Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited

BEAZLEY JA : Introduction

The appellant, as lessor of certain harbourside land at Waverton, claimed that the respondent was in breach of cl 7 of a lease dated 13 January 1972, which required the lessee to remove any structure upon the demised premises prior to the expiration of the term of the lease.

By proceedings commenced in the Equity Division of the Supreme Court, the appellants sought a declaration that by failing to remove the wharf, the respondent was in breach of cl 7 of the lease and sought an order that the respondent specifically perform its obligations under cl 7, including removing the wharf. The Waterways Authority also sought damages. The appellant subsequently abandoned its claim for specific performance and identified its claim for damages as being brought in lieu of the claim for specific performance pursuant to s 68(b) of the Supreme Court Act 1970 (NSW) (the Supreme Court Act ).

The trial judge, Barrett J, rejected the claim on the basis that, as it would have been unlawful to remove the wharf as at the date of commencement of proceedings, an order for specific performance would not then have been made. As a claim for specific performance would have been declined, under s 68(b) of the Supreme Court Act equitable damages were not available.

The appellant appeals against his Honour’s rejection of its claim for equitable damages. The respondent has filed a Notice of Contention seeking otherwise to uphold his Honour’s decision, should the appellant establish its ground of appeal.

The original parties to the lease, the Maritime Services Board of New South Wales and J & A Brown Abermain Seaham Collieries Limited, as lessor and lessee respectively, have changed name and/or corporate structure on more than one occasion. The Waterways Authority of New South Wales (formerly the Marine Ministerial Holding Corporation) is the successor in title to the Maritime Services Board. Coal & Allied (Operations) Pty Limited (C & A) is the successor in title to J & A Brown. It is convenient to refer to the lessor and lessee as the Waterways Authority and C & A respectively, regardless of the point of time at which those present entities came into existence and/or succeeded to the relevant interest in the lease. However, it will sometimes be convenient to refer to the parties by their correct names at a particular point in time. The lease

The trial judge made the following findings at [126] in respect of C & A’s obligations to remove the wharf: “1. The failure of C&A to remove the wharf at or before the expiration of the term created by the memorandum of lease dated 12 January 1972 (as subsequently varied) constituted breach by C&A of the contractual promise contained in clause 7 of the memorandum of lease. 2. It would not have been unlawful for C&A to remove the wharf at any time during the period commencing on 10 November 1992 (when [the Waterways Authority], in exercising the “exclusive control” over Sydney Harbour vested in it by s.33 of the Sydney Harbour Trust Act 1900, required C&A to remove all structures and equipment) and ending at the expiration of the term created by the memorandum of lease (as varied). 3. Because no relevant consent of the Minister for Ports and Waterways was for the time being in force, it would have been unlawful for C&A to remove the wharf on the day on which these proceedings were commenced, being 17 December 1999. 4. If [the Waterways Authority’s] application for an order for specific performance requiring C&A to remove the wharf were pressed, the court would decline to make that order. 5. Damages in lieu of specific performance will therefore not be awarded to MSB in respect of C&A’s breach of the contractual promise contained in clause 7 of the memorandum of lease.”

The lease commenced on 1 January 1969 for a term of 21 years and was thus due to expire on 31 December 1989. The term was extended for a further term of one year from 1 January 1990 and the lessee was subsequently granted a licence to remain on the premises until 31 December 1992. There was a further extension until 31 December 1993, on the basis that the lease provisions continued to apply. C & A remained in possession of the land up until May 1994, pursuant to an informal arrangement between the parties, but at the time it yielded up possession in May 1994, it had not removed the wharf. His Honour’s judgment thereafter proceeded on the basis that the lease terminated on 31 December 1993, which, he observed, at [11], was accepted by the parties.

Clause 7 of the lease provided that should C & A fail to remove the structures, the Waterways Authority could either retain any such structures or itself remove the structure, with C & A being required to pay liquidated damages for the cost of such removal. The structure in question was a wharf.

Pursuant to the lease, the Waterways Authority leased to C & A Lots 1, 2 and 3 in deposited plan 542933, being part of the land in certificate of title volume 5018 folio 1, which was land located at Waverton on which C & A conducted coal loading operations. The wharf, which is at the centre of the present controversy, is erected mainly on Lot 2 and was already in situ at the time the lease was granted on 13 January 1972. Lot 2 forms part of the bed of Sydney Harbour and does not adjoin dry land. The wharf stands wholly within and occupies substantially the whole of Lot 2. At the shore end of the wharf, the wharf extends over an area of the eastern boundary of Lot 2 and a retaining wall and is affixed to dry land, slightly inland from the retaining wall. The land between the eastern boundary of Lot 2 and dry land is also Crown land.

The coal loading operations conducted by C & A extended both over the leased land as well as over a small portion of Crown land. The wharf itself is predominantly of timber construction, but is also partly constructed of steel. It has steel gantry bearing rails along which a crane moved to carry coal to ships for the purposes of loading. The crane has been removed, but the steel gantry remains.

The primary clause with which the present proceedings are concerned is cl 7 of the lease. Clause 7 provided: “That the lessee shall without notice from the Board so to do remove any structure now erected or at any time hereafter to be erected on the said demised premises (other than the seawalls and reclamations) at the cost of the Lessee and without compensation prior to the expiration of the said term or prior to the termination of the said term under clause 26 hereof as the case may be and shall have [sic] the said demised premises clear to the satisfaction of the Board and should any such structure or any part thereof not be so removed the Board may if it so desires retain the same without paying to the Lessee any compensation whatsoever or itself remove and sell or otherwise dispose of the same and the Lessee shall pay to the Board on demand as and for liquidated damages the cost of such removal less the net proceeds of any such sale if made (the certificate of the Board’s Engineer-in-Chief to be conclusive evidence of the amount so payable).” (Emphasis added)

Clauses 8 and 11 are also relevant. Clause 8 provided: “That in the event of the tenancy being determined under the provisions of Clause 27 hereof or for non-payment of rent or non-performance or non-observance of any of the terms covenants provisions or conditions hereof or under the proviso for re-entry hereinafter contained the Lessee shall if called upon by the Board at any time not later than thirty days after such determination so to do but not otherwise within six calendar months after such determination remove any structure now erected or at any time hereafter to be erected on the said demised premises (other than the seawalls and reclamations) at the cost of the Lessee and without compensation and shall leave the said demised premises clear to the satisfaction of the Board and should any such structure or any part thereof not be so removed the Board may itself remove and sell or otherwise dispose of the same and the Lessee shall pay to the Board on demand as and for liquidated damages the cost of such removal less the net proceeds of any such sale if made (the certificate of the Board’s Engineer-in-Chief to be conclusive evidence of the amount so payable) AND it is hereby agreed that at the beginning of each month during the said period of six months the Lessee shall pay to the Board such a proportionate part of the rent hereinbefore reserved as the said demised premises then actually occupied bear to the premises hereby demised.”

Clause 11 provided “That the Lessee shall and will at all times during the said term conform to and comply with (a) all statutes (whether Commonwealth or State and including statutes administered by the Board) and all by-laws regulations or orders thereunder now or hereafter in force in any way applicable to the said demised premises or their use or howsoever otherwise relating thereto including but without affecting the generality of the foregoing the Public Health Act, 1902 the Inflammable Liquids Act, 1915-1953 and the Local Government Act, 1919 and any Act or Acts amending the same (b) the rules regulations and requirements of the Fire and Accident Underwriters Association of New South Wales (c) the requirements now or hereafter imposed of all public municipal and/or other authorities (including the requirements of the Board imposed under any statute administered by it or under any regulation made thereunder) having jurisdiction in respect of the said demised premises and whether such requirements be indicated by order made against or notice served upon the Board or the Lessee or otherwise.”

Other terms of the lease should also be briefly noted. Clause 4 contained a covenant to repair structures erected on the leased premises; cl 26 contained a right to terminate the lease on the giving of six months notice if the property or any part of it was required for public purposes; and cl 27 permitted the lease to be determined if the leased premises or any adjoining land owned or occupied by C & A was used contrary to the County of Cumberland Planning Scheme Ordinance.

The Waterways Authority adduced evidence that the cost of demolition of the timber part of the wharf as at the date of hearing was $1,075,000. C & A accepted that that was the cost of demolition as at the date of hearing but did not agree, should the Waterways Authority establish its claim for damages, that that sum was the amount to which the Waterways Authority was entitled by way of damages. Issues on the appeal Issues raised by the Waterways Authority on its appeal

The Waterways Authority’s principal argument on the appeal was that the trial judge erred in concluding that, as at 17 December 1999, being the date upon which it commenced proceedings, the Court would not have made an order for specific performance, because at that date there was no relevant consent for C & A to remove the wharf. On the Court’s reasoning, as there was no consent, any removal on that date would have been unlawful: (see trial judge’s reasons at [124]).

The Waterways Authority contended that his Honour, in reaching this conclusion, applied the wrong legal test and that the question for his determination was whether, as at the commencement of proceedings, specific performance could have been awarded, not whether specific performance would have been awarded: see Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1; [2004] NSWSC 547.

Underlying this submission was an argument that there was an implied obligation on C & A to obtain consent for the removal of the wharf. C & A contended that the Waterways Authority should not be permitted to advance this argument, as it had had not been advanced at trial. Rather, C & A submitted that the Waterways Authority’s primary case at trial was advanced on the assumption that no planning consent was required or, alternatively, if it was, as it was the relevant consent authority, it would have granted that consent. Issues raised by C & A on its Notice of Contention

C & A submitted that both the appeal and its Notice of Contention raised the following issues: (1) The operation of cl 7 of the lease. C & A submitted that after the expiry of the lease there was no remaining obligation on it to remove or demolish the wharf. As there was no remaining obligation, there was nothing in respect of which a decree of specific performance could be made and, it followed, no basis for an award of damages pursuant to s 68(b) of the Supreme Court Act . C & A’s only obligation was a secondary obligation to pay damages in accordance with the terms of the lease, which was only activated if the wharf was demolished: see Moschi v Lep Air Services Ltd [1973] AC 331. This issue raised the proper construction of cl 7 and in particular, whether cl 7 totally governed the rights and obligations of the parties. (2) Whether specific performance would be ordered in respect of a fully executed obligation. (3) That damages were an adequate remedy for the alleged breach, so that, as a matter of law, specific performance was not an available remedy. If damages were an adequate remedy, it was submitted that equitable damages were not available. (4) Whether the Waterways Authority had elected to retain the wharf. If it had elected to retain the wharf, C & A contended that the Waterways Authority had no right to damages of any kind, either contractual or equitable. (5) Should it be relevant, the proper measure of damages.

If C & A is correct in any of the first three of these issues, the matters raised by the Waterways Authority as the principal basis of its appeal will not arise. Accordingly, it is convenient first to deal with the issues as identified by C & A. Before doing so, it is necessary to deal with a problem that bedevilled the conduct of the appeal.

Both the Waterways Authority and C & A sought to raise issues not raised in the Court below. In the case of the Waterways Authority, it argued that the trial judge should have found that cl 7 of the lease gave rise to an implied obligation to obtain all necessary consents for the demolition of the wharf.

