this matter agreed with Mr Maurici’s conclusion.) In the same email, Mr Maurici stated that there had been “enough delay” and that Alamdo would be “seeking other tenants for the premises”.

This communication appears to have brought the lease negotiations to a halt for a period of around eight months.

In around June 2022, negotiations appear to have recommenced.

On 14 June 2022, Ms Natashia Radford, the Property Development Manager at Reece, contacted Mr Brendan Wein of CBRE, Alamdo’s real estate agent, with a query regarding “the construction/detail of the wall separating [the Premises and Unit 5] and if any fire rating has been installed on this wall”. Mr Maurici responded the following day, confirming that “the wall does not require to be fire rated because it is within a compartment that does not exceed the maximum permissible area or volume”. Mr Maurici noted that Mr Howes was “not a BCA consultant”, and invited Reece “to have a BCA consultant review the premises”.

On 18 August 2022, Ms Young, emailed Mr Williams of BW&A to request “a quotation for a NCC [National Construction Code] report base[d] on the documents in this dropbox”. Ms Young stated that BW&A was to issue a report to Reece “so they can negotiate a lease contribution deal to make the site comply”. Ms Young also noted that it would be necessary “to do a change of use at council etc…”. Ms Young confirmed in cross-examination that she was aware, at this time, that there would need to be development consent for Reece’s fit-out of the Premises and for the change of use, and that the proposed report from BW&A was “a step along the way to that process”.

On 30 September 2022, BW&A provided Novatec with a draft report “for comment”. Ms Young stated in cross-examination that this report was commissioned so that if the project “progressed to construction certificate stage we had some ideas of what [we] needed to address”. This report described the “Scope of Review” as follows:

This report identified the building as being of “Type A” construction and concluded with the following “Findings”:

On 21 October 2022, the Council issued a development consent in respect of an application made by a business called Dutton for the occupation and fit-out of Unit 5 for use as a car dealership (Dutton DA). This development consent was granted around one month after the Dutton DA was lodged, and appears to have been granted without a BCA report having been provided by Dutton to the Council.

On 8 November 2022, Ms Radford sent an offer for the lease of the Premises to Alamdo’s agent (Mr Matthew Alessi of CBRE), and attached Reece’s proposed fit-out and the draft report provided by BW&A in September 2022.

On 11 November 2022, Mr Maurici sent Reece a counter-offer, and also provided comments on the draft BW&A report. Mr Maurici stated that he had “offered to recommend a more competent building surveyor, because the report contains many errors [of] fact and incorrect recommendations primarily based on their engineer’s [Mr Howes’] report”. Mr Maurici expressed the view that the report was “correct” in stating “that an OC [Occupation Certificate] could be obtained”, but that its conclusions regarding “fire walls and resistance” were “incorrect”, and repeated that Mr Howes’ report had “erroneously” stated that “the intertenancy wall should be a fire wall”. Mr Maurici concluded that he was “confident that no major upgrade works will be required to the premises”. Ms Radford forwarded these comments to Ms Young, who in turn forwarded them to Mr Williams, stating that she “would prefer not to have any surprises for documentation and permits if things proceed”.

On 17 November 2022, Mr Maurici sent an email to Ms Radford attaching the BCA compliance report prepared for Flip Out by BuildCert (see paragraph [30] above), together with:

In this email, Mr Maurici stated that: “As I am confident that the building complies to your use and will require minimal compliance works, Alamdo is prepared to carry out any BCA compliance work to the base building, should any issue arise in this regard…”. On the same day, this correspondence was forwarded by Reece to Novatec.

In December 2022, Novatec was preparing a development application for Reece in respect of the Premises. Ms Young gave evidence that a member of her staff, Mr Bradley McKinley, was putting together the documents for this application under her supervision.

Ms Young acknowledged during cross-examination that, at this time, the Council was not a council that she was “familiar dealing with”. She recalled being shown a “council checklist” downloaded from the internet, which included a reference to a BCA report (although there was no form of the checklist in evidence which was issued by the Council as at that date and which bore such a reference). Ms Young gave evidence that Mr McKinley had made a telephone call to the Council on 15 December 2022, to confirm what was required for the development application. Mr McKinley informed Ms Young that he had been told, in this call, that in order to make the development application, Novatec “needed to obtain a BCA report”. Mr McKinley did not convey to Ms Young that the Council employee had told him anything regarding what the BCA report needed to include.

Ms Young explained that it was her view at that time, based on previous development applications, that a BCA report generally identifies whether “a particular element is likely to comply”, but does not “provide any advice”, because “at the end of the DA process the council will put conditions in the approval process and what they want”.

Ms Young also gave evidence that, on the same day, she informed Reece that the Council required a BCA report to accompany the development application. She did this so that Reece “understood [Novatec] needed to procure one”, because she needed to get approval to incur the related costs.

Ms Young’s evidence that Novatec was informed by the Council, on 15 December 2022, that the Council required a BCA compliance report in order to assess Reece’s development application is confirmed by the following matters:

I accept Alamdo’s submission that, given the timing of Ms Young’s request and Mr Williams’ response, and given the content of the BCA Report Version 1, it appears that Mr Williams prepared this report in less than a day, based on another document. In particular, the opening words of the report state that it is based on a review of design development drawings dated September 2021 and prepared by “Bruce Mactier (Architect)”. There were no such drawings prepared by Mr Mactier. Ms Young agreed in cross-examination that Mr Mactier is a person who had no involvement with Reece’s development application.

The BCA Report Version 1 identified the building as being of “Type A Construction”. Leaving aside the preliminaries, the entirety of the substantive part of the report was as follows:

As set out above, Mr Williams’ report referred to “NCC 2019 Volume 1 Amendment 1”. It was common ground that the relevant version of the BCA at all material times is the version headed “National Construction Code Volume 1 - Building Code of Australia 2019 Amendment 1”.

In her email which forwarded the BCA Report Version 1 to Reece on 16 December 2022, Ms Young advised that it “does not need to go [to] the building owners as it is for a council DA” (emphasis in original), and stated that she did not want the landlord “using this document for his OC purposes”.

On 16 December 2022, Reece’s solicitors sent to Ms Radford a “Certificate as to Orders” of the same date. This Certificate was issued by the Council, and indicated that the Fire Safety Order was still outstanding. The Certificate stated that Mr Charbel Gittany of the Council should be contacted for any further information regarding this matter.

On 19 December 2022, Ms Radford sent an email to Mr Maurici which attached the Certificate in respect of the Fire Safety Order, and sought assurance that Alamdo had “this in hand” and that the required works would “be completed prior to lease commencement”. On the same day, Mr Maurici responded to Ms Radford, describing the Fire Safety Order as “an old notice” which “has been addressed by both our fire services contractor and also our fire engineering consultant”. Mr Maurici provided comments in respect of each of the seventeen items in the Fire Safety Order. He indicated that eleven of them had been addressed, and that the remaining six were “in hand”, these being items numbered 4 (fire hydrant booster – thrust block), 5 (fire hydrant booster – assembly), 10 (travel distance to exit), 13 (separation of external walls and opening in different fire compartments), 15 (sprinkler – certification) and 17 (mechanical air handling system). Mr Maurici also stated as follows:

Shortly after receipt of this email, Ms Radford asked Mr Maurici: “do you have the close out doc’s / has council sent through a letter to confirm the items [in the Fire Safety Order] have been completed?” Mr Maurici responded as follows:

On 19 December 2022, Ms Young sent Reece a copy of the “documents that will form the DA submission once Reece approves”. Ms Young listed, in a series of bullet points, the relevant documents including “BCA Compliance Assessment” (that is, the BCA Report Version 1), and attached a copy of each of them.

On 20 December 2022, Novatec uploaded Reece’s development application to the Planning Portal (Development Application).

The “Pre-Lodgement Application Form”, which was completed by Novatec when submitting the Development Application, included the following statement:

The Development Application sought approval from the Council to:

The documents provided with the Development Application included the BCA Report Version 1.

On 21 December 2022, Ms Radford forwarded Ms Young’s email of 19 December 2022 (see paragraph [57] above) to Mr Maurici, stating: “Please see attached the DA to be submitted into council for your approval”. It appears that, before this email was forwarded to Mr Maurici, Ms Radford deleted the reference to the “BCA Compliance Assessment” from the series of bullet points in Ms Young’s email, and removed the BCA Report Version 1 as an attachment to that email. Reece did not provide any explanation as to why Ms Radford sought Mr Maurici’s approval of the Development Application only after it had been submitted to the Council, or as to why she did not provide a copy of the BCA Report Version 1 to him (and instead deleted the reference to the “BCA Compliance Assessment” from the email which she forwarded). It is likely that Ms Radford chose to remove this report from the materials forwarded to Mr Maurici based on Ms Young’s previous statement that it did not “need to go” to Alamdo (see paragraph [52] above).

Approximately one hour later, Mr Maurici responded, stating that the Development Application was “OK” and adding: “do not lodge unless the lease is signed”.

On Friday, 23 December 2022, Alamdo and Reece entered into the Lease.

Article 28 of the Lease permitted Reece to carry out fit-out works. It relevantly provided as follows:

It was common ground that (as is apparent from the above clause) the terms “Premises” and “Demised Premises” were used interchangeably in the Lease to refer to the Premises.

Article 29 of the Lease provided as follows:

The term “Base Building” was not defined, but the term “Building” was defined in Article 1.08 as follows:

Article 18.01 of the Lease required Reece to provide a bank guarantee to Alamdo as security for the performance of its obligations. (Reece subsequently provided the Bank Guarantee in the amount of $149,640.00 on 7 March 2023.)

Article 18.05 provided that:

On 23 December 2022, Ms Radford sent an email to Mr Maurici, confirming “the DA has been lodged but our consultant is now on xmas leave”.

On 4 January 2023, Council issued a notice to Novatec, stating that the fee payable in respect of the Development Application was $2,458.00. This notice stated that a failure to pay this amount “within 2 business days, may result in your application being returned in the NSW Planning Portal and requiring resubmission”.

At this time, Novatec’s offices were shut for the Christmas holiday period.

On 10 January 2023, Mr Maurici sent an email to Ms Radford, stating that he could not find any record of the Development Application on Council’s website and seeking confirmation that it had been lodged.

At 9.39am on 12 January 2023, upon the reopening of its office, Novatec paid the fee in respect of the Development Application.

By 17 January 2023, Mr Gittany had completed his initial review of the Development Application. As noted at paragraph [22] above, Mr Gittany was the Council officer who had signed the Fire Safety Order.

Mr Gittany determined that the BCA Report Version 1 was “unsatisfactory” for the following reasons:

Mr Gittany concluded as follows (emphasis in original):

On 2 February 2023, the Council issued its first request for information to Novatec in respect of the Development Application (the First RFI).

The First RFI stated that, pursuant to s 36 of the Environmental Planning & Assessment Regulation 2021 (NSW) (EPA Regulation), Novatec was requested to provide, within 30 days, certain “additional information to enable the further processing of [the Development Application]”.

The First RFI stated that the Council’s Fire Safety officer had reviewed the application and had made a number of comments. The First RFI then set out, verbatim, Mr Gittany’s criticism of the BCA Report Version 1 and the additional information which he had determined should be provided in respect of the Development Application (see paragraphs [77]-[78] above).

In addition, the First RFI requested a “floor plan of the proposed mezzanine”, details regarding “the proposed number of staff and patrons expected to be on site”, and confirmation as to whether consent was sought for operation of the Premises on Sundays.

The First RFI concluded by stating that the Development Application would be “held in abeyance pending receipt” of the requested information.

On the day of receiving the First RFI, Ms Young informed Ms Radford that the Council had requested a copy of the Fire Engineering Report prepared by Red Fire Engineers (copying the text of paragraph 2 of the First RFI into her email), and asked if Reece had a copy of the report. Ms Radford immediately forwarded this request to Mr Maurici, who responded on the same day, attaching a copy of the report.

Red Fire Engineers had been retained in 2018 by “Croc’s”, a previous tenant of Unit 5 to prepare a fire engineering assessment of the proposed fit-out of that unit as a playcentre for children. The matters addressed in the report were the floor covering that was to be used for the children’s play areas and the sign, which was constructed out of a combustible aluminium panel, that was to be attached to an external wall. Those matters were of no relevance to Reece’s application in respect of the Premises. The statement in this report that the building was of “Type B construction” was, as noted above, incorrect.

Also on the day of receiving the First RFI, and within less than half an hour of its receipt, Ms Young sent an email to Mr Williams, alerting him to the Council’s “comments on the NCC report you provided”, and promising to send him the report from Red Fire Engineers when it was received. Ms Young accepted in cross-examination that she understood that there was an urgency in dealing with the First RFI, and that she wanted to address it as quickly as she could.

On the following Monday, 6 February 2023, Mr Williams responded to Ms Young’s email, stating that he would review his report and “prepare [an amended version] along the lines of the request by council”. He also asked for the “latest drawings including the mezzanine floor”, which the Council had requested.

Ms Young confirmed in cross-examination that, at around this time, she understood that Mr Williams would be providing her with a revised BCA report by Friday, 10 February 2023. However, on 9 February 2023, Mr Williams sent an email to Ms Young stating that he would not able to get the revised report to her by the following day, adding that: “I clean forgot I will be in the Yarra ranges tomorrow”. He indicated that he would have the report completed by “early to mid-next week”.

Shortly after receipt of this message, Ms Young replied to Mr Williams, adding the word “URGENT” to the subject line of the email. She stated that “any delays in answering Council are difficult”, explaining that Alamdo was “pressuring [Reece] to achieve a DA within a certain timeframe, there is a significant rent penalty involved”. She concluded as follows:

Ms Young confirmed in cross-examination that she was, by this time, concerned about the delay:

Despite the urgent terms in which Ms Young’s email was expressed, she did not receive a revised report from Mr Williams by the deadline she had stipulated (14 February 2023), or for another two weeks thereafter.

On 16 February 2023, Ms Young had a discussion with Mr Gittany. She took a handwritten note of this conversation. (Ms Young confirmed in cross-examination that she could not remember anything of this call, other than what was in the note.) The note records that Mr Gittany told her: “Building owner has not complied with any fire orders – still outstanding”. The note also contains the following statements:

It is apparent from this note that Mr Gittany did not say anything to indicate that a BCA report which only “addresses the fitout as compliant” would be acceptable.

On the following day, 17 February 2023, Ms Radford sent an email to Mr Maurici, seeking confirmation that the works required by the Fire Safety Order had been completed. On 18 February 2023, Mr Maurici replied as follows:

Ms Radford forwarded this email to Ms Young. On 20 February 2023, Ms Young replied to Ms Radford, noting that the conditions of consent to the Dutton DA required “what could be perceived as Owners works to be completed in item 8”, and that she expected similar clauses to be written into the consent to Reece’s Development Application.

Item 8 of the consent to the Dutton DA required upgrading works to be undertaken in respect of various fire safety measures, including the fire hydrants, fire extinguishers, emergency lighting and exit signage. As set out below, Ms Young’s expectation proved correct, with similar conditions subsequently being imposed on the consent to Reece’s Development Application.

On 23 February 2023, Mr Williams carried out a site inspection of the Premises.

On 27 February 2023, Ms Young had a telephone call with Ms Madison Morris from the Council in respect of the First RFI. Ms Young deposed as follows:

Accordingly, this conversation appears to have largely resolved the issue regarding the Red Fire Engineering Report.

On the same day, Ms Young informed Ms Radford of the outcome of this conversation, and indicated that she had discussed with Mr Williams the results of his site visit and that he would issue “the BCA report” later that day, adding: “then we can complete the RFI ASAP”.

On 28 February 2023, Mr Williams sent an email to Novatec attaching a "Building Inspection Report". This report consisted of one page of text and a few photographs, and appears to have been compiled following his site visit. The Building Inspection Report records the following "notes":

On 28 February 2023, Ms Young sent the Building Inspection Report to Ms Radford, and noted that Novatec had informed Mr Williams “that Reece were not intending to use mezzanine”. Later the same day, Reece provided Novatec with a letter addressed “To whom it may concern”, confirming that:

Also on 28 February 2023, Mr Williams provided to Novatec a draft revised BCA Report which was designated as “Version 2.0” (BCA Report Version 2).

On 1 March 2023, Ms Young sent an email to Mr Williams and to Mr Peter Adorna of Reece, attaching a marked-up version of the BCA Report Version 2 for "consideration and amendment". Ms Young noted in her email that the report would "go to the building owner via Reece and to the council for the DA RFI". Ms Young also noted that Novatec was preparing “new architectural drawings showing new STD Reece mezzanine over bunking”.

On 3 March 2023, Novatec sent updated drawings to Mr Williams, requesting that he “finalise the report as soon as you can so we can get this back into council”. On 6 March 2023, Ms Young chased up Mr Williams for a response to this email “as soon as possible”, noting that "the council RFI closing date has lapsed".

On 7 March 2023, Mr McKinley sent an email to Ms Morris of the Council, requesting an extension of time for Novatec to respond to the First RFI.

On the following day, 8 March 2023, Mr McKinley sent a further email to Ms Morris, attaching a response to the First RFI, along with various attachments, including revised drawings and a revised BCA Compliance Report which was marked as “Version 3.0” (BCA Report Version 3).

The covering letter contained the following response to “RFI Item 2”, which was consistent with the telephone conversation between Ms Young and Ms Morris (referred to in paragraph [98] above):

The BCA Report Version 3 identified the building as being of Type A construction. The report contained a table which addressed individual provisions of the BCA, with various items being stated to be “Not applicable to fitout works”. The report concluded with a “Summary of Non-Compliance Issues”. The first item in that summary was as follows:

On 9 March 2023, Novatec was advised by the Council that the response to the First RFI was required to be submitted via the Planning Portal, and that its email attaching that response “will not be actioned”. Novatec submitted the document via the Planning Portal around five minutes later.

In cross-examination, Ms Young agreed that the response to the First RFI was not expeditious; that the process of preparing a response to the First RFI was poorly managed by Mr Williams; that he did not treat this task with any degree of urgency; and that there was no reason why, if he had done so, “a fulsome response to [the First RFI] could not have been provided a week or two after 2 February 2023”.

On 9 March 2023, Ms Radford forwarded to Mr Maurici an email from Ms Young, attaching a copy of the BCA Report Version 3 and setting out the “Summary of Non-Compliance Issues” from that report. In respect of the first issue identified in this summary (namely, that the “Panel Wall between tenancies 4 & 5 is not fire rated”), Mr Maurici responded as follows:

Mr Maurici followed this up with a further email a few hours later, noting that the BCA Report Version 3 did not refer to the Mobius advice of 12 December 2015 which had concluded that the building was of Type A construction (see paragraph [43] above). Mr Maurici attached another copy of that document. He asked that this material be sent to Mr Williams “for consideration in finalising his report and submit it to council at your earliest convenience to avoid further delay”.

On the morning of 14 March 2023, Mr Maurici sent an email to Ms Radford, asking whether the BCA Report Version 3 had been amended in light of the comments in his emails of 9 March 2023 (quoted at paragraphs [112]-[113] above). Mr Maurici's email continued as follows:

Within approximately half an hour of that correspondence being sent, Ms Radford responded to Mr Maurici by email, copying in Ms Young and requesting that Ms Young provide an update in respect of the response to the First RFI. Shortly afterwards, Ms Young forwarded Ms Radford's email correspondence to Mr Williams, stating that Mr Maurici's comments in respect of the BCA Report Version 3 were "serious" and requesting that Mr Williams "assist in answering the technical question on Building Type for [Mr Maurici]".

On 22 March 2023, Ms Young emailed Mr Williams, again requesting an answer to her query in respect of the “Building Type” of the Premises which was sent on 14 March 2023 and noting that Novatec wanted to “close this out with council ASAP”. Mr Williams responded on the same day, stating that BW&A had “identified the building as Type A” and that the BCA Report Version 3 had “referenced an old fire engineering report [namely, the Red Fire Engineers Report in relation to the playcentre fit-out for Unit 5] that indicated the building as Type B”.

As noted at paragraph [108] above, the response to the First RFI stated that the Red Fire Engineers Report was “not applicable to the current Unit 4 tenancy” and that the query raised by the Council in the First RFI (regarding the reference in that report to the building being of “Type B” construction) “shall be deemed closed out”.

Mr Gittany reviewed Novatec's response to the First RFI and prepared a memorandum dated 9 March 2023 setting out his comments, as follows:

On 16 March 2023, the Council issued its second request for information in relation to the Development Application (the Second RFI). The Second RFI stated that the Council’s Fire Safety officer (namely, Mr Gittany) had reviewed the BCA Report Version 3, and set out, verbatim, the six bullet points set out in Mr Gittany’s memorandum of 9 March 2023.

On the day that Novatec received the Second RFI, there was a telephone conversation between Mr McKinley and Mr Gittany. This conversation was referred to in an email which Mr McKinley sent to Mr Gittany in respect of the Second RFI on the following day (17 March 2023). The email recorded that Mr Gittany had indicated that he would be “happy if [Novatec] removed the existing mezzanine stairs, so the existing mezzanine will not be considered in any floor area calculations”. Mr McKinley’s email of 17 March 2023 attached new drawings which showed the mezzanine stairs being removed.

On 22 March 2023, Mr Gittany prepared an internal Council memorandum, in which he recorded that he had “reviewed the updated plans and [was] satisfied that the floor area of the mezzanine is less than 200m²”. Accordingly, the issues raised in Mr Gittany’s 9 March 2023 memorandum and the Second RFI regarding the mezzanine appear to have been resolved by the material provided by Novatec on the day after the issuance of the Second RFI. However, Mr Gittany recorded that it remained necessary for a further version of the BCA report to be prepared in order to address his other concerns:

On 24 March 2023, Ms Morris sent an email to Mr McKinley, setting out the comments of Mr Gittany that are quoted above.

On the same day, Mr Maurici had a telephone conversation with Mr Paul Curran, a Fire Safety Coordinator at the Council. Mr Maurici deposed that Mr Curran made statements to him to the following effect:

At 11.48am on 29 March 2023, BW&A sent Novatec “Version 4.0” of the BCA Report (BCA Report Version 4). At 3.14pm on the same day, Mr McKinley emailed BW&A to advise that “the old DA drawing” had been used in the BCA Report Version 4, and provided an “attached DA drawing to replace the old plans in the report”. Mr McKinley also attached a copy of the BCA Report Version 4, which was marked up “with a few minor tweaks required”. Mr McKinley requested that BW&A attend to these matters, so that Novatec could submit its response to the Second RFI by close of business that same day.

Shortly afterwards, at 3.53pm, Mr Maurici sent an email to Mr Adorna and Ms Young, in which he referred to his discussion with Mr Curran:

It is apparent from the terms of Mr Maurici’s conversation with Mr Curran, as relayed to Reece and Novatec, that the main issue which was delaying the Council’s assessment of the Development Application was not any confusion over the construction type of the building (with the Council agreeing that it was Type A, as stated in each version of Mr Williams’ BCA reports), but rather the fact that the Council had not, despite its previous requests, been provided with a report which undertook a clause-by-clause assessment of the building, rather than the fit-out, against the provisions of the BCA.

At 4.03pm, on the same day, 29 March 2023, Ms Young forwarded Mr Maurici’s email to Mr Williams, requesting that Mr Williams provide “the updated BCA report as soon as possible”.

On 4 April 2023, Mr McKinley sent a follow-up email to BW&A, requesting that the BCA Report Version 4 be “finalised and issued”, adding that “[Novatec] were expecting this last week so I am hoping someone can attend to this ASAP”.

On the morning of 6 April 2023, Ms Young again chased up Mr Williams for the amended report, stating as follows:

Ms Young confirmed in cross-examination that it was her view at the time that the time taken to respond to the Second RFI was “excessive”.

Later on the same day, BW&A provided “Version 5.0” of the BCA Report to Novatec (BCA Report Version 5). At 3.24pm, Mr McKinley sent Ms Morris an email attaching, in response to the Second RFI, updated DA drawings and the BCA Report Version 5.

The BCA Report Version 5 concluded with a “Summary” identifying non-compliances. The first point in this summary was in the following terms (which are substantially the same as in the BCA Report Version 3, but with a further sentence now added in bold):

At 3.40pm on 6 April 2023, Ms Young forwarded Novatec’s response to the Second RFI to Mr Adorna, stating that this material had now been sent to the Council and uploaded to the Planning Portal. Ms Young quoted the “Summary” section of the BCA Report Version 5, and stated as follows: “I don’t think we should entertain [Mr Maurici] with this until we see what conditions council put onto the permit.”

In the period during which the response to the Second RFI was being prepared, there were further communications between Reece and Alamdo regarding the Fire Safety Order. It is apparent from the terms of those communications that, at this time, Alamdo still had not completed the works necessary to comply with the Fire Safety Order.

On 21 March 2023, Ms Radford sent an email to Mr Maurici requesting an update on the “land lord compliance works that have been completed”. On the same day, Mr Maurici responded to Ms Radford as follows:

On 28 March 2023, Ms Radford sent a further email to Mr Maurici, copying Ms Young and Mr Adorna, asking Mr Maurici to confirm via email that the items on the Fire Safety Order “do not incorporate” any of the “common area, allocated car parks etc” and that “an Occupancy Cert[ificate] has been obtained for those areas”. Ms Radford further noted that “this was [her] last day at Reece”.

On 29 March 2023, Mr Maurici sent a response to this email to Mr Adorna and Ms Young, stating as follows:

Mr Maurici accepted, in cross-examination, that as at the end of March 2023, there were still works to be done in order to comply with one item of the Fire Safety Order and that Alamdo had not received sign-off from the Council that there had been compliance with that order.

On 11 April 2023, there was a telephone call between Ms Young and Mr Gittany. Ms Young took a contemporaneous handwritten note of this conversation. According to this note, Mr Gittany told Ms Young that “what he was after” was “all issues [with the] building” (that is, he wanted the BCA compliance report to identify any issues of non-compliance with respect to the building). In this conversation, Mr Gittany referred to section 64 of the EPA Regulation which applies, relevantly, to “a development application that involves … alteration of an existing building” in certain circumstances (which are addressed below), and requires the consent authority to consider “whether it is appropriate to require the existing building to be brought into total or partial conformity with the [BCA]”. According to Ms Young’s file note, Mr Gittany made the following statement regarding how this process should occur:

It is apparent, from Mr Gittany’s comments, that he was of the view that the BCA Report Version 5 was not sufficient, because it had not addressed “all issues [with the] building” and had not provided “a list of full non compliances”.

On the same day as his conversation with Ms Young, Mr Gittany prepared a memorandum which was dated 11 April 2023 and was addressed to Ms Morris. This memorandum stated as follows:

On 21 April 2023, Ms Morris sent an email to Mr McKinley, stating that Mr Gittany had a number of “remaining fire safety concerns”, and requesting that an amended BCA report be provided which addressed the five numbered points raised by Mr Gittany in his memorandum (which were set out in the body of Ms Morris’ email). This request was referred to in submissions as the Third RFI.

On the same day that Ms Morris provided the Third RFI to Mr McKinley, he responded to her email. He stated that he had tried to call Mr Gittany to discuss the Third RFI, but had been unsuccessful. Mr McKinley provided some comments in response to the first four items in the Third RFI, as follows:

On 27 April 2023, Mr McKinley sent a further email to Ms Morris following up in respect of the comments he had provided in response to the Third RFI on 21 April 2023.

On 3 May 2023, Mr Gittany and Mr McKinley had a telephone conversation regarding the “outstanding matters” in the Third RFI. On the same day, Mr Gittany sent Mr McKinley an email in which he referred to this conversation, and stated as follows:

On the following day, 4 May 2023, Mr McKinley responded to Mr Gittany’s email, setting out a summary of Mr McKinley’s comments on items 1-4, as follows:

Mr McKinley’s email concluded as follows: “Once we have final comments from yourself [Mr Gittany] on the above, we can finalise the BCA report and be in a position to get this DA issued”.