The new issues raised by C & A were that specific performance would not be granted of an executed obligation and that damages were an adequate remedy. Both parties contended that the Court should not entertain the new issues now sought to be raised. It will be necessary to determine whether leave should be granted to raise the new issues, but that is best dealt with as part of the consideration of the issue in question.

However, C & A’s resistance to the question of there being an implied obligation to obtain consent for the wharf to be removed, can be disposed of immediately. In its submissions in reply before the trial judge, the Waterways Authority argued that the question of the need to obtain consent was a false issue and was not one raised by it. It submitted in any event that C & A’s submission that C & A was not required to obtain any necessary statutory approvals under cl 7 of the lease was misconceived. It argued that in circumstances where C & A had an obligation to remove the structure, it had a commensurate obligation to take all reasonable and lawful steps to do so: see Butts v O’Dwyer (1952) 87 CLR 267; [1952] HCA 74. Alternatively, it contended that such a term was necessary to be implied to give business efficacy to the lease: Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24 and BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266 at 283; [1977] HCA 40.

In my opinion, the matter was sufficiently raised, although dealt with differently by the trial judge and thus it is open for the Waterways Authority to argue this point. The question of whether there was an obligation to obtain consent then kept in issue the identity of the relevant authority and whether consent had in any event been applied for and been refused. It will be convenient to deal with these questions after the question of whether damages were an adequate remedy. Proper construction of cl 7

C & A submitted at trial that cl 7 was a code such that the rights and obligations of the parties in relation to the removal or retention of the wharf were governed solely by the clause. It followed that the Waterways Authority’s only entitlement to damages was as specified in the clause.

The trial judge dealt with the construction of cl 7 at [15]ff of his judgment and specifically dealt with the question of whether cl 7 was a ‘code’ in the sense referred to by C & A at [27]ff. His Honour held, first, that the clause was not concerned with “ tenant’s fixtures as such ”. There was no dispute about this and it is to be observed that the wharf was in place at the time the lease was granted. It might also be observed that the wharf is undoubtedly a fixture and is thus the property of the Waterways Authority, being affixed to its land.

Next, his Honour observed that cl 7 specified the time at (or within) which structures were to be removed, namely, prior to the expiration of the term of the lease. In that regard, his Honour observed that cl 7 did not contemplate removal after the expiry of the term. That was to be contrasted with the provisions of cl 8. Clause 8 provided that in the case of termination prior to the end of the term due to breach, or otherwise as specified in cl 26, structures were to be removed within six calendar months of the lessee being given notice to do so and further provided that there be a special right of occupation for the period during which removal was to be effected and for which a payment of rent was required.

His Honour then dealt with that part of cl 7 that operated should the structure not be removed as the clause stipulated. His Honour observed that in that case, the lessor could either retain the structure or remove the structure and sell or otherwise dispose of it. Given that the wharf is a fixture forming part of the lessor’s land, his Honour considered, at [18], that the requirement that C & A remove the wharf prior to the expiration of the term was, in substance “ an obligation to yield up the land in the condition it was in before structures … were placed upon it ”. His Honour thus considered that the covenant was a covenant to undertake “ certain work upon and in relation to the land before the expiration of the term ”.

His Honour found support for this construction in the provisions of cl 4, which required the lessee to place and keep structures “ in good and efficient condition and in a thorough state of repair ” and to deliver them up in such condition and state of repair at the expiration or sooner determination of the term. The provisions of cl 4 were specifically made subject to the provisions that appeared thereafter, so that cl 7 had precedence over cl 4. It followed that the obligation to deliver up structures in a state of repair at the expiration of the term pursuant to cl 4 did not apply to structures which fell within cl 7, being structures that the lessee was required to remove before expiration. In short, his Honour construed cl 4 as applying to seawalls and reclamations, whilst cl 7 applied to structures and relevantly, the wharf, which were upon the land. His Honour thus construed cls 4 and 7 as each being a provision “ by which the lessee is bound to leave the leased property in a particular condition ”: see judgment [20].

His Honour’s consideration of the question whether cl 7 was a code commenced at [32] with the proposition that a provision that allowed a landowner to retain fixtures after the expiration of a lease did not create in the landowner any right or interest the landowner did not already have. Accordingly, the creation of the permission in cl 7 for the lessor to retain fixtures that the lessor, as landowner, already owned, had to have some other significance. His Honour considered that the significance was that the lessee was given an implied licence to remove structures as a concomitant of having a contractual obligation to do so. He said that the lessor had an express right to revoke that licence which could be done by electing to retain the structures.

His Honour concluded at [34] that the true effect of cl 7 was to preclude any right of the lessor to sue for damages if it either elected to retain the structures or, alternatively, elected to remove them. He considered that should the lessor elect to retain the structures, the lessee’s right to remove them was revoked and it followed, there was a relaxation or forgiving of the lessee’s duty to remove. In the second situation, where the lessor elected to remove the structures, his Honour considered that the lessor could not sue the lessee for damages for its breach of the covenant to remove. In that case, the lessor was confined to the right to damages specified in the clause.

His Honour stated at [35]: “I have said that the ordinary right to sue for damages is precluded if the lessor resorts to either of the alternatives expressly made available by clause 7. This means that, upon the proper construction of clause 7, there is no breach of contract by the lessee if the lessor acts in either of those ways. But there will be a breach of contract, actionable as such, if the lessor resorts to neither of the alternatives expressly made available by clause 7 – that is, if it does not itself remove the structures and does not take advantage of the part of the clause expressed by the words ‘may if it so desires retain the same’.”

It followed on his Honour’s reasoning that cl 7 was not a ‘code’. He considered that in the situation where the lessee did not remove the structures during the term, a breach of cl 7 would have been committed and be actionable by way of a claim for common law damages, should two conditions exist after the end of the term: first, if the Waterways Authority did not remove the structures itself as contemplated by cl 7, and secondly, if it did not act in accordance with that part of the clause expressed by the words “ may if it so desires retain the same ”: see judgment at [36].

Senior counsel for C & A submitted that this conclusion was erroneous. C & A accepted, as found by the trial judge, that the lessee’s obligation to remove structures on the demised land under cl 7 was limited to the period during which the lease was in force, as was apparent from the express words of cl 7 that “ the lessee shall … remove any structure … erected … on the … demised premises … prior to the expiration of the … term ”.

C & A submitted that cl 7 did not provide the lessor with the option to require the lessee to remove the structure after determination of the lease. Nor did it provide that the lessor may claim damages for the costs of demolition before the demolition actually occurred. Rather, it provided that if such structures were not removed at the expiry of the term, the Waterways Authority had two options, either to retain the structures, or remove them, and in the latter case, to charge the lessee the costs of removal less the proceeds of any sale of such structure. In short, damages for breach, which on this construction occurred if the lessee failed to remove the structures at the expiry of the term, were only claimable in accordance with the terms of the clause itself.

Senior counsel for C & A submitted that this construction was supportable by giving the words of cl 7 their plain and ordinary meaning: see Australian Broadcasting Commission v Australasian Performing Rights Association Limited (1973) 129 CLR 99; [1973] HCA 36; Toll (FGCT) Pty Limited v Alphapharm Pty Limited & Ors (2004) 219 CLR 165; [2004] HCA 52 and that further, that construction produced a sensible commercial result in a lease between a major commercial entity and a Government institution.

In Australian Broadcasting Commission v Australasian Performing Rights Association Limited , Gibbs J stated at 109 that, for the purposes of construction the whole instrument was to be considered as “ the meaning of any one part of it may be revealed by other parts ” and that, so far as possible, the individual clauses must be read harmoniously with the other clauses. However, the Court was required to give effect to unambiguous words. Stephen J, at 114-115, also emphasised the requirement to give effect to unambiguous words, noting in that case that the parties were large commercial entities who had agreed to enter into a formal contract governing their complex commercial arrangements for many years into the future.

In Pacific Carriers Ltd v PNB Paribas (2004) 218 CLR 451; [2004] HCA 35; the Court said of the documents under consideration in that case that their meaning was “… to be determined by what a reasonable person in the position of [the appellant] would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to [both parties] and the purpose and object of the transaction.” See also Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales at 350.

These principles underlie the objective theory of contract reaffirmed by the High Court in Toll (FGCT) Pty Limited v Alphapharm Pty Limited & Ors.

Senior counsel for C & A submitted that upon the application of the proper principles of construction, cl 7 was unambiguous. It fully governed the relationship of the parties in respect of structures on the leased land as at the expiry of the lease. It was submitted that there was no reason to add words into the clause, such as was, in effect, necessary on the construction given to cl 7 by the trial judge, or to make a breach of it amenable to other remedies.

It was submitted that this construction of cl 7 was supported by the operation of cl 8. It was said that the combination of cls 7 and 8 provided a careful scheme for when removal of the structure was to take place. In the case of cl 7, removal was to be prior to the expiry of the lease. In the case of cl 8, if the lease was terminated prior to the expiry of the term, then, should the lessor give notice requiring removal, removal had to be undertaken within a period of six months from the date of the notice.

It was submitted that should the lessee fail under either clause to remove the structure, then the Waterways Authority could remove it itself, and in that case had the benefit of a claim for liquidated damages, the amount of which was to be conclusively proved by a certificate of the Board’s Engineer-in-Chief. Alternatively, it could retain the structure if it so wished. The benefit for the lessee in both clauses was that, if it wished, it could control the cost of removal by undertaking the task itself, provided that it did so in accordance with the terms of the lease. That was prior to the expiry of the term in the case of cl 7; or within six months of being given notice to do so, in the case of cl 8.

The wharf was already in existence at the commencement of the lease. Accordingly, the trial judge’s construction of cl 7 is correct, namely, that it was a covenant to put the leased premises into a certain state at the expiry of the term, that is, with all structures removed, whether on the land at the commencement of the lease or placed there during the term of the lease. C & A did not dispute this, although the consequences that otherwise flowed, particularly in relation to the measure of damages, were in dispute.

Next, the requirement in cl 7 is ‘mandatory’, in the sense that it was something that the lessee was required by the terms of the lease to do: “t he lessee shall without notice remove the wharf prior to the expiration of the … term ”. The clause then provided for what could occur if that was not done, namely, the lessor was entitled to retain the structure or remove it at the lessee’s cost. Clause 7 did not contemplate removal by the tenant after expiry of the term, as observed by his Honour at judgment [16]. C & A accepts that this is correct, although the Waterways Authority maintains that C & A’s obligation to remove the wharf was, under the terms of cl 7, a continuing obligation. In my opinion, his Honour’s construction on this point was clearly correct. The words requiring removal prior to expiry of the term were unambiguous.

The essential point of differentiation between Barrett J’s construction and that advanced by C & A is that, thereafter, his Honour considered that the lessor still maintained a right to common law damages, whereas C & A submitted that all rights were governed solely by the clause. It is apparent that his Honour considered that as there were well known consequences for breach of a covenant to put premises into an agreed state at the end of the lease, there were additional rights to which the Waterways Authority was entitled other than those specified in cl 7. Those consequences included that the measure of damages for breach, subject to certain exceptions, was the expenditure necessary to put the premises into the contracted state, regardless of whether that expenditure was undertaken or not: see Telecom & CPS Community Credit Cooperative Ltd v Heberg Pty Ltd [1993] ANZ ConvR 312 per Fullagar J at 65,273-65,274.

In my opinion, this approach does not pay sufficient regard to the unambiguous words of cl 7, or to the notion that underlay cls 7 and 8 requiring removal of the wharf. Clause 7 provided that the lessee was to remove structures from the demised land prior to the expiration of the term, notwithstanding that such structures were fixtures and thus part of the demised land. In this sense, the Waterways Authority deprived itself of its right to insist that the wharf be left in place. It was only if C & A failed to remove the wharf that the Waterways Authority could elect to retain in. On the other hand, if the lease was terminated prior to the expiry of the term, which could occur at any time during the period, the Waterways Authority retained the wharf unless it gave notice for its removal.

This difference in the manner in which the Waterways Authority could deal with its land and, relevantly, fixtures on the land, was understandable. Although C & A had been given the benefit of a long lease so as to continue its coal loading operations, the long-term industrial use of the site, situated as it was in a residential locality and on the Harbour, was not contemplated and the requirement that the structures be removed was consistent with the Waterways Authority’s long-term objectives. However, if the lease was terminated at an early point, the Waterways Authority may not have been ready to consider alternative options for the use of the site, so that retention of the wharf may have suited its purposes. Clause 8 thus gave it the option to require the wharf to be removed only if that did suit its purposes at that time.

It would be a strange result if the position of the lessor was more advantageous at the expiration of the term, than if termination of the contract occurred during the term through default or breach by the lessee as would be the case if the Waterways Authority’s construction of the clause was accepted.

There are other reasons why cl 7 should be read according to its terms. Contrary to the trial judge’s finding, I am of the opinion that breach of cl 7 would occur should the lessee not remove structures at the expiry of the term. The effect of his Honour’s view is that the failure to remove constitutes a condition precedent to the right of the lessor to remove or retain. On his Honour’s approach, breach occurs at some other time post expiration of the term, that is, in circumstances where the lessor neither chooses to retain nor to remove the structure. I am unaware how, as a matter of principle, an obligation that does not survive the termination of the contract can be breached after termination.

Further, on his Honour’s construction and if his Honour is correct as to the proper approach to damages, the result upon breach would be substantially different from the position that the parties agreed to under the lease. Pursuant to cl 7, the Waterways Authority can retain or remove the wharf. However, it cannot, under the clause, retain and claim damages. That is the right that, according to his Honour, was available on breach. I do not consider that the reasonable person in the position of the parties would have understood that to be the case.

If I am correct in this construction of cl 7, the rights of the parties upon the termination of the lease are governed by the terms in cl 7, so that the Waterways Authority may remove the wharf itself or it may retain it. If it removed the wharf, it was entitled to the cost of doing so as specified by cl 7. If it retained the wharf, there is no question of any money adjustment between the parties. Is specific performance an available remedy?

If I am correct in deciding that the rights of the parties upon the term of the lease are contained wholly within cl 7, then no question of specific performance arises. However, if cl 7 does not fully govern the rights of the parties, so that upon expiry of the lease there remained a right to common law damages for breach should C & A have failed to remove the wharf, the question also arises whether specific performance is an available remedy. This question raises two issues. The first is whether specific performance may be ordered of an executed obligation. The second is whether damages is an adequate remedy and if so, whether that precludes the grant of specific performance.

The Waterways Authority submitted that as neither of these issues had been raised in the Court below, this Court should not now entertain the question. It conceded, however, that the first question, that is, whether specific performance could be ordered of an executed obligation, was not a matter that raised evidentiary issues. It did not otherwise assert it was prejudiced. However, it submitted that if C & A was successful on this point (or on any other point not argued below) costs consequences should follow. I will deal with the question of costs later, but , if my construction of cl 7 is wrong, this question is fundamental to determining the Waterways Authority’s entitlement to relief. Accordingly, leave should be granted to argue the matter. Can specific performance be ordered in respect of an executed contract?

C & A submitted that, even if cl 7 was not a code, specific performance was not available for the performance of a contract that was fully executed. It submitted that its obligation was to remove the wharf prior to the expiration of the term. In that sense, its obligation under cl 7 was fully executed and it had only a secondary liability to pay liquidated damages should the Waterways Authority itself remove the wharf: see Moschi v Lep Air Services , where Lord Reid, at 345-346, stated that after termination, contractual obligations no longer existed as obligations. The obligation to perform disappeared and by operation of law, was replaced by an obligation to pay damages. See also Diplock LJ at 350, who observed that there were exceptional ancillary obligations that might survive the termination of the contract, such as mutual promises to submit disputes to arbitration.

The Waterways Authority contended that specific performance was available in respect of executed contracts and referred to Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129, where it was held that cancellation and rescission of a contract in consequence of repudiation did not affect accrued rights to the payment of instalments of the contract price. Lord Fraser of Tullybelton at 1150 stated “ [t]hat remained … a debt due ”. Senior counsel for the Waterways Authority submitted that this was authority for the proposition that the initial obligation (in that case, a debt) remained, notwithstanding that the contract had come to an end. In other words, a party was not relegated to a claim for common law damages.

I do not consider that Hyundai Heavy Industries Co Ltd is of assistance. The question in that case was, as to the liability of a guarantor for accrued money obligations as at the date that the contract was brought to an end by repudiation. It was argued that as the contract had been brought to an end, the guarantor had no liability for instalments that had accrued due and which had not been paid. The reference to this instalment remaining a debt due was made in that context. No question as to specific performance of the primary obligation arose. The question here is whether relief in the form of specific performance could be granted of an obligation to carry out a specific act (not a money obligation), which under the contract, had to be carried out prior to the expiry of the lease.

Reliance was also placed on “ Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies ”, 4th ed (2002) Australia, Butterworths LexisNexis at 20-005 to 20-020, where the authors do make reference to specific performance in the case of executed contracts, but do so in the context of drawing a distinction between specific performance in its “ proper sense ” and relief analogous or approximate to specific performance, although for reasons I give below, that labelling will not be a critical distinction in this case. The real issue is the circumstances in which an order to perform an obligation under an executed contract will be made. However, an understanding of the distinction is necessary for the purposes of resolving what I have referred to as the ‘real issue’.

Specific performance in the strict sense has been described as “ an order of the court directing a party to a contract to perform his obligations thereunder according to its terms ”: “ Equity and the Law of Trusts ”, PH Pettit, 9th ed, p 628. In JC Williamson Limited v Lukey and Mulholland (1931) 45 CLR 282; [1931] HCA 15 Dixon J explained at 297 that specific performance in the proper sense: “… is a remedy to compel the execution in specie of a contract which requires some definite thing to be done before the transaction is complete and the parties rights are settled and defined in the manner intended.”

His Honour stated that specific performance in this strict sense was not available unless the order provided complete relief so that the contract could be carried into full and final execution. The resultant position was that the parties would thereby be placed in their respective positions as contemplated by the contract.

Likewise, in Wolverhampton and Walsall Railway Co v London and North-Western Railway Co (1863) LR 16 Eq 433, Lord Selborne LC at 439 stated that specific performance in its proper sense: “… presupposes an executory as distinct from an executed agreement, something remaining to be done … in order to put the parties in the position relative to each other in which by the preliminary agreement they were intended to be placed.” See also Tailby v Official Receiver (1888) 13 App Cas 523.

The distinction between specific performance in the true sense and an order that a contractual obligation be performed in specie, was acknowledged in Pakenham Upper Fruit Company Limited v Crosby (1924) 35 CLR 386; [1924] HCA 55, where the Court observed that the relevance of the distinction lay in the underlying basis that attracted the intervention in equity. In the case of true specific performance, the equity that gave rise to the remedy was the need to place the parties in the relative legal positions contemplated by the contract. In the case of an executed agreement, some other basis for the intervention of equity must be established “ appropriate to the actual legal relative situations of the parties ” (emphasis added) having regard to the terms of the contract. It is apparent that when their Honours referred to the “ actual relative legal situations of the parties ”, they were referring to those obligations which, under the terms of the contract, remained to be performed. Otherwise, there would no obligation of which performance could be ordered.

The distinction between specific performance in its strict sense and an order made requiring performance of a term of a contract has continued to be drawn: see Burns Philp Trust Co Pty Ltd v Kwikasair Freightlines Ltd (1963) 63 SR (NSW) 492: Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415; Masters v Garcia (No 2) [2006] NSWCA 15. In Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard Clarke JA (Mahoney and Meagher JJA agreeing) stated, at 423, that where the applicant has carried out its part of the bargain, the contract is not executory and the relief sought is analogous to specific performance, in the sense that “ a party seeks the aid of the court to compel the other party to perform its obligations according to the terms of the contract ”.

It follows from these principles, that where a contract has come to an end, in the sense that all the obligations under it have been performed, or, in the case of a lease, the term of the lease has expired, specific performance of obligations that were to be performed during the term is not available. A straightforward example is to be found in McMahon v Ambrose [1987] VR 817, where it was held (per Murray J at 819; Marks J at 849-850) that the Court did not have jurisdiction to grant specific performance, or equitable damages in lieu thereof, in respect of an oral agreement for lease where the term of the lease had expired at that time when proceedings were commenced.

Senior counsel for the Waterways Authority submitted that McMahon v Ambrose was not authority for this proposition, as it derived from a long line of authority applicable to leases where the courts, by the application of a fiction, backdated leases. The correctness of that submission is not apparent on the face of the judgment and the principle stated seems straightforward and obvious. However, if further authority is needed, another example is to be found in Laserbem Pty Ltd v Gainsville Investments Pty Ltd & Anor [2004] VSC 62 where Kaye J observed at [58] that if the time for performance of the lease under consideration had expired at the date of institution of the proceedings, the court would not grant a decree of specific performance, nor would it grant equitable damages in lieu. The position was otherwise where proceedings had been commenced before the time for performance of the agreement had expired.

There are in fact numerous examples of this principle in the cases. The Millstream Pty Limited v Schultz [1980] 1 NSWLR 547 involved a contract for the delivery of deer. As it turned out, the vendor did not have and was not in a position to deliver deer of the contractual description on the contract date. McLelland J, having noted that damages under s 68(b) of the Supreme Court Act will only be awarded where the court could properly have awarded specific performance at the commencement of proceedings (subject perhaps to discretionary defences), held the court would not order specific performance where the contract could not have been performed in specie on the contract date.

Although I have indicated that the ‘label’ attached to the remedy sought in this case is not of particular importance, the principles, and in particular the nature of the equity that must be attracted for the purposes of relief where performance of an obligation of a fully executed contract is sought, is relevant. If relief was available in this case, it would be relief analogous to specific performance. The underlying equity is one that requires the making of an order “ appropriate to the actual legal relative situations of the parties ”: see Pakenham Upper Fruit Company Limited v Crosby at [62] above.