On 18 May 2023, Mr McKinley sent an email to Mr Gittany and Ms Morris, attaching an updated set of DA drawings and an updated BCA Report, marked “Version 6.0” (BCA Report Version 6) in response to the Third RFI. The summary of non-compliances in the BCA Report Version 6 contained the same statement in respect of the Panel Wall separating Units 4 and 5 as had appeared in the BCA Report Version 5 (see paragraph [132] above).

In this email, Mr McKinley provided the following comments on Items 1–4 in the Third RFI:

Mr McKinley concluded his email by asking Mr Gittany and Ms Morris to “proceed to finalising the DA”.

It should be noted that Mr McKinley did not provide any comments on Item 5 of the Third RFI. Item 5 contained a request for “any recommendations by the author” of the BCA report, which was similar to previous requests by the Council for “Design Advice”. The BCA Report Version 6 included the following statement:

Ms Young gave evidence that she called the Council about the requirement for “design advice”, in order to convey her understanding that design advice cannot be given by a building surveyor if they have been appointed for the project including for a construction certificate. It appears accepted that such advice was not required for the assessment of the Development Application, as the Council subsequently proceeded to issue the Development Consent without any such advice having been received.

On 19 May 2023, Ms Young sent an email to Reece confirming that “all information has been provided to council this week” and that there were “NO RFI’s left to answer”.

By 23 May 2023, Mr Gittany had completed his review of Novatec’s response to the Third RFI and the BCA Report Version 6. He set out his conclusions in a memorandum of that date which was addressed to Ms Morris. Mr Gittany stated that section 64 of the EPA Regulation required the Council to determine “if the measures contained within the building are satisfactory to protect persons using the building and assist in their egress in the event of a fire and restrict the spread of fire to other nearby buildings”. He stated that he had inspected the Premises, and that he had “reviewed the proposed plans and the existing fire safety measures in the building”. He identified the following five “BCA issues … that need to be addressed”:

Mr Gittany concluded his memorandum as follows:

Mr Gittany proposed that, pursuant to section 64 of the EPA Regulation, certain upgrades, set out in eleven numbered paragraphs, be undertaken with the construction certificate works and be completed prior to an occupation certificate being issued.

On 1 June 2023, the Council issued its consent to Reece’s Development Application (Development Consent).

The Development Consent was subject to a number of conditions, including, relevantly, Condition 9, which stated as follows:

The eleven items in this condition corresponded with the eleven items that had been set out in Mr Gittany’s memorandum of 23 May 2023 (see paragraph [156] above).

On 6 June 2023, Mr Kerr sent an email to Ms Young, stating that, pursuant to the Lease, Reece was obliged to obtain a Construction Certificate within 14 days of obtaining Development Consent, and requested that Novatec “commence the necessary documentation/applications and provide proof that this has occurred within the prescribed timeframe”.

Ms Young acknowledged in cross-examination that, as matters eventuated, the application for a Construction Certificate was never finalised or submitted. (It appears that this was due to certain paperwork required to progress the application not being completed prior to Reece’s issuing of a notice of termination of the Lease.)

On 7 June 2023, Mr Kerr of Reece sent an email to Mr Maurici which sought, amongst other things, confirmation that if Lessor Works delayed the approval of an Occupation Certificate, Alamdo would, pursuant to Article 29(8) of the Lease, extend the rent free period until an Occupation Certificate was obtained. Mr Kerr stated that Reece was “formally requesting [Alamdo’s]… approval on this item as this condition has not been fulfilled”. Mr Maurici responded later that day, and sought clarification regarding what, in Reece’s view, had not been fulfilled by Alamdo. Mr Kerr replied that “[Reece] don’t have an Occupancy Certificate therefore we need [Alamdo] to acknowledge that the rent free period will be extended… so that Reece can cease monthly rent payments”.

On 8 June 2023, Mr Maurici refused this request. (It should be noted that Reece did not claim, in these proceedings, to have been entitled to any such extension of the rent-free period under the terms of the Lease.)

On 17 June 2023, Mr Maurici sent an email to Mr Kerr, copied to Mr Devereux and Mr Adorna, which included the following statements:

On 21 June 2023, Mr Kerr replied to Mr Maurici, stating that:

On 27 June 2023, the solicitors for Reece sent a letter to Alamdo which stated as follows:

On 29 June 2023, the solicitors for Alamdo responded as follows:

On 14 September 2023, Alamdo called on the Bank Guarantee. On 21 September 2023, the amount of $149,640 was transferred by the NAB to Alamdo.

On 11 August 2023, Alamdo commenced this proceeding by filing a Summons, seeking, inter alia, a declaration that the Lease remains on foot, and judgment for the amount of the unpaid rent and outgoings up to the date of judgment.

On 29 September 2023, Reece filed a Cross-Summons, seeking a declaration that the Lease was terminated by Reece on and effective from 27 June 2023, and judgment for the amount of the Bank Guarantee.

Between 27 July 2023 and 23 May 2025, Alamdo issued Reece with invoices for rent and outgoings in respect of the Premises.

On 30 June 2025, Alamdo’s solicitors sent an email to my Chambers, copied to Reece’s solicitors, setting out agreed calculations for Alamdo’s entitlement to rent and outgoings, in the event that Alamdo’s claim is established. Those calculations were as follows:

The central issue in this case is the interpretation and application of Article 29(9) of the Lease, which provides as follows:

Article 29(9) is expressed to be “subject to” Alamdo complying with Article 29(5), which provides as follows:

It is common ground that, as at the date that Reece sought to terminate the Lease in reliance on Article 29(9):

Alamdo contended that the effect of the opening words of Article 29(9) was that the right of either party to terminate arose only after the point in time when Alamdo had fully complied with its obligations under Article 29(5) (referred to below as the Temporal Limitation). It followed, on this interpretation, that as at 27 June 2023, Reece did not have any right to terminate the Lease.

Further, Alamdo contended that any reasonable businessperson reading Article 29(9) would understand that “implicit in the right to terminate is a requirement that the party seeking to rely upon the clause to terminate could not, by its own breach or default, be the cause of the failure to obtain the occupation certificate”. This is referred to below as the Own Default Limitation. This limitation on the right to terminate was said to arise either as a matter of the proper construction of Article 29(9) or as an implied term. As outlined below, Alamdo contended that Reece had breached Article 29(1) and Article 29(2) of the Lease, and Reece’s breaches caused or materially contributed to Reece’s failure to obtain an Occupation Certificate by 23 June 2023, with the result that Reece was unable to rely on Article 29(9) to terminate the Lease.

Reece disputed each of those alternative interpretations advanced by Alamdo. Reece contended that the effect of the opening words of Article 29(9) was that the parties had agreed that there was only one circumstance in which either of them would be unable to rely on the termination right set out in that article: that is, Alamdo would not be entitled to rely on Article 29(9) in the event that it had failed to comply with its obligations under Article 29(5). This is referred to below as the Specific Breach Limitation. It followed, on this interpretation, that any breach by Reece of Article 29(1) or (2) could not be of any consequence for Reece’s right to terminate under Article 29(9).

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean: Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7 at [35] per French CJ, Hayne, Crennan and Kiefel JJ. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract: Electricity Generation at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[47] per French CJ, Nettle and Gordon JJ.

Ordinarily, this process of construction is possible by reference to the contract alone: Mount Bruce Mining at [48]. The inquiry will start, and usually finish, by asking what is the ordinary meaning of the words used and the grammatical context in which the words operate: Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 at [53]-[54] per Leeming JA (Macfarlan JA and Sackville AJA agreeing).

The Court’s task of determining the legal meaning of a written contract involves weighing up the different considerations based on the text, context and purpose, and “checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences”: Norton Property Group Pty Ltd v Ozzy States Pty Ltd (in liq) [2020] NSWCA 23 at [44] per Leeming JA (Payne JA agreeing), referring to Re Sigma Finance Corp (in administrative receivership) [2010] 1 All ER 571; [2009] UKSC 2; at [12].

Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”: Electricity Generation at [35].

In performing such a task, it is important to keep in mind the following observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70 at [43]:

Where the literal meaning of the contractual words is an absurdity, and the objective intention of the parties is self-evident, ordinary processes of contractual construction will displace an absurd literal meaning by a meaningful legal meaning: National Australia Bank Ltd v Clownes [2013] NSWCA 179 at [34] per Leeming JA (McColl and Macfarlan JJA agreeing). Importantly this principle is premised upon absurdity, not ambiguity: see Westpac Banking Corporation v Tanzone Pty Ltd (2000) 113 NSWLR 73; [2000] NSWCA 25 at [21] (per Priestley and Fitzgerald JJA and Foster AJA).

Where the words are unambiguous, and there is no such absurdity, the literal meaning of words cannot be ignored simply to reach a result that is apparently more commercially convenient: HDI Global Speciality SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 at [22].

These principles regarding the interpretation of commercial contracts apply to the construction of a written commercial lease: Haxglow Pty Ltd v Mirvac Retail Sub SPV Pty Ltd [2020] NSWSC 233 at [33] (Darke J).

Alamdo placed reliance on a “presumption or principle” that a party cannot take advantage of its own breach or default to terminate a contract. The leading case is Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 which concerned a contract for the sale of a station property known as “Gundowda”. It was a condition of this contract that certain consents were to be obtained from Treasury within two months of the date of the contract. An issue arose as to the responsibility for the delay in acquiring the relevant consents. The Court (Latham CJ, Williams and Fullagar JJ) referred (at 440) to the following observations of Lord Atkinson in New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 at 9:

In Suttor, the Court observed (at 441) that:

In Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212 at [55], Powell JA (with whom Stein JA and Rolfe AJA agreed) described Sutton as involving “the application … to the agreement then under consideration of what has been described as a ‘rule of construction’ based upon a broad proposition that a party is not entitled to take advantage of his own default or wrong”.

It was common ground that this is a not “a principle of law to be applied irrespective of the apparent intention of the parties”, but rather “a principle to guide the construction of a contract, which can give way to sufficiently clear expressions of intention to the contrary”: MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 at [42], Hodgson JA (with Beazley and Ipp JJA agreeing).

This “own default” principle has been referred to and applied in various authorities including in Rudi’s Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 at 578 and TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130.

Rudi’s Enterprises concerned a deed for the sale of the business of a ski lodge, restaurant and bar located in Thredbo, NSW. Clause 5 of the deed provided that completion was subject to the written consent of the Director of National Parks and Wildlife Service, which owned the land on which the business was conducted. Clause 6 provided that if such consent was not granted, “then this Deed shall be null and void”. The deed also contained provisions regarding the making of applications for the required consents.

Samuels AP (with whom Priestley and McHugh JJA agreed) quoted (at 578) a passage from Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 at 188-189, in which Lord Diplock referred to:

Samuels AP observed as follows (at 579-580, emphasis added):

TCN Channel 9 concerned a television production agreement which gave Channel 9 a right to terminate in the event that a related contract for the provision of services by a particular television personality “comes to an end”. Channel 9 repudiated the latter agreement and claimed that, as a result, it was entitled to terminate the former. The Court of Appeal rejected this argument.

Hope JA (with whom Priestley and Meagher JJA agreed) stated (at 147) that:

Channel 9 argued that its repudiation did not bring about the termination of the agreement in relation to the television personality, which only occurred when that repudiation was accepted. Hope JA held that (at 189):

Alamdo submitted that the introductory words of Article 29(9) (“Subject to the Lessor complying with [Article 29(5)]”), introduced “a temporal limitation on the right to terminate under article 29.9, which only arises where the parties have reached the point in time at which the obligation under article 29.5 of the procedure to be followed for the performance of the Lessor’s works has arisen”.

Alamdo submitted that this interpretation is consistent with the language of Article 29(9) and “makes commercial sense”, for the following reasons:

I do not accept this submission.

First, as a matter of ordinary language, the words “subject to the Lessor complying with [Article 29(5)]” indicate that the exercise of the right is conditional upon the performance by the Lessor of a particular obligation, and not that the right can only be exercised after a particular point in time. The relevant temporal limitation in Article 29(9) is that the right to terminate does not arise until the conclusion of “the period ending six (6) months from the Commencement Date”. At that point in time, the right to terminate will arise if an Occupation Certificate has not been obtained, “subject to” Alamdo having performed its obligations under Article 29(5). If, at that point in time, no obligations on Alamdo have arisen under Article 29(5) (either because a Construction Certificate has not been obtained, or because there are no “compliance works to the Base Building, stemming from the conditions of consent and Construction Certificate”), then this condition is satisfied.

Secondly, the interpretation advanced by Alamdo would result in commercial inconvenience. In a situation where Reece had fully complied with its obligations under Article 29(1)-(2), and the Council had not provided Development Consent by 23 June 2023, Reece would not be entitled, on Alamdo’s construction, to terminate the Lease at that point in time. Instead, in that situation:

Reece contended that the Material Breach Limitation advanced by Alamdo “seeks to read into the clause words which do not appear”, submitting as follows:

Reece submitted that it “follows that, whether or not Reece was in breach of another provision of Article 29 is immaterial”.

I do not accept this submission.

First, I do not consider that, as a matter of language, the express reference to the right of termination under Article 29(9) being “subject to” Alamdo’s compliance with a particular provision of the Lease conveyed an intention that the right of termination would not be subject to any other limitation, or that any default by Reece could have no effect on its ability to exercise that right.

Secondly, such an interpretation would be uncommercial. This can be illustrated by positing a situation where all steps required by Article 29(1)-(6) and all of the works by Reece and Alamdo are completed by, say, early May 2023, but then Reece, in breach of its obligations under Article 29(7), fails to make an application for an Occupation Certificate within two days, and still has not made an application by 23 June 2023. On Reece’s interpretation, it would be entitled to terminate the Lease in such circumstances, despite the failure to obtain an Occupation Certificate being caused by its own breach of the Lease. I accept Alamdo’s submission that no reasonable businessperson would construe the power to terminate as operating in this way, so as to give, in substance, Reece a six-month option to lease the Premises.