The relevant time to consider that question is likely to be at the time of making the order. But in considering the availability of the remedy, it is necessary to consider the positions of the parties as at commencement of the proceedings. At that time, C & A had no contractual obligation to remove the wharf. Nor did it have any right under the lease to re-enter the premises to do so. The fact that the Waterways Authority may, or even would, have granted permission to C & A to do so is not to the point. A court will not, by way of specific performance or an order analogous to specific performance, remake the parties’ bargain.

Conversely, the Waterways Authority had no right to require C & A to re-enter and remove the wharf. In this regard, the language of cl 7 is significant. The obligation was to remove “ prior ” to the expiration of the term. That language was specific, and did not allow, by way of implication, for periods of grace, or for the removal of the wharf within a reasonable time after the expiry of the term. A failure to remove prior to the expiry of the term, meant that upon expiry, C & A was in breach of its contractual obligation.

It follows, therefore, that although C & A had breached its obligation to remove the wharf, at the date of commencement of the proceedings there was no outstanding obligation of which in specie performance could be ordered. Put another way, an order to remove the structure would not be an order according to the terms of the contract.

For this reason alone, the appeal, in my opinion, fails. Are damages an adequate remedy?

C & A submitted, alternatively, that even if cl 7 did not wholly regulate the rights and obligations of the parties, damages were an adequate remedy, as had been admitted by the Waterways Authority in its pleadings, so that, as a matter of law, specific performance was not available. The determination of this question involves, in the first instance, an understanding of the nature of the court’s equitable jurisdiction to grant specific performance.

The basis of the court’s equitable jurisdiction to grant specific performance, as explained by Windeyer J in Coulls v Bagot’s Executor & Trustee Company Limited & Ors (1967) 119 CLR 460 at 503; [1967] HCA 3, is because “ damages, cannot satisfy the demands of justice ”; or as Lord Selborne said in Wilson v Northampton and Banbury Junction Railway Co (1874) 9 Ch App 279 at 284, the court will grant specific performance instead of damages “ only when it can by that means do more perfect and complete justice ”: see also Inetstore Corporation Pty Ltd (in liq) & Anor v Southern Matrix International Pty Ltd (2005) 221 ALR 179 at 184; [2005] NSWSC 883 at [30]-[31]; Varley v Varley [2006] NSWSC 1025 at [23]-[24].

Before proceeding to consider each of these contentions, it should be said that although the authorities discussed above maintain a distinction between true specific performance and an order analogous thereto, general equitable principles including the adequacy of damages apply when what is sought is an order analogous to specific performance: “ Equity: Doctrines and Remedies ” at 20-015.

In Dougan v Ley & Anor (1946) 71 CLR 142; [1946] HCA 3 Dixon J at 150 said that the foundation of specific performance was that damages would not give the party seeking relief “… the compensation to which he was entitled; that is, would not put him in a situation as beneficial to him as if the agreement were specifically performed’.”

Williams J said at 153: “It is clear that the Court of Equity will not decree specific performance of a contract where a money payment, or in other words damages, will afford an adequate remedy for the breach …”

Recently, in Co-operative Insurance v Argyll Stores (Holdings) Ltd [1998] AC 1, Lord Hoffmann (with whom Lord Browne-Wilkinson, Lord Slynn of Hadley, Lord Hope of Craighead and Lord Clyde agreed) said, at 11, that it had been established since the nineteenth century that "… the power to decree specific performance was part of the discretionary jurisdiction of the Court of Chancery to do justice in cases in which the remedies available at common law were inadequate. This is the basis of the general principle that specific performance will not be ordered when damages are an adequate remedy.”

In Wentworth v Woollahra Municipal Council & Ors (1982) 149 CLR 672; [1982] HCA 41, the Court, at 678, observed that Lord Cairns himself had considered that Chancery had a power to award equitable damages, provided the plaintiff had made out, at the commencement of the suit, the ingredients of a case for equitable relief, notwithstanding that the claim ultimately failed on discretionary grounds: see Ferguson v Wilson (1866) LR 2 Ch at 91-92. Their Honours concluded by assuming, without finally deciding, that equitable damages were available even if the claim for equitable relief was defeated by a discretionary defence, for example, laches, acquiescence, or hardship. This case is not concerned with the question of relief where equitable defences have been raised. The question is whether damages are an adequate remedy.

C & A submitted that, in this case, damages were an adequate remedy. It advanced this submission as a matter of principle, but also relied on an admission in the pleadings filed by the Waterways Authority to that effect. I will turn to that question first.

In the Statement of Claim filed on 17 December 1999, the Waterways Authority claimed a declaration that C & A was in breach of cl 7 (para 16(a)); an order for specific performance (para 16(b)) and damages (para 16(c)).

In para 17 of its amended defence, C & A pleaded: “In answer to the whole of the Statement of Claim, the Defendant says specific performance would be an inappropriate remedy if the Plaintiff is entitled to any remedy (which is denied), because damages would be an adequate remedy and is the remedy provided for by clause 7 of the Lease if (which is denied) the Defendant had breached clause 7 of the Lease.”

In para 3 of its reply, the Waterways Authority pleaded: “In answer to paragraph 17 the Plaintiff admits that damages is an adequate remedy.”

On the first morning of the hearing, C & A filed a further amended defence in which it made amendments to paras 15, 15A and 17A. Its pleading otherwise remained unchanged, including the assertion in para 17 that damages were an adequate remedy. The Waterways Authority, after a contested application to do so, was granted leave to file a reply to the further amended defence in which it pleaded only to paras 15, 15A and 17A (in an expanded form in each case). The ‘admission’ in para 3 of its original reply was not repleaded.

C & A submitted that, given the admission in the Waterways Authority’s original reply, that damages were an adequate remedy, it had been entitled to assume that the claim for damages made in the Statement of Claim was a claim for common law damages. It said that it only became aware that the claim was for equitable damages in lieu of specific performance from the Waterways Authority’s preliminary outline of submissions dated 10 August 2005, filed in the week before the hearing.

C & A contend that, in filing its reply to the further amended defence, the Waterways Authority had not withdrawn its original reply. Senior counsel for the Waterways Authority submitted that the new reply to the further amended defence was, unquestionably, a complete statement of its pleading and replaced any previous pleading. Both parties make reference to the transcript of the application to file a reply to the further amended defence in support of their respective positions. Senior counsel for the Waterways Authority also relied on the form of the pleadings, the fact that the issue as to whether damages were an adequate remedy had not been argued at trial and the fact that there had been no reference to the admissions and to the pleadings themselves during the course of the hearing.

On examination, the original reply and the new reply, although not providing a conclusive answer, appear to fully plead to the further amended defence. If the new reply was a complete substitute, there would have been an implied joinder of issue on para 17 so as to constitute a denial that damages were an adequate remedy: see Uniform Civil Procedure Rules 2005 (NSW) ( UCPR ) r 14.27.

C & A point out that even if the new reply was a complete substitute, the Waterways Authority had not obtained the leave of the Court, nor the consent of C & A, to withdraw the admission as required by UCPR r 12.6(2). (The Civil Procedure Act 2005 (NSW) and the UCPR commenced operation on 15 August 2005, the first day of the trial, and applied to these proceedings pursuant to Sch 6 cl 5(1) of the Act. Rule 21.3(2) of the Supreme Court Rules 1970 (NSW) was in the same terms.)

As Campbell JA observed in The Nominal Defendant v Gabriel & Anor [2007] NSWCA 52, at [112], there are principles that govern the exercise of the Court’s discretion in determining whether leave should be granted. However, for the reasons I give below, as I consider that C & A should be permitted to raise the question whether damages were an adequate remedy, but not on the basis of the admission, it is not necessary to consider those principles.

The argument that damages were an adequate remedy and that it had been admitted that that was the case, took the Waterways Authority by surprise when raised by C & A on the appeal. C & A conceded that the proposition, that specific performance could not have been awarded because damages was an adequate remedy, had not been argued at trial in the way in which it was now sought to be advanced and no reliance had been placed on the ‘admission’. C & A submitted, however, that that question was a matter of law and it having been put in issue in the proceedings, then, if the Waterways Authority had proposed to prove that damages was not an adequate remedy, it might have been expected that in the conduct of its case, such evidence would have been adduced. Senior Counsel also submitted that the question whether specific performance was available was always an issue in the trial, although the focus of the argument at trial was on the operation of cl 7, rather than on the question of the adequacy of damages.

The Waterways Authority submitted it was prejudiced, should leave be given to raise this question. In particular, it submitted that it would undoubtedly have sought leave to withdraw the admission had the matter been raised at trial. It also submitted it may have sought to adduce evidence from one of its officers, or cross-examined one of C & A’s witnesses as to the public amenity considerations relevant to the desirability of demolition of the timber structure of the wharf.

The principles governing the raising of a new point on appeal are well established. They were restated by the High Court most recently in Park v Brothers (2005) 80 ALJR 317; [2005] HCA 73, where the Court stated at 324: “As was pointed out in Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at [52] even when there are pleadings, to determine whether a party is raising a new point on appeal the actual conduct of the proceedings must be considered. In adversarial litigation, as a general rule, a party is bound by the conduct of his case. There are circumstances in which the interests of justice may lead an appellate court to permit a party to raise a point that was not taken at trial, but where the point is one that could have been met by calling evidence below then it cannot be raised for the first time on appeal: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; Water Board v Moustakas (1988) 180 CLR 491 at 497, 62 ALJR 209; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at [51]-[52].” See also Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21 and David Syme & Co Ltd v Lloyd (1985) 1 NSWLR 416 per Kirby P at 420-421.

Perhaps unusually, questions relating to the public and heritage character of the wharf, its public amenity and the considerations of various public entities in respect of it, was the subject of detailed evidence in this case. Much of it is canvassed below. The evidence of C & A’s witness could not have been relevant to that question, nor could the personal view of its own witness. Accordingly, I would reject the submission that the Waterways Authority is prejudiced because further evidence might have been adduced.

The question of prejudice arising from being deprived of the opportunity of seeking leave to withdraw the admission is different. That may give rise to a relevant prejudice, if reliance on the admission was the basis upon which C & A now sought to establish its position on this issue. However, whilst staking its claim on the admission as an initial strategy, as I understand C & A’s case, it submits that it is apparent in any event that damages are an adequate remedy in this case.

As the question of the adequacy of damages is fundamental to the question whether specific performance is an available remedy so as to provide the jurisdictional route for an award of damages under s 68(b) of the Supreme Court Act , I consider that C & A should be permitted to raise this issue but should not be permitted to rely on the admission.

The authors of “ Equity: Doctrines and Remedies ” point out at 20-030 that the authorities and texts when dealing with the question whether damages are an adequate remedy have tended to place the cases in categories and have developed sub-rules in relation to the established categories. They observe that whilst in Coulls v Bagot’s Executor & Trustee Company Limited & Ors Windeyer J indicated that there was no reason to limit the principle to particular categories of cases, that remained the approach. They also noted the approach developing in the United Kingdom, that the question of adequacy of damages as a jurisdictional limitation was being replaced with the discretionary approach as to whether it would be more just to grant specific performance rather than damages: see ICF Spry, “ The Principles of Equitable Remedies ”, 7th ed (2007), Lawbook Co, p 60. This has not attracted support in Australia: cf The Mayo Group International Pty Ltd v Hudson Respiratory Care Inc [2005] NSWSC 445, where Young CJ in Eq was content to adopt the English approach without determining whether it was the presently correct jurisprudence.