Although I have rejected the Temporal Limitation advanced by Alamdo and the Specific Breach Limitation advanced by Reece, I accept that, as both parties submitted, the opening words of Article 29(9) must be given some work to do.

It was a matter of commercial importance to Reece that an Occupation Certificate be obtained as soon as possible. Article 26 of the Lease provided for a rent-free period of three months from the Commencement Date. After that period expired, Reece would, until the issue of an Occupation Certificate, be paying rent for premises which it could not occupy or use to operate its business.

Similarly, it was a matter of commercial importance to Reece that the obtaining of an Occupation Certificate not be delayed as a result of any delay by Alamdo in completing any works which it was required to undertake. This concern is reflected in:

Having regard to those matters, I consider that the objective intention of the parties, in specifying that the right of termination in Article 29(9) was “subject to” Alamdo complying with Article 29(5), was to make Alamdo’s ability to exercise that right conditional upon Alamdo having complied, as at the relevant point in time, with its obligation to perform the Lessor’s Works “expeditiously and continually” (to the extent that such obligation had, by that time, arisen). If Alamdo had not done so, then it would be disentitled from relying on the right of termination in Article 29(9) by reason of such non-compliance. That would be so, by operation of Article 29(9), irrespective of whether there was any causal connection between such non-compliance and the failure to obtain an Occupation Certificate by 23 June 2023.

However, it does not follow that this was the only limitation on the right to terminate.

In Article 29, the parties agreed on a “Procedure to be Followed” in the six-month period from the date when the Lease was entered. The objective purpose of stipulating this procedure was to ensure that both parties actively and expeditiously took steps in order to obtain an Occupation Certificate by the end of this period.

For its part, Reece was also required to meet tight deadlines in order to secure this object, and in particular was required to:

In addition to those express obligations, Reece was obliged to do all such things as were necessary to enable Alamdo to have the benefit of the Lease (Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45 at [36]; per Gleeson CJ, Gummow, Kirby and Hayne JJ).

Those features of the Lease support, rather than displace, the application of the principle of construction preventing a party who is in breach of a contract from taking advantage of a right of termination that arises as a result of its own default. (I address below the nature of the causal connection that must be established.)

Reece relied on the following observation of Hodgson JA in Metro Edgley (at [47]):

Reece submitted, in reliance on the above statement, that since the issuing of an occupation certificate is not a matter uniquely within either party’s control, and there are many matters that could cause the non-fulfilment of this condition, the Court should conclude that “the Suttor principle does not apply at full strength”, such that Article 29(9) is not subject to the Own Default Limitation.

As is apparent from the quotation set out above, Hodgson JA was using the phrase “the Suttor principle” to refer to the statements in Suttor (at 441) that a stipulation “that the contract shall be void on the happening of an event” is “to be construed as making the contract not void but voidable”, both in the case where “the event in question is one which cannot occur without default on the part of one party to the contract”, and also in the case where “the event … may be brought about by failure on the part of either party to take certain necessary steps … or … without any default on the part of either party”.

Hodgson JA was, in this passage, expressing the view that this particular principle applied most powerfully where the event in question could “occur only through a breach of contract by one or other party”. Similar views were expressed by Samuels AP in Rudi’s Enterprises at 578-579.

In the present case, Article 29(9) does not provide for the Lease to be “void” if an Occupation Certificate is not obtained by 23 June 2023, but instead for each party to have a right to terminate in such circumstances. This provision is to be interpreted having regard to the “well known rule of construction” that “it is to be presumed that it was not the intention of the parties that either party should be entitled to rely upon his own breaches of his primary obligations as bringing the contract to an end” (Rudi’s Enterprises at 578).

I accept Alamdo’s submission that Reece could not simply breach or fail to fulfil the obligations imposed on it in respect of the “Procedure” in Article 29 of the Lease, with the result that an Occupation Certificate was not obtained by 23 June 2023, and then rely on Article 29(9) to terminate the Lease. Such an outcome would undermine the commercial purpose of the Lease and of Article 29 itself.

In summary, the effect of the opening words of Article 29(9) is to deprive Alamdo of the ability to exercise the right of termination under that clause if Alamdo has failed to comply with its obligations under Article 29(5) (irrespective of the causal consequences of any such breach); and the inclusion of those opening words does not displace the principle of construction that Reece cannot rely on the right of termination under Article 29(9) if its own default has brought about the event which triggers that right.)

Alamdo submitted that the requisite causal connection will be established where the default of the party who is seeking to terminate the contract “materially contributed” to the non-performance of the event which gives rise to the right to terminate.

In contrast, Reece submitted that it is necessary to establish a “direct causal link” between the breach and the relevant event.

As outlined below, both formulations have been used in the authorities, and have been harmoniously applied.

In Nina’s Bar Bistro Pty Ltd v MBE Corp (Sydney) Pty Ltd [1984] 3 NSWLR 613, a contract for the sale of a business involved the proposed assignment of a lease, and required the parties to obtain the consent of the lessor to that assignment. The contract provided that, if the lessor’s consent was not obtained by the completion date, either party could terminate. The purchaser purported to terminate in reliance on this provision, and a dispute arose as to whether the purchaser could exercise this right of termination, in circumstances where the purchaser was alleged to have delayed in taking certain steps for the purposes of obtaining that consent. On appeal, a question arose as to whether, irrespective of any such conduct on the part of the purchaser, the lessor’s consent would not have been obtained by the required date in any event.

Mahoney JA observed that “the question is whether, had those obligations been performed, the consent would in fact have been obtained”; and, on the facts of that case, concluded that “as a matter of probability, the lessor’s consent would not have been obtained” by the relevant date (at 621, emphasis added). Glass JA agreed that “the evidence does not support a finding that if the purchaser had fully performed its obligations to use its best endeavours the lessor would probably have given its consent to the transfer of the lease” (at 614, emphasis added).

Priestley JA (in dissent) found that the purchaser had been guilty of other default which amounted to repudiatory conduct.

In Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW ConvR 55-461, a contract for the sale of land contained a special condition permitting rescission of the agreement if the Club did not obtain development consent. The relevant clause imposed an obligation on the Club to “pursue such application diligently”. Development consent was obtained, subject to a requirement that the Club obtain a lease from the State Rail Authority for the provision of a carpark. No such lease was obtained, and the Club sought to rescind the contract. The vendor contended that the Club was not entitled to rely on the right to rescind the contract because it had failed to use its best endeavours to procure satisfaction of the relevant condition. On appeal, the parties agreed that, in order for the Club to be disentitled from relying on the right of rescission, it was necessary to establish, on the balance of probabilities, that had the Club complied with its “best endeavours” obligation, a lease from the State Rail Authority would have been obtained (at 58,336).

Mahoney JA (with whom Kirby P and Samuels JA agreed) referred to the decision in Nina’s Bar and framed the issue to be addressed as follows: “if the Club’s failure to use its best endeavours did not result in the lease not being obtained, that would not deprive the Club of its right to rely on the fact that the lease was not obtained” (at 58,337, emphasis added). His Honour considered that this accorded with “common sense” and the objective intention of the parties, observing that:

In Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34, McLelland CJ in Eq referred to the decisions in Nina’s Bar and Italo-Australian Club, and framed the question of causation as follows:

Reece relied on this decision of McLelland CJ in Eq as stating the relevant principle. However, in another decision handed down shortly afterwards, his Honour framed the issue of causation in different terms. In Hunyor v Tilelli (1997) 8 BPR 15,629, McLelland CJ in Eq turned to consider again the question of causation in such a situation, particularly where there are multiple potential causes of the relevant condition not being fulfilled. His Honour framed the relevant principle which emerged from Suttor as follows (at 15,633, emphasis added):

In Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Incorporated (1998) 9 BPR 16,823, Young J referred to the above quotation from Hunyor and continued as follows (at 16,826, emphasis added):

Young J concluded on the facts of that case as follows: “As it has not been shown that the vendor caused or materially contributed to the [relevant event], the vendor is not disentitled from relying on [the right of termination arising on that event]” (at 16,829, emphasis added).

In Mitchell v Pattern Holdings, Powell JA formulated the relevant principle in terms similar to those adopted in Hunyor and Sanctuary Investments, as follows (at [56], emphasis added):

His Honour did not regard this as a principle that was inconsistent with, but instead as a principle that emerged from, the decision in Nina’s Bar, describing it (at [57]) as a case in which:

It follows that his Honour regarded the requirement for “a direct causal relationship” as capable of being satisfied where the default in question “materially contributed” to the occurrence of the relevant event.

Given that is so, I do not accept Reece’s submission that a test of “material contribution” is inconsistent with statements in the authorities that there is a need for:

Framing the principle in the terms adopted in Mitchell v Pattern Holdings – namely, whether the default “brought about, or at least materially contributed to, the occurrence of the relevant event” – is consistent with the observations of Taylor, Menzies and Owen JJ in Gange v Sullivan (1966) 116 CLR 418; [1966] HCA 55. Their Honours described the principle which emerges from the Suttor line of authority as follows (at 441-442, emphasis added):

This passage has frequently been cited and applied at an intermediate appellate level, including in VS Property and Holding Pty Ltd v Zurzolo [2024] VSCA 199 at [68] (per Niall, Walker and Kenny JJA); Alliance Building and Construction Pty Ltd v Veesaunt Property Syndicate 1 Pty Ltd [2024] QCA 75 at [26] per Bond JA (Mullins P and Dalton JA agreeing); and Kheng v Secola & Ors [2001] WASCA 3 at [13] per Pidgeon J (Ipp and Wallwork JJ agreeing).

In Masters v Belpate Pty Ltd [2001] NSWSC 169 at [66], Hodgson CJ in Eq referred to Young J’s decision in Sanctuary Investments and considered the meaning of the phrase “materially contributed to”. His Honour observed as follows (emphasis added):

Similarly, in Mordue v Kroone [2009] NSWSC 255 at [16], Brereton J referred to Sanctuary Investments, Masters v Belpate and Mitchell v Pattern Holdings, in framing the relevant principle in the following terms:

This test has been adopted by the Victorian Court of Appeal. In Joseph Street Pty Ltd & Ors v Tan & Ors (2012) 38 VR 241; [2012] VSCA 113 at [47], the Court (Warren CJ, Nettle JA and Cavanough AJA) stated as follows, citing Mordue:

This principle has subsequently been applied in a number of first-instance decisions in this Court, including Abourjaily v Parkview Estate Pty Ltd [2017] NSWSC 1256, Tamanna v Zattere [2017] NSWSC 1388, and Sentinel Orange Homemaker Pty Ltd v Davis Investment Group Holdings Pty Ltd (in liq) [2021] NSWSC 550.

For reasons set out above, I am satisfied that, on a proper construction of Article 29(9), a party may not exercise the right of termination in that provision in circumstances where its own breach of the Lease has caused, or materially contributed to, an Occupation Certificate not being obtained within six months of the Commencement Date (that is, by 23 June 2023).

In the light of that conclusion, it is unnecessary to address Alamdo’s alternative contention that a term to this effect should be implied into the Lease in order to give business efficacy to the Lease, in accordance with the principles in BP Refinery (Westenport) v Shire of Hastings (1977) 180 CLR 266 at 282-283.

Given the conclusion that I have reached on the construction issue, the following further issues must be addressed in order to resolve the dispute between the parties:

If those questions are answered in the affirmative, the result is that Reece was not entitled to terminate the Lease pursuant to Article 29(9). Given that Reece did not advance any alternative basis upon which the Lease was said to have come to an end, it would follow that the Lease remains on foot and Reece is obliged to pay the outstanding rent and outgoings up to the date of judgment.

If either of those questions is answered in the negative, then Reece was entitled to terminate the Lease on 27 June 2023 in accordance with Article 29(9), by reason that an Occupation Certificate had not been obtained by the end of the specified period. It would then follow that Reece has no obligation to pay any rent or outgoings from that date, and is therefore entitled to the return of the amount of the Bank Guarantee.

Article 29(1) of the Lease provides that Reece “must apply to [the Council] for development consent for its Lessee’s Works and use of the Premises on or prior to 23 December 2022”.

Alamdo contended that:

In response, Reece contended that, in order to comply with the obligation to “apply to [the Council] for development consent … on or prior to 23 December 2022”, Reece had to submit an application by that date, and that Reece did so when Novatec submitted the Development Application via the Planning Portal on 20 December 2022.

The critical question therefore is one of construction. If Alamdo’s construction is accepted, and it was necessary for the Development Application to be lodged by the specified date, then Reece breached Article 29(1). If, however, Reece’s construction is accepted and it was necessary for the Development Application to be submitted by that date, then there was no such breach.

Section 24 of the EPA Regulation draws a distinction between the “submitting” and the “lodging” of an application for development consent. It relevantly provides as follows:

An application is “submitted” when it is submitted on the Planning Portal, but “lodged” when the fee is paid.

Article 29(1) does not use the verbs “submit” or “lodge”, but “apply”.

As a matter of ordinary language, the requirement to “apply” for development consent is more naturally read as a requirement to submit an application for such consent. In contrast, the notion of “lodgement” is a term adopted by the EPA Regulation in order to identify the point in time at which an application which has been submitted will begin to be processed. In effect, the EPA Regulation requires any necessary fee to be paid before an application will be assessed.

In order to submit the Development Application on the Planning Portal, Novatec had to complete a “Pre-Lodgement Application Form” (the title of that document suggesting that “application” occurs before “lodgement”). Importantly, this form stated as follows:

Accordingly, before an application which had been submitted could be lodged, three steps had to be taken (two of which were out of the control of the applicant):

It follows that there was necessarily a gap between the submission and the lodgement of an application, and the applicant could not control how long that gap would be.