No occasion has been shown in this case to depart from the long-standing Australian approach to these principles. Thus there is no need to explore any difference there may be between changing or modifying long-established principles, and working out what is inherent in accepted principle, nor to examine carefully the extent of High Court authority and dicta on the topic: cf Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 81 ALJR 1107; [2007] HCA 22.

Further, the fundamental basis of the Waterways Authority’s case is that the question for determination is whether specific performance could have been awarded at the commencement of proceedings, not whether specific performance would have been awarded. That principle accommodates discretionary defences, but it cannot, it seems to me, accommodate the essence of the Court’s jurisdiction.

The obligation sought to be enforced here does not fall within any of the traditional categories of case where damages have been considered to be an inadequate remedy. Nor is there anything that makes the obligation under cl 7 analogous to those categories where damages are considered inadequate. The obligation was to remove a particular structure. Breach of the obligation gave rise to a right to claim damages, either under cl 7, or on the construction of the contract, as found by his Honour, at law. On either basis, damages must be an adequate remedy, in which case, the appeal must fail. Was North Sydney Council the appropriate consent authority and did it refuse to give consent?

The trial judge held that the Minister for Ports and Waterways, not North Sydney Council, was the relevant consent authority. C & A contended, however, that as at the expiry of the lease, North Sydney Council was a relevant consent authority and had rejected its application to demolish the wharf. Demolition was necessary, of course, for the removal of the wharf. On 31 May 1993, C & A lodged a development application seeking development consent for, relevantly, demolition of the wharf. The Waterways Authority, as owner of the land, consented to the application being lodged.

The development application came before North Sydney Council on 16 August 1993, on which occasion it deferred consideration of the application pending completion of the Berry’s Bay Planning Study and C & A submitting a heritage assessment of, relevantly, the wharf. North Sydney Council also resolved to oppose demolition of the wharf prior to the consideration of the options for the site. North Sydney Council informed the Sydney Ports Authority of this decision by letter dated 8 September 1993.

Subsequently, North Sydney Council informed the Sydney Ports Authority that it was not the consent authority for the application, due to the application of Sydney Regional Environmental Plan No 23 (SREP 23). It also informed the Sydney Ports Authority that the consent of the Heritage Council of New South Wales was required for demolition of the wharf. The second part of this advice is recognised by both parties as being incorrect and is not presently relevant. The question in issue is whether the North Sydney Council was a consent authority. C & A submitted that under the relevant planning legislation and in particular, North Sydney Local Environmental Plan 1989 (NSLEP 1989), North Sydney Council was a consent authority at the expiration of the lease.

The NSLEP 1989 was made pursuant to the Environmental Planning and Assessment Act 1979 (NSW) (the Environmental Planning and Assessment Act ). Clause 37(1) provided: “A person shall not, in respect of a … heritage item - (a) demolish or alter the building or work: … except with the consent of Council.” “ [H]eritage item ” was defined in cl 36 as “… a building, work … (a) situated on land coloured orange on the map marked ‘Heritage Conservation’, or (b) listed in Schedule 2.” The coal loader was listed as a heritage item under Sch 2. More relevantly, the wharf was coloured orange on the map incorporated into the NSLEP 1989 pursuant to the terms of the definition of “ heritage item ”, so that under cl 37, the Council’s consent to its demolition was required.

The trial judge held, at [80], that NSLEP 1989 did not refer to or affect the wharf as distinct from the coal loader. The difficulty with that finding is, as is now acknowledged by both parties, his Honour was not provided with the entirety of the planning instruments and in particular, was not provided with the planning map which was incorporated into NSLEP 1989 pursuant to the provisions of cl 36. It is apparent from his Honour’s judgment that he was not aware of its existence.

Although the planning map was not brought to the attention of the trial judge, the Court cannot operate on the fiction that the statutory instrument did not include it. It follows that his Honour’s conclusion that NSLEP 1989 did not refer to or affect the wharf, as distinct from the coal loader, was wrong.

Senior counsel for the Waterways Authority accepted that the wharf was marked orange on the planning map and thus, in accordance with the provisions of cl 36, was a heritage item for the purposes of that clause. He submitted, however, that reliance upon this material now posed difficulties for his client. Senior counsel for C & A submitted that the matter was clearly one of statutory construction and having regard to the manner in which the Waterways Authority conducted its case in the Court below, no ensuing prejudice arose.

I am uncertain as to why the Waterways Authority would be prejudiced by this argument as C & A argued at trial, that having regard to the inclusion of the coal loader in the meaning of heritage item in NSLEP 1989, North Sydney Council was the consent authority. The argument is no different in point of principle. Nonetheless, C & A concede that having regard to its reliance on the planning map, the Waterways Authority should be allowed to amend its Notice of Appeal to include the following ground: “His Honour erred in failing to hold that by reason of cl 4 of the Sydney Regional Environmental Plan No 23 (SREP 23), SREP 23 prevailed over North Sydney LEP 1989.”

This issue had been argued at trial and I am of the opinion that leave to amend to include that ground should be given. It is that issue to which I now turn. Sydney Regional Environmental Plan No 23

The starting point of the Waterways Authority’s argument is cl 4(1) of SREP 23, which provided that in the case of any inconsistency between SREP 23 and any other planning instrument, the provisions of SREP 23 applied to the extent of the inconsistency.

SREP 23 was made on 5 June 1990. His Honour found that SREP 23 as originally made, did not extend to demolition: see [91] of the judgment. On this basis, there was no inconsistency between NSLEP 1989 and SREP 23.

C & A does not dispute that the operation of SREP 23 extended to the wharf, nor does it dispute the operation of cl 4(1). The question is, what was the extent to which the provisions of SREP 23 governed the use of the wharf.

The Waterways Authority accepted that as originally made SREP 23 did not extend to demolition of the wharf but only made provision for development. “ Development ” was defined in cl 5 to have the same meaning as in s 4 of the Environmental Planning and Assessment Act . “ Development ” in s 4 of the Environmental Planning and Assessment Act did not expressly include demolition. His Honour accepted, in accordance with the decision of Bignold J in Belle Design Group Pty Ltd v Woollahra Municipal Council (2004) 136 LGERA 1; [2004] NSWLEC 284 that “ development ” in s 4 did not include demolition. Both parties accept that proposition, which is well established: see Mulcahy v Blue Mountains City Council (1995) 87 LGERA 422; Sharp v Hunters Hill Council [2002] NSWLEC 27.

SREP 23 was relevantly amended on 22 March 1994. Clause 8 was amended so as to provide in cl 8(4) that “ the consent authority for water based development … was the [Maritime Services] Board ”. Part 4 made provision for heritage items and cl 22 provided that a heritage item shall not be demolished “ except with the consent of the consent authority ”. The coal loader was a specified heritage item: Sch 5.

The Waterways Authority submitted that it followed from cl 22 that the Maritime Services Board was the relevant consent authority. I accept that this was so as from the date of the amendments. However, from a comparison of SREP 23 in its original form and as amended as at 22 March 1994, it is apparent that Part 4 was only inserted at that time. If I am correct in finding that the obligation to remove the wharf was at the expiry of the term of the lease, which, as stated earlier, was 31 December 1993, the Maritime Services Board was not then the consent authority. Rather, it was North Sydney Council, for the reasons I have given. The question of who was the relevant consent authority at some later date on this approach is irrelevant.

I should add that it is possible that this submission was advanced on the premise that the date of termination of the lease was in May 1994 when C & A left the site. However, his Honour found, and there was no appeal from the finding, (indeed his Honour stated that it was accepted) that the lease governed until the termination of the lease on 31 December 1993.

The Waterways Authority advanced an alternative submission based on ss 75 and 76 of the Environmental Planning and Assessment Act . Pursuant to s 76(2), where an environmental planning instrument provided that “ development ” could only be carried out with consent, that consent was to be obtained before the development could be carried out. As explained above, “ development ” in the Environmental Planning and Assessment Act did not initially encompass “ demolition ” and “ development ” in SREP 23 had the same meaning as in that Act.

However, “ development ”, for the purposes of s 76(2) had the meaning given to it in s 75(1). Section 75 was an interpretation provision for Pt 4 of the Act. Section 75(1) provided that “In this Part, a reference to development includes a reference to any other act, matter or thing referred to in section 26 which is controlled by an environmental planning instrument.”

Section 26 provided that an environmental planning instrument may make provision for or with respect to any of the following: “(d) controlling the demolition of buildings or works.”

A “ building ” was defined in s 4 as including a “ structure or part of a structure ”.

It was submitted, therefore, that s 76(2) had to be construed so that the word “ development ” included the word “ demolition ”, imported from s 26, via s 75. As s 76 referred to any environmental planning instrument, it followed that where reference was made to “ development ” in SREP 23, it bore the same meaning as in s 76(2). Thus, under SREP 23, even prior to its amendment in March 1994, it was submitted that the Maritime Services Board was the consent authority for demolition of the wharf.

The trial judge rejected this argument. He pointed out that s 75 applied only to Pt 4 of the Environmental Planning and Assessment Act and did not have the effect of incorporating the extended meaning of “ development ” into SREP 23. This must be correct. The purpose of s 26 was to provide for the range of matters for which an environmental planning instrument could be made. Those matters included demolition. Section 76 expressly referred to “ development ” as specified within an environmental planning instrument. Pursuant to s 26, development could include demolition. Whether it did depended upon the terms of the instrument. The meaning of “ development ” in SREP 23 was defined by reference to s 4 of the Environmental Planning and Assessment Act : see cl 5(1), and not by reference to s 26. Thus, “ development ” for the purposes of SREP 23, prior to its amendment on 22 March 1994, did not include demolition.

Accordingly, there was no inconsistency between the two instruments, with the result that pursuant to the NSLEP, as at the date of the expiry of the lease, North Sydney Council was the planning authority and its consent was required for demolition of the wharf as at the expiry of the lease.

That is not the end of the matter. The trial judge found that the position of North Sydney Council as consent authority was, in effect, ousted by the operation of s 33 of the Sydney Harbour Trust Act 1900 (NSW) (the Sydney Harbour Trust Act ). C & A challenge this finding. Operation of the Sydney Harbour Trust Act

Pursuant to s 205 of the Local Government Act 1993 (NSW) (the Local Government Act ), the whole of the land occupied by the wharf is governed by the provisions of the Local Government Act . Section 68 of the Local Government Act provided that the approval of the local council was required before the demolition of a building could be undertaken. “ Building ” was defined to include “ part of a building and any structure or part of a structure ” and so included the wharf.

The trial judge held, however, that the exclusive control of the wharf was vested in the Commissioners appointed under the Sydney Harbour Trust Act : s 33. The powers of the Commissioners under that Act were subsequently transferred to and became exercisable by the Maritime Services Board pursuant to the provisions of s 6 of the Maritime Services Act 1935 (NSW) (the Maritime Services Act ).

His Honour reached this conclusion by application of the rule of statutory construction that general legislation which is inconsistent with particular legislation does not repeal the particular legislation. It followed, on his Honour’s analysis, that as the Maritime Services Board had exclusive control of the wharf, C & A did not require approval of North Sydney Council under the Local Government Act for the demolition of the wharf as at 31 December 1993 (judgment [76]).

C & A submitted that in reaching this conclusion his Honour failed to have regard to the provisions of s 69 of the Local Government Act , which cast light upon the proper construction of s 68, so that, demolition, other than by the Council or a Crown instrumentality could only take place with the approval of both the Maritime Services Board and North Sydney Council.

Sections 68 and 69 provided as follows: “ 68 What activities, generally, require the approval of the council? (1) A person may carry out an activity specified in the following Table only with the prior approval of the council, except in so far as this Act, the regulations or a local policy adopted under Part 3 allows the activity to be carried out without that approval. (2) This section does not apply to the carrying out of an activity specified in Part B of the following Table on land to which any of the following Acts apply: Hunter Water Board (Corporatisation) Act 1991 Water Board Act 1987 Water Supply Authorities Act 1987 TABLE APPROVALS Part A Buildings, temporary structures or movable dwellings 1 … 2 Demolish a building ... Part B Water supply, sewerage and stormwater drainage work … 69 Crown exemption from approval to erect or demolish a building Section 68 does not require the Crown or a person prescribed by the regulations to obtain the approval of a council: · to erect a building · to demolish a building · to do anything that is incidental to the erection or demolition of a building.”

It was submitted that the effect of these sections was first to regulate what work could be carried out and in what circumstances, that is with or without Council approval and that certain work did not require consent: s 68(1); and, secondly to exempt the Crown from the operation of s 68, so that the Crown did not need to obtain consent to carry out the activities specified in s 69.

It was submitted that, even accepting that s 33 of the Sydney Harbour Trust Act was not repealed by s 68 of the Local Government Act , the two provisions could be read together so as operate concurrently.

In Butler v Attorney-General for the State of Victoria (1961) 106 CLR 268; [1961] HCA 32, Fullagar J, in determining the question whether a later State Act applied to the exclusion of an earlier State Act, stated at 275-276: “The books contain, of course, plenty of examples of an implied repeal--total or partial--of an earlier statute by a later statute of the same legislature. But it is a comparatively rare phenomenon, and it has been said again and again that such a repeal will not be held to have been effected unless actual contrariety is clearly apparent. I would say that it is a very rare thing for one statute in affirmative terms to be found to be impliedly repealed by another which is also in affirmative terms. … [W]here the comparison to be made is between two State Acts, there is a very strong presumption that the State legislature did not intend to contradict itself, but intended that both Acts should operate. It will often be found that the two may reasonably and properly be reconciled by reading the one as subject to the other.”

In Parramatta City Council v Stauffer Chemical Co (Aust) Pty Ltd & Ors (1971) 2 NSWLR 500 Hope J, at 506-507, reproduced the comments of this Court in Woollahra Municipal Council v MacLennon [1970] 1 NSWR 273 relating to the operation of ss 33 and 311 of the Local Government Act as follows: “It may be that where the Local Government Act and [relevantly the Sydney Harbour Trust Act ] merely establish requirements of consent, approval or licence, these may operate concurrently upon the same subject matter, without its following that the provisions of the other Act are ‘affected’ or that powers vested thereby are ‘taken away’. But it is otherwise where the provisions of one or both Acts are mandatory in their character, or empower mandatory requirements to be imposed, leading to an impossibility of complying with both of them or of both standing together. When consideration is given to the relevant provisions of the Sydney Harbour Trust Act the position emerges that a refusal of approval by a council might impinge upon the provisions of s.33 whereby exclusive control of the port and the preservation and improvement of the port generally are vested in the Maritime Services Board. Again a refusal of approval by a council might prevent a lessee from carrying out works which pursuant to the covenants of a lease granted under s. 67 he was required, or directed by the Board, to carry out. Thus it appears that to construe s. 311 of the Local Government Act in the sense contended for by the appellant council - that is as requiring the approval of the council to the works in question in this case - would lead to the result prohibited by s. 10 namely that s. 311 would ‘affect’ ss. 33 and 67 of the Sydney Harbour Trust Act .” (Citations ommitted)

C & A submitted that in this case, when regard was had to the effect of ss 68 and 69 of the Local Government Act , s 33 of the Sydney Harbour Trust Act and s 68 of the Local Government Act could co-exist. The effect of s 68 was, it was said, simply to add another layer of consent to the carrying out of work. Thus, in a case such as the present, the Maritime Services Board, as the body with relevant control of the wharf, could require, as a term of the lease that the wharf be removed. Clause 7 imposed that obligation. In order to remove the wharf, the lessee had to obtain the consent of North Sydney Council. It was submitted that that did not raise any relevant inconsistency or contrariety between the two provisions even if the Council refused consent, because the Waterways Authority could itself still remove the wharf under cl 7 and pursuant to s 69, it was not required to obtain Council’s consent for its demolition.

I consider that this submission is correct. There is nothing in the Local Government Act that is contrary to or diminishes the Waterways Authority’s exclusive control in respect of the demolition of the wharf. It may demolish it if it so chooses. The Waterways Authority, by entry into the lease, affected its own ability to control the wharf, including its right to demolish it, for the duration of the lease. But it did that as part of its exclusive control of the wharf. That is a different matter from the question of whether the two provisions are inconsistent. For the reasons I have explained, they are not.

The relevance of this conclusion relates to the Waterways Authority’s claim that there was an implied term that C & A apply for all relevant consents to enable it remove the wharf. This is considered in detail below. In short however, C & A says that it has in fact taken steps to obtain consent and that consent was refused. Has the Waterways Authority decided to retain the wharf?

C & A contended that in any event, the Waterways Authority had made a decision to retain the wharf. This submission involves a detailed consideration of the dealings in relation to the wharf, including planning instruments, over a lengthy period.

The Waverton Peninsula Industrial Sites - Conservation Management Plan described the wharf in the following terms: “7.5.4 The Coal Loader Site The Coal Loader wharf has landmark qualities and shows evidence of a defunct industrial process. The timber structure of the Coal Loader wharf: · is aesthetically distinctive; · is outstanding because of its size; and · is a rare example of its scale and type. The timber structure of the Coal Loader wharf provides opportunities for a public viewing/fishing platform but its condition poses constraints in terms of conservation costs and public safety. The Coal Loader tunnels and stonework have aesthetic qualities and show evidence of a defunct industrial process. Similarly the strong repetitive forms of the engaged piers and gantries on the western elevation of the Coal Loader impart the structure with aesthetic values and further evidence of the mode of operation of the Loader. The upper surface of the Coal Loader provides interesting views of the Harbour and Anzac Bridges and opportunities for community activities and site interpretation.”

By letter dated 6 December 1993, the Secretary of the Heritage Council of New South Wales informed the Maritime Services Board that the Heritage Council had no objection to the demolition of the gantry crane. On 13 June 1995, the Maritime Services Board’s Property Manager, Geoff Booth, wrote to North Sydney Council, stating that the Board proposed to issue a directive to C & A to remove the structure in accordance with its obligations under the lease. However, it raised for Council’s consideration a possible alternative, namely, that some “ appropriate authority ” seek to take over the wharf for the purposes of preservation or redevelopment. The Board requested that any proposal for retention of the structure be forwarded to Mr Booth’s attention in the first instance.

On the same day, the Board wrote to C & A, reminding it of its obligation under the lease to remove the wharf. It informed C & A that its view was that Council did not have “ jurisdiction to prevent removal of the structure ” and that an opportunity would be given to Council to seek retention of the wharf subject to Council accepting responsibility for upkeep and insurance. The letter stated that if Council accepted this proposal it might be permissible for C & A to assign its interest in the wharf. The letter concluded that the Board held C & A responsible for the removal of the wharf and reinstatement of the site in accordance with the lease and for any liability that may arise from the continuing presence of the wharf on the Board’s land.

North Sydney Council responded to the Board’s letter of 13 June 1995 by letter dated 26 June 1995. Council advised the Board that the wharf was part of the coal loader site which was identified as a heritage item both in SREP 23, and the NSLEP 1989. Both the NSLEP 1989 and cl 22 of SREP 23 required the development consent of the relevant authority for the demolition of a heritage item and in determining what action to take, the relevant authority was required to consider the effect of the proposed demolition on the heritage significance of the site. The letter also referred to cl 25, which required that before granting consent to demolition of a heritage item the consent authority must seek the views of the Heritage Council. It informed the Board that the Heritage Council had previously indicated that demolition of the wharf was inappropriate prior to the future of the site being determined. Council then advised the Board that the relevant application for demolition of the wharf was required to be made to Council under the provisions of NSLEP 1989.

Subsequently, on 11 July 1995, the Assistant Property Manager, Sydney Ports Corporation, prepared a memorandum to the Board in which she stated that, in her view, C & A needed to make an application to the Office of Marine Safety and Port Strategy seeking consent for demolition in accordance with SREP 23. Nothing of relevance happened thereafter until 2 April 1996, when Mr Booth wrote to C & A in the following terms: “As you are aware it has not been possible to secure consent for demolition of the Coal Loader structure due to heritage and local planning issues. Our enquiries to relevant local and State Government agencies indicate that from a heritage viewpoint, it will be necessary to demonstrate that there are no other feasible options for the structure, before demolition could be considered. Legally, the Corporation is of the view that either it, or the Office of Marine Safety and Port Strategy would be the consent authority for demolition, however the Port Corporation is required to give full and proper consideration to heritage issues. … Our reading of the current situation, however, is [that] due to the particular circumstances attaching to both the wharf and the adjoining land it is unlikely that resolution of planning and heritage issues will be reached in the immediate future. We recognise your point that the resulting increase in the eventual clearance cost is an unreasonable imposition on Coal & Allied …”

Mr Booth thus proposed that: “ · Coal & Allied ... pay the Corporation the current (1996) cost of such works (to a specification approved by Sydney Ports). · Sydney Ports to release Coal & Allied from its obligations under its expired lease. · Sydney Ports to take over responsibility for the conduct of negotiations with local and State Government Agencies regarding future options for the structure. · The sum paid by Coal & Allied to be held in trust by the Corporation, to be ultimately used either for the demolition of the structure or, subject to the Corporation being satisfied as to the merits of any alternative use proposal involving retention of the structure, then the sum may be offered as a contribution towards repair and restoration works. This to be subject to the release of the Corporation from any future responsibility or liability in respect of the structure.”

It should be observed at this stage that the proposal that the retention fund possibly be applied as a contribution towards repair and restoration of the works was a proposal that fell outside any obligation that C & A had under the lease. Its only obligation was the obligation under cl 4, to keep the wharf in repair during the term of the lease.