This conclusion is supported by the following evidence of Ms Young, which was not challenged in cross-examination:

As matters eventuated, there was a gap of more than two weeks between Novatec submitting the Development Application (on Tuesday, 20 December 2022) and the Council notifying Novatec of the fee payable in respect of that application (on Wednesday, 4 January 2023).

The interpretation advanced by Alamdo is, having regard to those matters, uncommercial, in that it would have required Reece to do something which could not practically be done. The Lease was entered on Friday, 23 December 2022, and required Reece to “apply” for development consent by that same date. On Reece’s construction, this could be achieved, and was achieved, by submitting an application. However, on Alamdo’s application, Reece was required not only to submit the application on that day, but also pay the applicable fee (which was yet to be calculated by the Council, and was not notified by the Council to Novatec until well after that date).

This issue was raised with Senior Counsel for Alamdo in closing submissions:

Having regard to those matters, I find that Article 29(1) of the Lease required Reece to submit an application for development consent on or prior to 23 December 2022. Reece complied with this obligation, as the Development Application was submitted via the Planning Portal on 20 December 2022. It follows that Article 29(1) was not breached.

Article 29(2) of the Lease required Reece to “provide all plans, statements and other information required for Council to expeditiously process its application”.

It was common ground that, although in this clause the adverb “expeditiously” is attached to an action (“process”) which a third party (the Council) is to perform, Reece was required “expeditiously” to “provide” the documents and information required for this purpose. It would make a nonsense of the provision if Reece were free to take as long as it wished to provide the information required for the Council to expeditiously process its application.

Similarly, it was common ground that the term “required” included:

In relation to the latter point, Reece submitted that, as a matter of construction, the obligation to “provide all plans, statements and other information required for Council to expeditiously process its application” is limited to that which is lawfully required, and that delays occasioned by unlawful requests cannot ground a claim for breach of Article 29(2). In this regard, Reece relied on the proposition that a contract “must be read as being intended to be executed with due regard to the law”: Langley v Foster (1906) 4 CLR 167 at 187 per Barton J.

As a general proposition, this may be accepted. For example, if a Council officer had “required” that a bribe be paid in order for the Development Application to be expedited, Reece could not have been in breach of the Lease by refusing such a request. However, Reece did not allege there to have been any illegality of that type. Instead, Reece submitted that a number of the requests made by the Council were beyond the scope of the power under the EPA Regulation pursuant to which those requests were made, and therefore any delay by Reece in responding those requests could not constitute a breach of Article 29(2).

I am not persuaded that the provision was intended to operate in this way. It would not make commercial sense for Article 29 – which placed a repeated emphasis on moving with expedition, avoiding delay, and meeting tight timeframes – to operate in such a way that Reece would be permitted to delay in answering requests from the Council whenever there was a contestable issue regarding whether a particular request for information went beyond the scope of the power conferred on the Council by various provisions of the EPA Regulation.

In any case, it has not been established that any of the requests made by the Council was “unlawful” in this sense, for reasons set out below.

Reece’s submissions on this issue focussed on whether the Council had power, pursuant to section 64 of the EPA Regulation, to request a clause-by-clause assessment of the existing building’s compliance with the deemed-to-satisfy provisions of the BCA.

That focus is understandable, given that:

In his telephone conversation with Ms Young on 11 April 2023 (see paragraph [139] above), Mr Gittany expressly referred to s 64 when explaining that he was seeking that BW&A “provides a list of full non compliances” so that the Council could then “decid[e] what they will accept”. Further, in the memorandum which Mr Gittany prepared prior to the Council issuing the Development Consent to Reece (see paragraph [154] above), Mr Gittany recorded that he had made various enquiries in order to determine, pursuant to s 64:

The language used by Mr Gittany in his memorandum closely mirrors the language of s 64(1)-(2) of the EPA Regulation, which provides as follows:

Reece’s contention that the requests made by the Council (and drafted by Mr Gittany) were beyond power was as follows:

The first proposition in this argument was contested, as Alamdo submitted that each of s 64(1)(a) and s 64(1)(b) was satisfied. However, it is unnecessary to determine this issue, for the reasons given below.

It was common ground that:

The dispute between the parties was whether, in such circumstances, there should be some limitation read into s 64(2), to the effect proposed by Reece.

There is no justification for such a limitation. There is nothing in the statutory language to indicate that the scope of the obligation imposed on a consent authority by s 64(2) varies depending on whether the gateway in s 64(1)(a) or s 64(1)(b) has been satisfied.

Further, one of the objects of the Environmental Planning and Assessment Act 1979 (NSW) is “to promote the proper construction and maintenance of buildings, including the protection of the health and safety of their occupants”: s 1.3. It is difficult to see how it is consistent with that object for a consent authority, in circumstances where a development application has been made to alter an existing building and where it is known that the fire-safety measures in the building are inadequate, to be unable to consider whether there are other respects in which the existing building does not comply with, and should be brought into compliance with, the BCA.

Instead, I accept Alamdo’s submission that, in circumstances where the “gateway” in s 64(1) was satisfied (by either s 64(1)(a) or s 64(1)(b)), the obligation in s 64(2) applies, and the Council was, in accordance with the terms of that provision, required to consider, when determining the Development Application, whether it was appropriate to require the existing building to be brought into total or partial conformity with the BCA. It follows that the Council was entitled to request information for the purposes of addressing this mandatory consideration in s 64(2) of the EPA Regulation, including a clause-by-clause assessment of the existing building’s compliance with the BCA and a full list of non-compliances.

Finally, even if (contrary to the findings above) the Council’s power to request information for the purposes of considering the matter in s 64(2) of the EPA Regulation was limited to requests in respect of the adequacy of the fire safety measures in the existing building, then the evidence of Reece’s own expert, Mr Haskew, was that each of the three numbered requests for information in the First RFI (see paragraphs [78] and [81] above) was “necessary” for this purpose. In particular, Mr Haskew expressed the following opinion in his expert report:

It follows that the requests made by the Council to Novatec, which were made for the purpose of assessing the extent of the existing building’s non-compliance with the BCA and whether to require the existing building to be brought into total or partial conformity with the BCA, were within power, having regard to the terms of s 64 of the EPA Regulation.

Given the matters outlined above, it is unnecessary to address in any detail Reece’s further submission that the requests made by the Council were outside the scope of the power conferred by s 36(1) of the EPA Regulation, which provides as follows (emphasis added): “A consent authority that receives a development application may request additional information about the development from the applicant”. Reece contended that “the development” in the present case comprised the fit-out works, and therefore the requests made by the Council in relation to the existing building’s compliance with the BCA were not requests “about the development”. For the reasons given above, I am satisfied that those requests were made for the purpose of assessing the matter in s 64(2), which had to be considered as part of determining the Development Application, and were therefore “about” the development. Further, the parties’ respective fire engineering experts (Mr Harriman and Mr Halstead) agreed as follows in the Joint Report:

There was a dispute between the parties as to whether a BCA compliance report was “required” to be submitted to the Council with the Development Application.

Reece disputed that there was any such requirement.

Reece relied on the following matters:

These matters are of limited significance. The issue to be determined in the present case is whether a BCA compliance report was “required” within the meaning of Article 29(2). It was common ground that information would be “required for Council to expeditiously process [the Development Application]”, within the meaning of that clause, if the Council specifically requested such information for the purposes of processing the Development Application.

In that regard, the evidence establishes that the Council expressly told Novatec, prior to the submission of the Development Application, that it “needed to obtain a BCA report for a fit-out”. This was understood by Novatec and Reece to be a request for a BCA compliance report. On the same day that the Council told Novatec that a “BCA report” was required, Ms Young contacted Mr Williams, requesting him to prepare “a BCA Compliance Report” for the Council in respect of the Premises (see paragraphs [46]-[49] above). The report that Mr Williams provided on the following day was headed “Preliminary Regulatory BCA Compliance Assessment” (emphasis added). When Ms Young provided this report to Ms Radford, she described it as “a BCA report that needed to be done as part of the change of use for the [Development Application]”.

Given that the Council specifically requested that a BCA compliance report be submitted with the Development Application, it follows that such a report was “required” within the meaning of Article 29(2) (irrespective of the fact that a BCA compliance report was not specified as required in any regulation or guideline, or was not required in respect of the Dutton DA, or was not understood by Mr Maurici to be required).

Further, the evidence of the town planning expert called by Reece, Mr Haskew, was that, having regard to the terms of the EPA Regulation, it was at least “best practice”, if not mandatory, for a BCA compliance report to be submitted. In his report, he expressed the following opinions (emphasis added):

In cross-examination, Mr Haskew gave the following evidence regarding the documentation required for a development application for a fit-out and change of use of industrial premises:

Immediately after giving this evidence, the following exchange occurred:

Similarly, the fire engineering expert called by Alamdo, Mr Harriman, gave the following evidence in his report:

If (as Mr Haskew and Mr Harriman agree) the purpose of a BCA report is to provide information to assist the consent authority in carrying out its assessment, pursuant to s 64(2) of the EPA Regulation, whether to require the existing building to be brought into total or partial conformity with the BCA, then the BCA compliance report should identify, on a clause-by-clause basis, the extent to which the existing building complies or does not comply with the BCA, so that the Council can assess what works would be required in order to bring the building into “total” conformity with the BCA.

Mr Halstead, a fire engineering expert who was called by Reece, gave the following evidence when asked to explain “what you would call in your profession a BCA compliance report”:

Mr Halstead explained that, if he had been asked to provide “a BCA compliance report”, he would have inspected the building; considered the proposed fit out; “analyse[d], by reference to the BCA, where [he thought] there may or may not be non-compliances”; “work[ed] out whether or not there are any potential solutions [he could] offer up in relation to BCA compliance”; and then prepared a report.

For those reasons, I find that the Council’s request that a “BCA report” be provided with Reece’s development application (which was understood by Novatec to be a request for a “BCA compliance report”) was a request for a report which provided a clause-by-clause assessment of compliance with the deemed-to-satisfy provisions of the BCA.

It follows that a report containing information of this type was, within the meaning of Article 29(2), “required for Council to expeditiously process” the Development Application. Further, insofar as Reece or Novatec had any doubt about the scope or contents of the “BCA report” that had been requested by the Council, then it was incumbent on them, having regard to Reece’s obligation under Article 29(2), to make enquiries so as to clarify the specific “information” which the Council had, by this request, “required” to be “provided” for the purposes of processing the Development Application.

Novatec provided the BCA Report Version 1 to the Council when submitting the Development Application on 20 December 2022.

Ms Young gave evidence that Novatec provided the BCA Report Version 1 to the Council “in satisfaction” of what Ms Young understood to be the Council’s “BCA report requirement”.

However, it does not follow that Reece thereby complied with its obligation under Article 29(2).

There was a dispute as to whether the BCA Report Version 1 constituted a BCA compliance report, in the sense described above, and as to whether the BCA Report Version 1 contained the “information required for Council to expeditiously process” the Development Application.

The BCA Report Version 1 was produced in a single day, without Mr Williams having conducted any inspection of the Premises. It contained a series of statements that:

The BCA Report Version 1 concluded with the following statement:

Reece submitted that, insofar as there was a need for a BCA compliance report to accompany a development application, all that was required, at that stage of the process, was a report which expressed an opinion as to whether the development was “capable of compliance” with the BCA, and that the BCA Report Version 1 was sufficient for this purpose. Reece contended that the appropriate time for a clause-by-clause assessment of compliance with the BCA was not at the time that a development application is submitted or assessed, but at the Construction Certificate stage (referring to s 19(1)(c) of the Environmental Planning and Assessment (Development Certification and Fire Safety) Regulation 2021 (NSW)).

In support of this submission, Reece relied on the evidence of Mr Halstead, who expressed the following opinion in his report:

Reece submitted that, consistently with this evidence, the purpose of the BCA Report Version 1 was “simply to provide a level of comfort to the Council that at later stages in the process, whatever issues might arise under the BCA, were capable of being fixed”.

Mr Halstead expressed the view outlined above in circumstances where he assumed that the Council had not stipulated that it was necessary for a BCA compliance report to accompany the Development Application, and that Reece had provided this report, “over and above the minimum submission requirements”, to “assist” the Council in being comfortable that the “development design” was capable of complying with the BCA, with any detailed assessment of compliance occurring “at construction certificate stage”. In fact, as outlined above, the Council expressly told Novatec that a BCA report needed to be obtained for the purposes of the Development Application.

Further, Mr Halstead appears to have assumed that it was inappropriate for the Council to consider, in the course of determining the development application, whether the existing building should be brought into total or partial conformity with the BCA. In particular, he stated in the Joint Report that:

However, as I have addressed above, the Council was required by s 64 of the EPA Regulation to consider, when assessing the Development Application, whether to require the existing building to be brought into total or partial conformity with the BCA. It was not sufficient, for the purpose of assessing this issue, for the Council to receive a report of the type that Mr Halstead proposed, namely, a report as to whether the “subject works” (that is, the fit-out works) were “capable of complying” with the BCA. Instead, the Council required a clause-by-clause assessment of the existing building’s compliance with the deemed-to-satisfy provisions of the BCA.

I accept Mr Harriman’s opinion that the BCA Report Version 1 fell “well short” of what was required for the Council “to assess the requirements of clause 64 of the EPA Regulations”. It did not address the existing building’s compliance with the BCA on a clause-by-clause basis, or identify the extent of any non-compliance.

Further, in the Joint Report, each of the experts expressed the view that the documents provided with the Development Application (and, in particular, the BCA Report Version 1) did not contain all of the information required for the Council to expeditiously process the Development Application.

First, Mr Haskew expressed the opinion in the Joint Report that, in submitting the Development Application, Reece and Novatec did not provide “all plans, statements and other information required for the Council to expeditiously process its application”, since the BCA Report Version 1 omitted an assessment of:

These matters were the subject of specific requests for information in the Second and Third RFIs (see paragraphs [118]-[119] and [140]-[142] above).

Secondly, Mr Harriman and Mr Halstead confirmed that the Joint Report should be corrected so as to record their agreed position as follows (emphasis added):

In cross-examination, Mr Halstead gave the following evidence in relation to this statement:

Thirdly, the town planning expert called by Alamdo, Mr Anthony Betros, also expressed the view in the Joint Report that Reece and Novatec did not provide all plans, statements and other information required for the Council to expeditiously process the Development Application, with the deficiencies being identified in the RFIs issued by the Council.

As outlined below, one of the deficiencies in the material provided by Reece, which was identified in each of the RFIs issued by the Council, was the failure to provide a BCA compliance report which contained a clause-by-clause assessment of the existing building’s compliance with the deemed-to-satisfy provisions of the BCA.

For those reasons, I find that the material in the BCA Report Version 1 was inadequate to satisfy the Council’s requirement for a BCA compliance report, and therefore Reece did not, at the time of submitting the Development Application, “provide all plans, statements and other information required for the Council to expeditiously process its application”.

On 2 February 2023, the Council sent the First RFI to Novatec, which was forwarded to Reece.

Reece placed some reliance on the fact that the Council issued a request for information, rather than rejecting the Development Application. Reece noted that s 39(1)(b) of the EPA Regulation provides as follows:

Reece submitted that, if the Council had been of the view that a clause-by-clause BCA compliance report was “required”, the Council could have simply rejected the Development Application, but it did not do so.

However, there is plainly a distinction between:

Accordingly, I do not consider that the fact that the Council sought further information in respect of the Development Application, rather than rejecting it, has any significant bearing on whether a BCA compliance report was “required” within the meaning of Article 29(2).

In the First RFI, the Council expressly stated that, for the purpose of assessing the Development Application, it required a report that addressed the existing building’s compliance with the BCA on a clause-by-clause basis.

Specifically, the Council stated that:

On receipt of that letter, it must have been clear to Novatec and Reece (whatever their understanding prior to that point in time) that a report containing a clause-by-clause assessment of the existing building’s compliance with the BCA was “required for Council to expeditiously process” the Development Application.

Within less than half an hour of receiving the First RFI, Ms Young forwarded it to Mr Williams, alerting him to Council’s “comments on the NCC report you provided”. Mr Williams did not express any difficulty about the scope or nature of the Council’s request for a revised report. Instead, he responded that he would “prepare [a revised report] along the lines of the request by council”, and appears to have initially promised to deliver his revised report within around a week of the First RFI being issued (see paragraphs [86]-[90] above).

Ms Young, who has extensive experience in respect of development applications for fit-out and change of use, agreed that if “Mr Williams had treated this with a degree of urgency there was no reason why a fulsome response to [the First RFI] could not have been provided a week or two after 2 February 2023” (see paragraph [111] above).

However, as Ms Young acknowledged, Mr Williams “did not treat this with any urgency”, such that the BCA Report Version 3 was not completed and provided to the Council until 8 March 2023, around five weeks after the First RFI. The response to the First RFI was submitted immediately after Novatec received the revised report from Mr Williams. Ms Young acknowledged that taking five weeks to respond was “not expeditious”, and this was due to the task being “poorly managed” by Mr Williams (see paragraph [111] above).

Ms Young’s conclusion is borne out by the evidence summarised at paragraphs [86]-[91], [103]-[107] and [124]-[131] above. In particular, this evidence establishes that there was a failure to meet a series of deadlines and a lack of urgency on Mr Williams’ part.

Reece placed reliance on the fact that s 36(3) of the EPA Regulation provides that a consent authority must “specify a reasonable period” within which requested information must be provided, and the First RFI had specified that the information requested be provided within 30 days. However, the fact that the Council allowed this length of time as a “reasonable period” for Reece to respond does not mean that taking 30 days to respond would have been sufficient to comply with Reece’s obligation under Article 29(2) of the Lease. That clause required “expedition”, in circumstances where the Development Application was the first part of a specified “Procedure to be followed” for the purpose of obtaining an Occupation Certificate by 23 June 2023. (For similar reasons, it is of little consequence that that the time taken to respond to the First RFI was considered by Mr Haskew to be “appropriate” and by Mr Halstead to be “satisfactory”. That is not the issue to be determined.)

Given Ms Young’s evidence regarding the time needed to prepare a report of the type requested by the Council (namely, one to two weeks), I do not consider that, if Reece had provided the requested material within 30 days, Reece would have been acting “expeditiously”.

In any case, Reece did not respond to the First RFI within 30 days and Reece’s response did not adequately address the matters required by the First RFI.

In particular, the BCA Report Version 3, which formed part of the response to the First RFI, did not provide the information which the Council had identified in the First RFI as necessary for the purpose of expeditiously processing the Development Application.

As set out above, the Council had specifically stated, by the First RFI, that it required, for the purposes of assessing the Development Application, a report:

The BCA Report Version 3 did not meet those requirements. In particular, the Second RFI, which was issued on 16 March 2023 (one week after receipt of the response to the First RFI), identified various deficiencies in the BCA Report Version 3, including the following matters.

The Second RFI stated that the Council required these issues to be addressed in order “to expedite [Reece’s] application” (emphasis added).

Despite being told that this information was required for the Council to expeditiously process the Development Application, the response to the Second RFI was not provided until 6 April 2023, when Mr Williams produced the BCA Report Version 5 (with Ms Young again acknowledging in cross-examination that Mr Williams took “excessive time to do a job that should’ve been relatively simple”).

Further, despite Mr Williams having taken three weeks to produce a revised report in response to the Second RFI, his revised report did not address each of the matters raised by the Second RFI, since it continued to omit any reference to D3.2 & D3.3 of the BCA.

Accordingly, in the Third RFI issued on 21 April 2023, the Council had to repeat this request, and again ask for an “amended report” which addressed this issue:

In addition, the Third RFI requested that the BCA Report Version 5 be “amended” to address the following matter:

According to Reece’s own expert, Mr Haskew, the failure to address D3.2 & D3.3 of the BCA (which deal with disabled access) and the path of travel from the rear of the tenancy to the road, meant that there were deficiencies in the BCA Report Version 1, such that Reece failed to provide all information required for Council to expeditiously process the Development Application (see paragraph [317] above). The same must equally be true of the BCA Report Version 3 and the BCA Report Version 5, since each of those reports also failed to address these matters.

The deficiencies outlined above were not addressed until the Council was provided with the BCA Report Version 6 on 18 May 2023, as part of the response to the Third RFI. The Development Consent was granted two weeks later, on 1 June 2023.

Having regard to the matters set out above, I find that Reece failed to comply with its obligation under Article 29(2) of the Lease to “provide all … information required for Council to expeditiously process its application”. In particular, it failed to provide a BCA compliance report, which assessed the existing building against the BCA on a clause-by-clause basis and stated whether the existing building was “compliant” or “non-compliant”, until it provided the Council with the BCA Report Version 6 on 18 May 2023.

The Council was entitled to request this information for the purposes of considering the matters in s 64(2) of the EPA Regulation when assessing the Development Application and, in particular, for the purposes of considering whether it was appropriate to require the existing building to be brought into total or partial conformity with the BCA. It was best practice, if not mandatory, to provide such a report to the Council, in order to expedite the processing of a development application in relation to an existing building, and the Council had specifically stated that it required a BCA report prior to the Development Application being lodged.

The Council subsequently made known, through the First RFI, that the BCA Report Version 1 was deficient, because it did not provide a clause-by-clause assessment of the existing building’s compliance with the deemed-to-satisfy provisions of the BCA. Despite Ms Young’s view that such a report could be prepared in “a week or two”, these matters were not finally addressed until the BCA Report Version 6 was provided to the Council on 18 May 2023, some five months after the submission of the Development Application and three-and-a-half months after the First RFI.

As set out at paragraph [111] above, Ms Young frankly acknowledged that this was not expeditious, and that the process was poorly managed by Mr Williams, who did not treat the task with any urgency. In addition, she gave the following evidence regarding the delays in obtaining Development Consent (emphasis added):

Alamdo submitted that, in addition to the delay in providing an adequate BCA compliance report, there were further delays in the process which were due to Reece. For example, Alamdo submitted that:

Alamdo also relied on the fact that, during the process of obtaining development consent, issues were raised by Novatec regarding the intertenancy wall between the Premises and Unit 5 and, in particular, whether there was a need to upgrade this wall, despite being aware that the building was of Type A construction (such that a fire-rated wall was not required).

It is unnecessary to determine these further factual issues, given that any delay in addressing these matters did not add to the delay caused by the failure to provide a report which contained a clause-by-clause assessment of the existing building’s compliance with the BCA. The failure to provide such a report was the first, and main, matter raised by the Council in the First RFI. This problem was not finally addressed until the Council was provided with the BCA Report Version 6. The Council did not, after receipt of that report on 18 May 2023, make any further requests for information, and moved expeditiously to assess the Development Application, with Development Consent being granted 14 days later (on 1 June 2023). I agree with Ms Young’s assessment, in the passage of cross-examination set out at paragraph [352] above, that “Mr Williams’ component was the most part of the delay”.

Alamdo also submitted that Reece breached its obligation under Article 29(4) to apply for a Construction Certificate within 14 days of Development Consent being obtained (that is, by 15 June 2023). Ms Young acknowledged, in cross-examination, that, by the time that Reece issued a termination notice on 27 June 2023, the application for a Construction Certificate had not been finalised or submitted. However, any such breach was inconsequential. It was common ground that, in circumstances where a Development Consent was only obtained on 1 June 2023, it was impossible for an Occupation Certificate to be obtained by 23 June 2023, irrespective of any compliance or non-compliance with the remaining provisions of Article 29.

I have determined that Reece breached Article 29(2) of the Lease (but not Article 29(1)).

In order for this breach to deprive Reece of the right to rely on the right of termination in Article 29(9), it must be established that the breach caused, or materially contributed to the event which gives rise to that right of termination (namely, the failure to obtain an Occupation Certificate by 23 June 2023).

Alamdo contended that, as a result of Reece’s failure to comply with its obligation under Article 29(2) to provide the information required for the Council to expeditiously process the Development Application, the Development Consent was not obtained until 1 June 2023, which in turn meant that an Occupation Certificate could not be obtained by 23 June 2023.

In response, Reece contended that, irrespective of whether Reece breached Article 29(2) or not, an Occupation Certificate could not have been obtained by 23 June 2023, and therefore the requisite causal link between Reece’s breach and the event which gave rise to the right to terminate had not been established.

Reece did not advance any submission that, as at the date the Lease was entered, it was impossible for an Occupation Certificate to be obtained by 23 June 2023:

Instead, Reece submitted that, irrespective of any breach on its part, there would have been delays in obtaining the Development Consent by reason of Alamdo’s failure to comply with the Fire Safety Order and the Council’s numerous requests for further information in respect of Development Application, which were unrelated to the adequacy of the BCA compliance report.

Further, Reece submitted that, even if the Development Consent had been obtained by 20 February 2023 (being the date that Alamdo’s programming expert was instructed to assume), it is unlikely that the necessary steps could have been completed in time for an Occupation Certificate to be issued by 23 June 2023.

These issues are addressed below.

Alamdo submitted that, if Reece had promptly addressed the Council’s requirement for a BCA compliance report, either when the Development Application was submitted, or even after it received the First RFI, Reece would have obtained the Development Consent by about 20 February 2023. This date was based upon the time actually taken to assess the Development Application, which was a period of around five to six weeks (calculated by excluding the period from the submission to the lodgement of the Development Application, and excluding the periods within which Reece and Novatec were responding to requests for information).

In response, Reece submitted that, notwithstanding the existence of “deemed refusal” periods, a council is not under a duty to process and determine a development application within any particular timeframe (Coshott v Wollahra Municipal Council (1988) 14 NSWLR 675 at 683), but is instead required to determine a development application within a reasonable time, with an applicant who is aggrieved by unreasonable delay being able to obtain an order in the nature of mandamus directing a council to determine the application (MM Constructions (Aust) Pty Ltd v Port Stephens Council [2012] NSWCA 417 at [207] per Basten JA; CSKS Holdings Pty Ltd v Woollahra Council (2014) 205 LGERA 207; [2014] NSWLEC 176 at [48]). Reece relied on an analysis by Mr Haskew of the time taken by the Council to assess development applications, which revealed that the average assessment time in the 2022/2023 financial year was 116 days, and in the 2023/2024 financial year was 110 days.

I am not satisfied that such an analysis assists in determining the length of time that would have been taken to assess the Development Application, in the event that Reece had complied with its obligations under Article 29(2), having regard to the following matters.

First, Mr Betros gave evidence, based on his experience, that an analysis of average assessment times is not of assistance in determining the time required to assess a particular development application, since each development application has different characteristics and a broad range of factors can affect assessment time, including the nature and extent of an application, the availability of Council staff, and the quality of the submission.

Secondly, as regards the nature and extent of the development application in this case, Mr Haskew gave the following evidence:

The Dutton DA had involved an application of a similar type, in respect of Unit 5, and had been assessed and determined within the space of a month in around October 2022, shortly before Reece’s Development Application (see paragraph [40] above). According to information from the Council’s website:

Thirdly, the evidence establishes that, during the relevant period, the Council’s staff were available to review any materials submitted by Reece in respect of the Development Application shortly after receipt (as had been the case with the Dutton DA). In particular, Mr Gittany:

Although there was, in each case, a period between the review by Mr Gittany and the provision of comments to Novatec by the Council, this was at most in the order of around one to two weeks.

Accordingly, whatever the position in respect of other development applications (of unknown size and complexity), the evidence establishes that the material in relation to this Development Application was able to be reviewed and assessed by the Council, with a response being given to Novatec, within a period of around two weeks after receipt.

That conclusion is supported by the fact that the Council did in fact determine the Development Application, and grant the Development Consent, within two weeks of receiving the BCA Report Version 6.