C & A responded to this proposal by letter dated 31 May 1996, advising that it was prepared to lodge a bank guarantee in the sum of $380,000, which was the quotation it had obtained for demolition of the works in November 1992, when the Port Authority requested it to remove the wharf. C & A reminded the Board that it had not been allowed to proceed with demolition at that time due to heritage and local planning issues. C & A’s offer was rejected, notwithstanding an internal memorandum recommending acceptance.

It appears that between 1993 and 1996, no demand was made on C & A to enter upon the premises for the purposes of removing the wharf.

The next matter of relevance is that in August 1998, Sydney Environmental Planning Policy 56 (SEPP 56) came into effect. The aims of SEPP 56 were to co-ordinate the planning and development of land comprising the foreshores of Sydney Harbour and its tributaries: cl 2. Pursuant to cl 4, the Policy applied to the land specified in the planning map, which included the coal loader and the wharf. Pursuant to cl 6, the stated objective of Pt 2 was to provide a set of clear principles for the development of all land to which the Policy applied. Clause 7 then set out guiding principles including that all decisions made in the administration of the Environmental Planning and Assessment Act or any instrument under that Act relating to the planning and development of land to which SEPP 56 applied were to be taken into account. Those guiding principles included: “[T]he conservation of items of heritage significance identified in an environmental planning instrument or subject to an order under the Heritage Act 1977.” (Cl 7(i))

Clause 14 provided that development consent must not be granted for development on specified land unless “(1) … (a) there is a master plan for the land, and (b) the consent authority has taken the master plan into consideration, and (c) the development is consistent with the master plan.”

Prior to granting a development application, the consent authority was required to seek the views of the Director-General; cl 15. The Minister could waive compliance with the requirements of cl 14(1); cl 14(2). The Masterplan for the coal loader was not made until March 1999. The effect of the Masterplan was to recommend conservation of the wharf.

On 18 June 1998, the Waterways Authority obtained an indicative quotation for demolition of the wharf which was estimated to be $0.8-$1m.

On 25 June 1998, the Assistant Secretary of the Ministry for Forests and Marine Administration wrote to C & A stating that the wharf was deteriorating and restoration would be prohibitively expensive. The Assistant Secretary pointed out that the wharf was within SREP 23 and it was understood that North Sydney Council and the Heritage Council would not oppose demolition, but that the formal approval of those bodies would be required. A proposal was again put that C & A submit a development application to the Ministry for Forests for demolition, or, alternatively, negotiate for the payment of a mutually acceptable monetary settlement for the satisfactory demolition of the wharf. Subsequently, the Heritage Council advised C & A that the Heritage Council opposed the demolition until a use had been found for the site. The consent of the Heritage Council was not, of course, required for demolition.

A number of Government departments made representations to North Sydney Council in relation to the proposed rezoning under the NSLEP 1989. The New South Wales Department of Public Works advised North Sydney Council that preservation of the coal loader site as a significant heritage item, was vital. Although the Department did not specifically identify the wharf, a reasonable interpretation of that letter is that the reference to the coal loader site included the wharf. The Waterways Authority made a submission to North Sydney Council on 16 November 1998, expressing its concern that the NSLEP 1998 did not “… occlude the SEPP and impose limitations on preserving and fulfilling the strategic regional significance of the site or the adaptive uses of structures for heritage perpetuity.”

The Minister for Forests and Marine Administration made a submission under the hand of the Acting Secretary, stating that the terms of the draft Masterplan were supported insofar as they related to the potential future uses of the coal loader and wharf. In its submission dated 11 January 1999, the Department of Urban Affairs and Planning advised North Sydney Council that the draft Masterplan was broadly consistent with the Government’s goals for Sydney Harbour. Specifically, in relation to the coal loader wharf, the submission stated: “5. Coal Loader Wharf and Structure Potential uses also include maritime/boating industry facilities. Commercial uses compatible with the heritage significance, waterfront location and recreational focus are also appropriate for the Coal Loader Structure. These uses should not be excluded from this precinct at this stage but should be explored through subsequent studies.”

On 24 March 1999, C & A wrote to the Ministry for Forests and Marine Administration, informing them of its view that the Ministry’s support for the retention of the coal loader wharf was a clear and unequivocal election to retain the wharf rather than to seek its demolition.

On 17 December 1999, the Waterways Authority filed its Statement of Claim. On 20 November 2000, the Waterways Authority sought an update of its previous quotation for demolition. In seeking that update, the internal memorandum from the Property Planner to the General Manager of Waterways Construction Pty Ltd stated: “It is now important that negotiations be concluded with [C & A], however there is still considerable debate within Government of the relative merits of retention and repair or demolition. [C & A’s] obligation is the demolition and disposal of the materials, and it is possible that Government will accept a sum in lieu of demolition.”

Finally, on 15 April 2002, the Waterways Authority wrote to North Sydney Council in the following terms: “The Authority acknowledges the regional significance of these sites. Under the NSW Government’s Sharing Sydney Harbour Regional Action Plan , the sites are identified as important strategic positions providing a potential myriad of opportunities for open spaces, landscaping, cultural development and working harbour initiatives. The Authority’s primary interest in the Waverton Peninsula relates to the potential for the sites to continue to accommodate, at least partially, maritime operations. The Authority is also supportive of the possible upgrade of infrastructure to facilitate public access linkages between the foreshore and the waterway.”

C & A submitted that the correspondence and planning instruments to which reference has been made revealed the following: that up until the time the lease expired, C & A had been willing to meet its obligations to demolish the wharf, but was unable to do so. The Maritime Services Board had given its consent to the development application for demolition lodged by C & A with North Sydney Council, but consent was not forthcoming from the Council. Subsequently, C & A had been willing to give the Maritime Services Board a sum equivalent to the cost of demolition, but this had not been accepted. It was submitted that, thereafter, demolition had been indefinitely deferred for a variety of reasons, but, during the long period since the expiry of the lease, the Waterways Authority was at the best equivocal as to the question of demolition and at times supportive of the retention of the wharf.

C & A submitted that it was apparent from the correspondence referred to above that it was unlikely that consent to demolition would be forthcoming and that this had been recognised by the Waterways Authority, with the consequence that it had effectively made a decision to retain the wharf. Added to that was the fact that the Waterways Authority had abandoned its claim for specific performance. As I understand that submission, it was thereby apparent that it had no intention to remove the wharf.

I do not accept the last of these submissions. It is not known why the claim for specific performance was abandoned, although a number of reasons for doing so could be postulated, not the least of which might have been to avoid the possibility that its claim may have been defeated by discretionary defences such as delay.

In further support of its submission that the Waterways Authority had made a decision to retain the wharf, C & A pointed out that the only “ costs ” it was seeking to recover were the costs of the removal of the timbers. It was not seeking in its claim the costs of removal of the steel structure. It was submitted in effect that the Waterways Authority, by only claiming costs for partial demolition, that part that it did not want to retain, had indicated an intention to retain the wharf or part thereof.

The Waterways Authority submits that this factual history overlooks the fact that, until 1999, C & A continued to accept responsibility for the removal of the wharf, so that the question whether the Waterways Authority had intended to retain the wharf was not under active consideration by it. It relied, inter alia, on the evidence of Mr McLeod, the officer within C & A responsible for matters relating to the wharf, who agreed that C & A considered right up until the late 1990’s that it had a continuing obligation to remove the wharf and that C & A had obtained quotations as to the cost of removal as late as June 1998.

The trial judge held that the conduct of the Waterways Authority up until the commencement of proceedings did not support a finding that it had manifested a desire to retain the wharf. His Honour considered that its conduct in giving notice to C & A prior to the expiration of the term that it wanted the wharf removed and the giving of consent to C & A’s application to North Sydney Council for demolition of the wharf were indicative of its position that it had not made a decision or expressed a wish to retain the wharf.

The resolution of this issue is clouded by a number of factors. First, both parties appeared to operate upon the assumption that C & A had a continuing obligation to remove the wharf after the expiry of the lease. That is not the position that C & A now takes. Secondly, the planning, governmental and heritage issues (the planning matters) surrounding the retention of the wharf affected the way each party, but in particular, the Waterways Authority, acted. Thirdly, and this is really the nub of the problem, the Waterways Authority appears not to have made any express decision as to whether it intends to retain the wharf. Finally, the matter is complicated by the fact that the Waterways Authority’s damages claim is only in respect of the cost of removal of a portion of the wharf.

Notwithstanding these confusing circumstances, I have reached the conclusion that the matter is resolved by the fact that the Waterways Authority is not seeking removal of the wharf. Rather, if it is seeking removal of any part of the wharf, which itself is not clear, it is only seeking removal of the deteriorating timber portion. That is not the obligation under the contract (should there be any subsisting). C & A’s obligation was to remove the structure. It is not an answer in this case that the Waterways Authority is seeking damages for a lesser obligation. There was no evidence whether the requirement to remove the timber imposed a lesser financial obligation on C & A than removal of the whole of the wharf. Nor can it be gainsaid that the cost would be less. Indeed, as the evidence revealed, C & A had, when obtaining quotations, sought a breakdown of the cost of removal of the wharf as between timber and steel because the steel had a resale value. There may also be problems removing part of the wharf only, including the possibility of damage to the remaining structure. None of those matters was explained in evidence and no assumptions can be made about them.

The fact that the Waterways Authority is only seeking the removal of part of the wharf then lends support for the proposition that, at some stage, the Waterways Authority’s position in respect of the wharf reached the stage where it intended to retain the steel structure. It does not matter, in my opinion, that that position was reached because the planning matters were themselves in a state of evolution. The Waterways Authority, by its conduct, revealed that it was prepared to support the planning matters that involved retention of the wharf. Had it intended that the wharf be removed, it could have expressed this in the various responses it made, for example, to North Sydney Council, at the time that the Conservation Management Plan was under consideration. Nor does it matter that its position in relation to retention of the steel structure only was taken so as to maintain maximum flexibility in its ultimate determination as to what should happen with the wharf whilst uses for the wharf and the surrounding area were under consideration by both Local and State governments. Conclusion on C & A’s arguments

It follows that, for the reasons advanced by C & A, his Honour was correct in holding that equitable damages were not available. However, having regard to the significant argument addressed to the appeal, consideration should also be given to that issue. The issue raised by the Waterways Authority on the appeal

The Waterways Authority contends that his Honour erred in applying the test whether the Court would have ordered specific performance as at the commencement of the proceedings, when the correct test was whether the Court could have ordered specific performance: see Mills v Ruthol (2004) 61 NSWLR 1; [2004] NSWSC 547. This argument, while itself quite simple, needs to be considered in a slightly more amplified context.

Before proceeding to consider this argument, it should be said immediately that C & A does not submit that the legal proposition so advanced is wrong. That proposition does no more than state in other words the well understood principle that damages under s 68(b) of the Supreme Court Act can be awarded even if the court would not have made an order for specific performance or final injunction by reason of some discretionary defence. Much of the judgment in Mills v Ruthol is concerned with whether there is a right to damages under s 68(b) of the Supreme Court Act in circumstances where the plaintiff had no relevant equitable rights at the time of commencing proceedings, but acquired the right to an injunction or specific performance between the date of commencing proceedings and the date of hearing. The present case involves no such factual situation, so it is unnecessary to comment on this aspect of the decision in Mills v Ruthol . The time that both parties focussed on in their submissions concerning whether specific performance was available, was the date of institution of the proceedings, so that is the date that I shall assume is the only relevant one for the purposes of these proceedings.