Reece relied on Mr Betros’s concession, in cross-examination, that it is almost invariable that councils will send requests for information to DA applicants. He added that, in “a properly put together DA application”, an applicant would generally expect to receive one request for information, “but it’s not prescriptive”. Further, Mr Betros expressed the view that, for a development application involving fit-out works and change of use for an industrial premises, a person who is experienced in dealing with councils “would have a pretty sound idea” of the matters which were likely to be requested. That is consistent with Mr Haskew’s evidence that the assessment of such an application would probably not identify any “matters that hadn’t already been identified by a competent consultancy team” (see paragraph [369] above).

Given that the matters raised by the First, Second and Third RFIs extended beyond deficiencies with the BCA compliance report, I accept that it is likely that the Council would have made a request for information, even if Novatec had submitted, either with the Development Application or in response to the First RFI, a report of similar content to the BCA Report Version 6.

However, most of the other issues raised by the Council in relation to the Development Application were comparatively minor matters, which were addressed within a short space of time.

For example, the Council’s request in the First RFI for confirmation regarding staff and patron numbers, and opening hours, is a matter that could have been readily addressed by Reece (and was, according to Reece, already addressed in the information provided with the Development Application).

Similarly, the Council’s query in the First RFI regarding the Red Fire Engineers Report was addressed shortly after the receipt of the First RFI. Ms Young obtained a copy of the relevant report from Alamdo on the day that the First RFI was issued (see paragraph [84] above), and the Council’s concern appears to have been addressed by way of a telephone call between Ms Young and Ms Morris, in which Ms Young explained the reasons why the report was of no relevance to the Development Application (see paragraph [98] above).

The Council’s request for “design advice” was not a request separate from, but rather was an aspect of, its request for a revised BCA compliance report. In any case, the Council did not ultimately insist on any such requirement (see paragraphs [151]-[152] above). It is therefore unlikely that the raising of this issue caused any material delay in the assessment of the Development Application, separate from the issues raised in respect of the BCA compliance report.

Further, there is no reason, on the evidence, to conclude that the Council’s requests for amended plans in the First RFI could not have been provided within a short space of time. Ms Young’s evidence was that “Mr Williams’ component” was the main part of the delay in responding to the RFIs. In respect of each of the First, Second and Third RFIs, a response was submitted by Novatec on the day that a revised report from Mr Williams was received. It can therefore be inferred that, if Mr Williams had provided a report along the lines of the BCA Report Version 6 either prior to the submission of the Development Application, or within a week or two of receipt of the First RFI, the remaining issues raised by the Council would have been able to be addressed within a similar timeframe.

One matter which does appear to have taken some time to resolve is the issue of the mezzanine. However, as explained below, this was largely due to the time taken by Reece in order to finalise its position on that issue.

The BCA Report Version 1 had described the “Scope of proposed work” as follows (emphasis added):

Further, the Development Application stated that the proposed fit-out works would include:

In the First RFI, the Council made the following request: “A floor plan of the proposed mezzanine is to be submitted as part of the application”.

On 28 February 2023, Ms Young instructed Mr Williams that Novatec was “not intending to use mezzanine”, and received written confirmation from Reece to that effect (see paragraph [102] above).

Ms Young gave evidence in cross-examination that:

Within a few days of this confirmation being given, Novatec prepared new drawings (see paragraphs [103]-[105] above), which Reece approved on 3 March 2023.

The indication that the mezzanine would not be used gave rise to a further query by the Council in the Second RFI. However, the issue raised by the Council appears to have been resolved on the same day that the Second RFI was received by Novatec, by means of a telephone call between Mr McKinley and Mr Gittany in which Mr McKinley proposed that the staircase to the mezzanine be demolished (see paragraphs [121]-[122] above).

Finally, there was a minor issue raised in the Third RFI regarding the mezzanine, namely, that the handrail for the staircase, which was shown on the plans, should be removed. This was agreed to by Novatec on the day that it was raised (see paragraphs [142]-[143] above).

It follows that the matters raised in the Second and Third RFIs regarding the mezzanine did not materially add to the time taken by the Council to address the Development Application. Insofar as time was taken as a result of the query regarding the mezzanine that was raised in the First RFI, this was due to Reece’s delay in coming to a final position on use of the mezzanine (following which amended plans were quickly prepared). Having regard to the obligation on Reece under Article 29(2) of the Lease, it is likely that, if this was the only matter which had been holding up a response to the First RFI, Reece would have moved more quickly in coming to a resolution on this issue, in order to ensure that the Council had the information which it required to expeditiously process the Development Application.

By reason of those matters, I am satisfied that, if a report providing a clause-by-clause assessment of the existing building’s compliance with the BCA had been provided to the Council either with the Development Application, or within a week or so of receipt of the First RFI, it is likely that the Development Consent would have been issued within five or six weeks of the Development Application being lodged on 12 January 2023, that is, by around mid to late February 2023.

The proposed fit-out works were relatively small in scale and complexity. The scope of the fit-out was described as follows in the Development Application:

Alamdo relied on the evidence of a programming expert, Mr King. He was asked to assume that the Development Consent would have been obtained by 20 February 2023. On the basis of this assumption, he concluded that the necessary steps could have been completed in order for an Occupation Certificate to be obtained by 16 June 2023 (that is, around one week before the end of the period specified in Article 29(9) of the Lease).

In response, Reece relied on the evidence of another programming expert, Mr Watson. There were various differences between the opinions expressed by Mr Watson and Mr King which were, as explained below, partly due to differences in their instructions and partly due to differences in their approaches to the overlapping of tasks within the program.

One of the main differences was that Mr King was instructed to assume that the Development Consent would have been obtained on 20 February 2023, while Mr Watson was instructed to commence his program of works from the date that the Development Consent was in fact obtained (namely, 1 June 2023). For the reasons given above, I have determined that, but for Reece’s breach of Article 29(2) of the Lease, the Development Consent would have been obtained by mid to late February 2023. It follows that I accept the starting point for Mr King’s program.

Reece advanced five main submissions as to why the Court would not be satisfied (even if this starting point of 20 February 2023 was accepted) that an Occupation Certificate would have been able to be obtained by 23 June 2023.

First, Reece criticised Mr King’s evidence, on the basis that he had been instructed to prepare a program which set out the “shortest period that this building can be fitted out”, and therefore understood that “it was important” that his program “finished as quickly as it possibly could”. One consequence of adopting this approach was that Mr King overlapped a number of tasks in his program of works, in order to save time. Reece submitted that Mr King had not examined what was “reasonable” or “likely”, and that this “substantially undermines the weight of Mr King’s opinion”.

While Mr King acknowledged that he had sought to prepare a program which resulted in the works being completed as soon as possible, he maintained that he was “comfortable that the program that [he] had prepared was achievable”. This conclusion was supported by the evidence of Reece’s own expert, Mr Watson. He acknowledged that Mr King’s estimate of “durations and sequences” for the works involved (which required “overlap” of certain works) was “aggressive but achievable”, whereas his own approach was “conservative”:

I do not accept Reece’s submission that the appropriate question to ask is what was a “reasonable” (or “conservative”) timeframe in which to complete the works. Article 29 specified a “Procedure to be Followed” in order to achieve the parties’ commercial objective of obtaining an Occupation Certificate by 23 June 2023, and imposed obligations on each party to move expeditiously in performing the steps assigned to it as part of that “Procedure”. In addition, each party was obliged to do all such things as were necessary to enable the other party to have the benefit of the Lease (see paragraphs [211]-[214] above). It was the objective intention of the parties that the program of works leading up to the issue of the Occupation Certificate be completed as soon as possible.

It is also relevant to take into account the means available to Reece in order to achieve this commercial objective and to comply with its obligations under Article 29.

Reece is part of a group of companies (Reece Group) which, at the relevant time, had significant financial resources. In the financial year ending 30 June 2023, the Reece Group reported, on a consolidated basis, EBITDA of $667.737m and NPAT of $387.607m, and had, at year end, net assets of $3.625bn, including $372.706m cash at bank.

Accordingly, the Reece Group had the resources available to ensure that it performed its obligations under Article 29 in a timely and expeditious manner.

Having regard to those matters, I do not accept that it is appropriate to approach the issue of the timing of the fit-out works on the basis of a program of works that was “conservative” or “reasonable” (unless the concept of “reasonableness” includes reference to Reece’s obligations and resources). It is instead appropriate to have regard to a program that was, like Mr King’s, aggressive but achievable.

Secondly, Reece contended that Mr King’s program – which has the Occupation Certificate being obtained by 16 June 2023 – would need to be adjusted in order to take account of a number of concessions made by Mr King, and that those obligations would push the date for the Occupation Certificate beyond 23 June 2023.

Two of these concessions related to the timeframes specified in Article 29 for certain steps by Reece: namely, Mr King had allowed eight days to submit an application for a construction certificate, whereas the Lease allowed fourteen; and Mr King had allowed one day for the application for an occupation certificate, whereas the Lease allowed two. Further, in the expert conclave, Mr King accepted that an additional five days had to be added to his program to account for “the link between the insertion of the mezzanine floor and commencement of the mechanical rough-in”.

Reece submitted that Mr King also made a concession that it might take three to four weeks to obtain a construction certificate, rather than the two weeks which he had allowed. It is, however, important to note the qualified terms in which the relevant question and answer were framed (emphasis added):

Further, Reece’s own expert, Mr Halstead, expressed the opinion that a construction certificate would be determined in “one or two weeks”.

If the application were determined in one week rather than two (as Mr King allowed), this would reduce the impact of the other adjustments referred to above. Further, Mr Watson accepted in cross-examination that, “if you’re in a hurry”, “a more aggressive work program” could be adopted which had a six-day week (rather than a five-day week, as Mr King had done), and that this “would potentially reduce the time needed”. In this regard, Mr King expressed the view that, if the works were programmed on a five-and-a-half-day week, this would reduce the program by “probably a week”.

It follows that, although some adjustments might be made which would lengthen Mr King’s program, others might be made which would shorten it by a corresponding amount. Further, in considering the availability of steps to shorten the program, it is again necessary to take into account both the parties’ obligations pursuant to the Lease and the resources available to Reece.

Thirdly, Reece noted that Mr King’s program adopted a start date of 23 December 2022, being the date when the Lease was signed. In particular, Mr King expressed the view in his report that Reece could begin, from that date, a number of tasks: namely, “Update Construction Drawings”, “Certifier Interface & Interaction”, and “Engage Relevant Consultants”. Reece submitted that it would have been “illogical” for an applicant for development consent to take such steps, “without knowing whether consent would be granted by the Council, when it would be granted and on what terms”.

In the joint report, Mr Watson expressed the view that: “Depending on the circumstances, documentation and some other steps can be undertaken whilst the Development Application was being considered by the Council”. In particular, he agreed, in cross-examination, that the construction drawings could be updated before the development consent was issued, adding that “to the extent that you don’t know what … the consent is going to, what conditions it’s going to put on to you, you’re progressing at risk”.

Although emphasising that such steps were “at risk”, Mr Watson did not suggest that this was an “illogical” course of action.

Nor do I consider that it would be “illogical” in the circumstances of this case. Reece had agreed to a “Procedure to be Followed”, with tight timeframes and obligations to act “expeditiously”, with a view to obtaining an Occupation Certificate by 23 June 2023. In that context, it is not irrational or illogical for a party in Reece’s position to overlap some tasks, and to spend some preliminary costs on preparing for future stages of the “Procedure” (albeit that there is a risk of such costs being wasted in the event that matters do not proceed as planned). Such a course is consistent with Article 29 of the Lease, which requires both parties to take steps and incur costs in circumstances where there is a risk that development consent, or a construction certificate, or an occupation certificate, may not be obtained in the required timeframe (or at all), such that those costs are wasted. This makes commercial sense in a context where, unless an occupation certificate is obtained as quickly as possible and by 23 June 2023, other costs will be wasted, including wasted transaction costs and (for Reece) moneys spent on rent during the period when it is unable to occupy the Premises.

Fourthly, Reece submitted that Mr King, having allowed only seven days “for the perusal of the DA in order to identify any additional conditions and the incorporation of these additional conditions into the updated drawings”, acknowledged in cross-examination that if (as Mr Halstead has opined) it would take 50-70 calendar days to satisfy the conditions of consent in order to obtain a Construction Certificate, then this would “probably” delay the program by “a significant number of weeks”.

That answer logically flows from the assumption that Mr King was asked to make, namely, that Mr Halstead’s opinion should be accepted. (It should be noted that Mr King was not asked to review, or express any opinion, on Mr Halstead’s report.)

However, I am not satisfied that it would take 50-70 calendar days to satisfy the conditions of consent, or that the relevant work would need to be completed prior to the obtaining of a construction certificate.

There are eleven subparagraphs set out in Condition 9 of the Development Consent (see paragraph [158] above). Mr Halstead expressed the opinion that one of those subparagraphs would require no work, five would be able to be addressed with one day’s work, and the remaining five could be addressed with seven days’ work (with this work able to be “undertaken simultaneously by the necessary professionals”). The reason that Mr Halstead arrives at a figure of “approximately 50 days in a best case scenario” for the necessary tasks is that he expresses the view that, in respect of the items which require seven days’ work, it would take up to 40 days to “find and appoint” an appropriately qualified consultant. He does not explain the basis for this opinion. He does not, for example, refer to his experience in procuring services from access consultants, hydraulic engineers, or electrical engineers. Mr Halstead describes his experience as “a practising building surveyor carrying out certification work” and “an Accredited Practitioner Fire Safety Assessment”.

In contrast, Mr Watson (who, like Mr Halstead, was called by Reece) has extensive experience in programming, project delays and costs. He allowed a period of two weeks for the required consultants to be engaged.

Mr Watson made this allowance based on an instruction that “consultant reports for certain conditions under Section 64 of the development consent would have been required”. That instruction was likely based on Mr Halstead’s opinion that consultants were required in order to address the relevant conditions of the Development Consent, prior to the issue of a Construction Certificate.

There were five conditions in respect of which Mr Halstead expressed the opinion that a consultant would need to be engaged, namely, conditions 9(i), 9(v), 9(vii), 9(viii) and 9(x). As outlined below, Mr Halstead’s opinion was disputed by Mr Harriman.

Condition 9(i) was in the following terms:

Mr Halstead expressed the view that “to satisfy this condition an Access Consultant would to be required engaged [sic] to undertake an audit of the building”, without identifying any basis for this opinion. Mr Harriman disagreed with this view and explained, in detail, his reasons for doing so:

I accept Mr Harriman’s opinion on this matter, having regard to the reasoning set out above.

Condition 9(v) was in the following terms:

It was common ground that this condition corresponded with the matter that had been raised by paragraph 6 of the Fire Safety Order (see paragraph [19] above). Mr Halstead expressed the opinion that it would be necessary to retain an appropriately qualified Hydraulics Engineer (21 days) to perform the necessary works (7 days). Mr Harriman disputed this opinion, on the following basis: “I am of the opinion no works are required to the hydrant system as a result of the proposed development as the works required in the fire order were evident as being carried out or existing on site”. Mr Harriman’s opinion is supported by Mr Maurici’s evidence that by the end of March 2023, most of the necessary works for compliance with the Fire Safety Order had been completed, with only one item remaining outstanding (which did not relate to the fire hydrants).

Condition 9(x) was in the following terms:

Mr Halstead expressed the view that condition 9(x) would require the appointment of an appropriately qualified BCA consultant (40 days) and the preparation of a report (7 days). However, Mr Harriman disputed the need for any such consultant, on the basis that the path of travel was already compliant with the provisions of the BCA. This was a view which Mr Harriman expressed based on his own inspection of the building, in his report in chief dated 17 November 2023:

Mr Halstead was provided with Mr Harriman’s report and was asked whether he “agree[d] with the conclusions reached by Mr Harriman” and “if not, why not?” In answer to this question, Mr Halstead provided comments on all parts of Mr Harriman’s report. His only response to the opinions quoted in the previous paragraph was to disagree with paragraph 7.10.4 on the basis that it was not necessary for the BCA Report Version 6 to assess existing paths of travel to the road.

Having regard to the matters set out above, I accept Mr Harriman’s opinion that it was not necessary to engage a consultant in order to address Condition 9(x).

The final two conditions of the Development Consent in respect of which Mr Halstead expressed the view (and Mr Watson assumed) that a consultant would have been required are Conditions 9(vii) (upgrade to emergency lighting) and 9(viii) (upgrade to exit and directional signs).

Condition 9 of the Development Consent relevantly stated as follows (emphasis added):

As stated above, the “upgrades” in conditions 9(vii) and 9(viii) were matters to be addressed in the course of performing “the construction certificate works”.

On this basis, Mr Harriman disputed Mr Halstead’s opinion that these matters needed to be addressed prior to the issue of the Construction Certificate.

Mr Harriman was challenged on this opinion in cross-examination, by reference to Condition 5 of the Development Consent, which provided as follows: “Plans submitted with the Construction Certificate are to be amended to incorporate the conditions of the Development Consent”. Mr Harriman agreed that the reference to incorporating “conditions” of the Development Consent “must include condition 9”, and that “one way” of addressing this requirement would be to conduct a review to determine if an upgrade was required and, if (and to the extent that) any amendments to the plans were required as a result of such review, to make those amendments prior to submitting the application for a construction certificate. In re-examination, Mr Harriman was asked to identify “the other ways” of addressing this requirement. He responded as follows:

Reece submitted that this “other way” was inconsistent with the terms of Condition 5. However, Condition 5 must be read with Condition 9. It is plain from Condition 9 that the upgrades required by conditions 9(vii)-(viii) were to be undertaken as part of the construction works. Mr Harriman’s approach would be consistent with Condition 5 (in that plans for each stage of the construction certificate would be submitted with the application for that stage of the construction certificate), and Condition 9 (in that any upgrades would be performed in the required period).

Reece also submitted that the course proposed by Mr Harriman would be inconsistent with Article 29 of the Lease, which required a single application to be made for a construction certificate with 14 days of receiving Development Consent. However, Article 29 is to be interpreted in a manner consistent with its evident commercial purpose, which is for both parties to take steps expeditiously with a view to obtaining an Occupation Certificate by 23 June 2023. It is doubtful that the approach suggested by Mr Harriman, involving a staged process, would amount to a breach of Article 29. In order to reach this conclusion, it would be necessary to find that the requirement in Article 29(4) that Reece “must apply for a Construction Certificate” within 14 days of obtaining development consent necessarily precluded a staged construction certificate, even where such an approach was undertaken with a view to achieving the evident commercial object of Article 29.

For those reasons, I am not satisfied that any time taken to determine whether upgrades to emergency lighting or exit signs were required would add to the program proposed by Mr King.

Fifthly, Reece submitted that Mr King’s program must be extended in order to make allowance for Article 10.02(i) of the Lease, which provides as follows:

I accept Alamdo’s submission that there was no need for any such allowance in Mr King’s program, for the following reasons.

For those reasons, I am satisfied that Mr King’s program of works, though aggressive, is achievable. In particular, I am satisfied that if the Development Consent had been obtained by mid to late February 2023, there was a substantial chance that the Occupation Certificate would have been obtained by 23 June 2023 and, further, this outcome would likely have been achieved.

It follows that Reece’s breach of Article 29(2) caused, or at least materially contributed to, the failure to obtain an Occupation Certificate by 23 June 2023.

The Fire Safety Order required various works to be completed by February 2022. As at the date when the Lease was entered (23 December 2022), a number of these items remained outstanding, and Alamdo had still not completed the required works by late March 2023.

Reece submitted that “the entire process of [the Council] requiring a BCA compliance report, and the delay it occasioned, was wholly due to the failure of Alamdo to maintain the base building in a compliant state”, adding that:

This submission implicitly acknowledges that it is the delay in the determination of the Development Application that is critical and that, if the Development Consent had been obtained at an earlier point in time (in respect of the application which was lodged on 12 January 2023), then the necessary steps could have been taken to obtain an Occupation Certificate by 23 June 2023.

In order to address Reece’s submission in respect of the Fire Safety Order, it is necessary to consider the following matters:

The Fire Safety Order was issued pursuant to s 9.34(1)(b) of the Environmental Planning & Assessment Act 1979 (NSW). Accordingly, Alamdo was required to comply with that order, and any failure to do so was an offence: s 9.37.

The Fire Safety Order required that compliance “must be achieved by 15 February 2022”. There was no evidence that this deadline was formally extended. On Mr Maurici’s own evidence, various matters in the Fire Safety Order remained outstanding as at (and for a number of months after) this deadline had passed.

However, it does not follow that Alamdo was in breach of the Lease by reason of its failure to complete the required works. In submitting that there was such a breach, Reece relied on Article 13.05, which relevantly provides as follows:

Relevantly, this clause required Alamdo to ensure that, as at 23 December 2022 and during the term of the Lease, the fire detection and prevention equipment installed on the Premises or on the Land complied with all applicable statutory and regulatory requirements.

In considering whether there was a breach of this clause, it is necessary to take into account the precontractual communications of the parties.

Shortly prior to entry into the Lease, Reece became aware of the terms of the Fire Safety Order and that the works required by that order had not yet been completed. On 19 December 2022, Ms Radford asked Mr Maurici for confirmation that the required works would “be completed prior to lease commencement”. Mr Maurici responded that they would “not be completed by the commencement date”, that a number of the requirements of the Fire Safety Order had been addressed but others remained outstanding (which were identified), and that he expected that “all items will be finished with sign-off from Council before you occupy” (see paragraph [55]-[56] above). Reece did not express any disagreement with Mr Maurici’s proposal. I accept Alamdo’s submission that it can be inferred, particularly in the absence of any witness from Reece, that Reece was aware from these communications, prior to entry into the Lease, that a number of items that were the subject of the Fire Safey Order would remain outstanding during the period in which Reece was seeking development consent from the Council, and that Reece was content to enter into the Lease on this basis.

There is force in Alamdo’s submission that, having regard to those matters, Reece could not insist on strict compliance with Article 13.05(a) insofar as that clause required the fire safety equipment to comply with the matters specified in the Fire Safety Order by the Commencement Date and throughout the term of the Lease. It is unnecessary, having regard to the findings below, to determine whether this would be because Article 13.05 would be interpreted in light of the matters known to both parties at the time of entry into the Lease, or because of some waiver or estoppel.

Even if it be assumed that Alamdo breached the Lease by failing to have completed the necessary works in respect of the Fire Safety Order by the Commencement Date of the Lease, I am not satisfied that any such default caused the delay in obtaining the Development Consent.

Reece contended that there was a “clear causal link between … the failure to comply with the fire safety order, and council embarking on this entire interrogation of Reece in terms of BCA compliance”.

As a starting point, it was common ground that the failure to comply with the Fire Safety Order meant that the fire safety measures in the existing building were “inadequate” within the meaning of s 64(1)(b) of the EPA Regulation, and that this in turn triggered s 64(2), which required the Council to consider, at the time of determining the Development Application, whether it was “appropriate to require the existing building to be brought into total or partial conformity with the [BCA]”. Further, I accept, for reasons set out at paragraphs [274]-[277] above, that Mr Gittany, in assessing the Development Application and in making requests for information, appears to have proceeded on the basis that the Council required a clause-by-clause assessment of the existing building’s compliance with the BCA for the purpose of the mandatory consideration in s 64(2) of the EPA Regulation.

However, it does not follow that those matters led to the delay in the issuing of the Development Consent.

The Council made known to Novatec that “a BCA report” was required before the Development Application was submitted, leading to Ms Young requesting a “BCA Compliance Report” from Mr Williams. If there was any doubt, as at the time the Development Application was submitted, about what the Council wanted this report to address, the First RFI made clear that the Council required a clause-by-clause assessment of the existing building against the deemed-to-satisfy provisions of the BCA, with a statement as to whether there was compliance or non-compliance. It was Ms Young’s evidence that such a report was able to be produced in around one or two weeks. The delay in obtaining the Development Consent was not due to the fact that such a report was requested, but was due to the time taken for such a report to be prepared. I have determined that, if such a report had been expeditiously prepared and provided to the Council, the Development Consent would likely have been granted by mid to late February 2023, that is, within around five or six weeks of the Development Application being lodged on 12 January 2023 (see paragraphs [365]-[392] above).

I accept that various aspects of the RFIs issued by the Council related to matters concerning fire safety measures. However, those requests were made in the context of the Council requiring that there be a clause-by-clause assessment of the existing building’s compliance with the BCA, and identifying respects in which the BW&A reports which had been provided to date did not meet that description (including by reason of failing to address matters relating to fire safety). Importantly, the Council did not, at any point, indicate that development consent would not be granted until the works necessary to comply with the Fire Safety Order had been completed.

The Council imposed, as conditions of the Development Consent, a requirement that various upgrades be undertaken, including some which (it is common ground) corresponded to items in the Fire Safety Order. For example, Alamdo accepted that:

This correspondence between the conditions of consent and the requirements of the Fire Safety Order does not establish that a failure to comply with the Fire Safety Order caused a delay in the grant of the Development Consent. Instead, it shows that the Council did not require the outstanding matters in the Fire Safety Order to be resolved prior to the issuing of the Development Consent, and was instead content for them to be addressed in the course of the construction works. That was consistent with the approach which the Council had adopted in respect of the Dutton DA. The outstanding items in the Fire Safety Order did not hold up the issuing of consent in respect of that development application (with such consent being issued in October 2022, around one month after the application was made) (see paragraph [370] above). Instead, the Council required, as a condition of its consent to the Dutton DA, works in respect of various matters covered by the Fire Safety Order (including the fire hydrants, fire extinguishers, emergency lighting and exit signage) to be “undertaken with the construction certificate works and … completed prior to an occupation certificate being issued”.

Finally, even if it had been established that Alamdo had breached the Lease by failing to complete the works required by the Fire Safety Order prior to the Commencement Date, and that this had caused a delay in obtaining the Development Consent (with the result that the Occupation Certificate could not be obtained by 23 June 2023), it would not follow that, by reason of those matters, Reece was entitled to rely on the right of termination in Article 29(9) of the Lease.

If those matters had been established, the result would have been that the default of each party caused, or materially contributed to, the Development Consent not being obtained by 1 June 2023, in that the result would have been as follows:

In such a situation, a “but for” analysis is not appropriate: “one does not have to see that the default was the whole cause of the non-fulfilment of the condition, nor must the opposing party necessarily be blameless” (Sanctuary Investments at 16,626 per Young J, referring to Hunyor at 15,633 per McLelland CJ in Eq).

Instead, in circumstances where each party materially contributed to the non-performance of the condition, such that there are two legally operative causes, the consequence is that neither party can rely on the contractual right of termination.

For those reasons, I find that Reece’s breach of Article 29(2) of the Lease caused, or at least materially contributed to, the non-fulfilment of the condition specified in Article 29(9) (namely, the failure to obtain an Occupation Certificate by 23 June 2023).

It follows that Reece was not entitled to terminate the Lease pursuant to Article 29(9), when it purported to issue a notice of termination on 27 June 2023.

It also follows that, since Reece did not allege that the Lease was brought to an end by any other means, the Lease remains on foot.

Alamdo has succeeded in its claim against Reece. It is entitled to a declaration that the Lease remains on foot, and judgment in the amount of the unpaid rent and outgoings, together with interest on that amount.

Reece has failed to establish its cross claim in respect of the Bank Guarantee, which will be dismissed.

Having regard to its success in respect of both its claim and the cross claim, Alamdo is also entitled to its costs of the proceedings.

The parties should bring in short minutes of order to give effect to these reasons for judgment. Insofar as there is a dispute regarding those matters, including any dispute regarding the calculation of the judgment sum or interest thereon, or regarding the form of costs order, I will give the parties an opportunity to make submissions on those matters and, unless any party requests an oral hearing, will deal with any such dispute on the papers.

Accordingly, I make the following orders.