Rather than attack the test stated in Mills v Ruthol , C & A submits that the case now advanced by the Waterways Authority is different from that advanced at trial. The case now sought to be advanced was one that involved the making of an order for specific performance subject to C & A making an application to the relevant authority for development consent to demolish the wharf.

The starting point of the context in which the Waterways Authority advanced this part of its argument is the regulatory regime which governed the removal of the wharf as at the date of commencement of the proceedings. The trial judge held that as at 17 December 1999, C & A was prohibited by SREP 23 from demolishing the wharf in the absence of development consent by the Minister for Ports and Waterways. Under SREP 23 the Minster was required to consider any application for such consent in accordance with SEPP 56 and the Waverton Masterplan.

The trial judge at [120] considered the submissions advanced by the parties as to what the Minister might have done in considering an application by C & A for consent to demolish the wharf. He decided, however, that no reliable conclusion could be reached on what he called at [121] a “ wholly hypothetical and speculative question ”. His Honour concluded at [122] that it was, in any event, unnecessary to speculate as to whether the Minister would have consented had C & A applied for development consent. His Honour considered that what was relevant was that as at 17 December 1999, removal would have been unlawful in the absence of consent. It was on that basis that his Honour concluded that the Court would not have made an order for specific performance as at the date of commencement of proceedings.

The principle that the relevant question for his Honour was whether the Court could have granted specific performance as at the date of commencement of proceedings is not, in my opinion, in doubt. In Mills v Ruthol Palmer J, at 13, stated that equitable damages were available where “… the court could , not necessarily would , have granted … specific performance. If such circumstances change after the commencement of the proceedings so that specific performance … becomes impossible … the court's power to award damages under s 68 is not thereby lost.” (Additional emphasis)

The trial judge’s finding, at [126], was that: “It would not have been unlawful for C & A to remove the wharf at any time during the period commencing on 10 November 1992 (when MSB, in exercising the ‘exclusive control’ over Sydney Harbour vested in it by s 33 of the Sydney Harbour Trust Act 1900, required C & A to remove all structures and equipment) and ending at the expiration of the term created by the memorandum of lease (as varied).”

The Waterways Authority contended, however, that whether or not the Court “ would have made an order ” was not the relevant test. Rather, his Honour was required to consider whether an order for specific performance could have been made. It was submitted that such an order could have been made, requiring C & A to take whatever steps were reasonably necessary to perform its obligations under the contract. Those steps would have included applying for consent. It was contended that such an obligation was implied into cl 7; see Mackay v Dick & Anor (1881) 6 App Cas 251 at 263; Suttor v Gundowda Proprietary Limited (1950) 81 CLR 418; [1950] HCA 35.

I do not consider that his Honour made the error alleged. Rather, having found that consent was necessary for demolition of the wharf, and that no consent was in existence at the date of the commencement of proceedings, his Honour found that an order for specific performance would require the doing of an unlawful act. For that reason specific performance could not be ordered.

The Waterways Authority submitted, however, that there was a range of orders that could have been made by way of specific performance so that illegality was not a necessary consequence of the making of such order. It was argued that a blanket order for specific performance was available notwithstanding that there was still something remaining to be done before C & A could comply with its obligation to remove the wharf, namely, obtain the consent of the Minister: see Langley v Foster (1906) 4 CLR 167; [1906] HCA 28. Alternatively, the Court could make a “ staged ” order for specific performance: see Kennedy v Vercoe (1960) 105 CLR 521; [1960] HCA 64.

There have been numerous examples of courts granting specific performance in circumstances where there remained outstanding a consent or permit necessary to be obtained for the contract either to be performed or to be lawful. In Dougan v Ley & Anor the plaintiffs had sought specific performance of an agreement for the sale of a taxi cab. Such an agreement could only be effected if the Commissioner for Road Transport and Tramways granted a transfer of the registration and licence of the subject taxi cab. Dixon J observed that under the legislation the defendant was bound to take formal steps and the plaintiffs for their part had to satisfy the Commissioner of their fitness to hold a taxi cab licence.

His Honour held that the contract in question was within the scope of the remedy of specific performance given that the transfer of taxi cab licences was restricted so that the price paid under the contract represented the value of the licence. It had been argued in that case that the contract would not be specifically enforced because it would require continued supervision of the Court, in that it would not be known whether or not the Commissioner would grant the application for transfer so that it would not be known whether or not the order for specific performance would be of utility. The Court rejected that argument. Dixon J observed at 152 that if the plaintiffs failed to satisfy the Commissioner of the preconditions for the transfer, then the decree simply had no further operation.

A limited order for specific performance was also made in Booker Industries Proprietary Limited v Wilson Parking (Qld) Proprietary Limited (1982) 149 CLR 600; [1982] HCA 53. In that case, a lessee exercised the option for renewal in accordance with the terms of the lease which provided that the new rental, if the option was exercised, was “… such rental as may be mutually agreed between the Lessor and the Lessee and failing agreement then such rental as may be fixed by an arbitrator …”

Notwithstanding the lessee’s exercise of the option, the lessor refused to grant a new lease. The lessee sued for specific performance. Gibbs CJ, Murphy and Wilson JJ held that as there had been an effective exercise of the option, both parties to the lease were under an obligation to take the necessary steps to nominate an arbitrator as specified by the terms of the lease. Their Honours considered that: “In those circumstances there should be a limited decree for specific performance of the kind made in Butts v O'Dwyer and Kennedy v Vercoe .”

The Waterways Authority submitted, alternatively, that it was not open to C & A to set up in answer to a decree for specific performance the absence of Ministerial consent, because to have done so would have permitted it to rely upon its own default in failing to fulfil an implied obligation under the lease to take all steps necessary to obtain such consent: Mackay v Dick ; Suttor v Gundowda Proprietary Limited ; Secured Income Real Estate (Australia) Limited v St Martins Investments Proprietary Limited (1979) 144 CLR 596 at 607-608; [1979] HCA 51; and Nyhius v Anton (1979) 45 LGRA 93 at 99.

The principle that there is an implied obligation on each party to a contract to do all that is reasonably necessary to secure its performance was stated in these terms by Lord Blackburn in Mackay v Dick at 263: “… as a general rule ... where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”

In Secured Income Real Estate (Australia) v St Martins Investments Proprietary Limited , Mason J pointed out at 607, that this rule of construction was not confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary for the performance by the other party of the other party’s obligations under the contract. His Honour pointed out that as Griffith CJ had said in Butt v M’Donald (1896) 7 QLJ 68, at pp 70-71: “It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”

In Butts v O’Dwyer it was held that where parties had agreed to transfer land subject to a condition that it was not to become effective unless the Minister’s consent had been obtained, there was an implied obligation on the part of the person giving the transfer to do all that was reasonable on his part, so that the Minister’s consent might be obtained. In Kennedy v Vercoe , a contract for the sale of a business contained a clause that the purchaser of the business also be accepted by the landlord as tenant. In that case it was held that there was an implied obligation on the purchaser to do whatever was reasonably required of him to enable the vendor to obtain the landlord’s consent, so that the contract could be performed.

In Secured Income Real Estate (Australia) v St Martins Investments Proprietary Limited Mason J explained further at 607 that whilst it was easy to imply a duty to co-operate when the acts to be performed were fundamental obligations under the contract, it was not so easy to imply such a term when, although the acts that needed to be done were necessary to provide a contractual benefit to the other party, they were not fundamental to the contract. In the latter case, the question whether a term was to be implied to do all things necessary to enable the other party to have the benefit of the contract was a matter of the intention of the parties, objectively assessed having regard to the terms of the contract.

Senior counsel for C & A did not doubt the proposition that the Court could order a staged decree of specific performance. It submitted, however, that this case was governed by the principles stated in Secured Income Real Estate (Australia) v St Martins Investments Proprietary Limited to which reference is made above, namely, that upon the proper construction of cl 7, C & A was entitled to decide for itself whether to remove the wharf at the end of the term. That being so, it was submitted that there was no term to be implied into the lease that C & A was required not only to remove the wharf at the end of the term but to obtain the necessary consents to do so.

C & A’s submission that it could decide for itself whether to remove the wharf, has, I believe, to be understood in the following sense. Under the contract it had an obligation to remove the wharf. However, the contract also recognised the possibility of breach of that obligation and made provision for the consequences of breach. In that sense, C & A could make its own decision as to whether to remove the wharf. For that reason, the obligation to remove the wharf could not be seen as fundamental to the operation of the contract. In the first place, breach of the obligation was contemplated by the terms of the contract itself. Further, even if an application for consent to demolish the wharf was made, a lessee, under cl 7, could still find itself in breach of contract if consent was refused.

In those circumstances, I am of the opinion that a term that C & A would take all necessary steps to obtain the consents required, as a matter of law, would not be implied. Rather, the position is as I have already stated. If C & A wanted to remove the wharf itself, it was incumbent upon it to obtain the necessary consents to do so. If it failed to obtain consent, or consent was refused, then the remainder of the provisions in cl 7 would have effect.

However, even if I am wrong in so concluding, C & A’s position is that it complied with is implied obligation and made application to North Sydney Council for consent but that consent was not forthcoming. The Waterways Authority submitted, that the obligation did not stop there and that C & A had an obligation to pursue an appeal from the Council’s failure to give consent. I can see no basis for the implication of a term in that extended sense. In the first place, there would be a question of the extent of the obligation. Would it apply only to a first instance appeal? Would it be implied that there was an obligation to pursue an appeal through the appellate courts, including to the High Court? In my opinion, it could not be said that the implication of a term requiring C & A to appeal – at any level – was so obvious that it would go without saying that the term was implied. Nor was the implication of a term to that effect necessary to give business efficacy to the contract: BP Refinery (Westernport) Pty Limited v Shire of Hastings at 283.

Further, the implication of a term with this extended content could involve C & A in protracted litigation involving many issues and numerous parties. The history of the interest and involvement of numerous government entities in respect of the retention or otherwise of the wharf is ready testament to this. As was said in BP Refinery (Westernport) Pty Limited v Shire of Hastings at 283 (per Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel): “It is because the implication of a term rests on the presumed intention of the parties that the primary condition must be satisfied that the term sought to be implied must be reasonable and equitable. It is not to be imputed to a party that he is assenting to an unexpressed term which will operate unreasonably and inequitably against himself.” Accordingly, I consider that a term in the extended sense would not be implied. Summary and Conclusion

In my opinion, the appeal fails. In the first place, I doubt that his Honour made the error alleged. Although his Honour used the word “would” at [124] of his judgment, he did so in the context that at that stage he had found that to grant specific performance, as at the commencement of proceedings, meant that the Court’s order would require the performance of an illegal act. There is no dispute that a court will not do so. It is apparent, in my opinion that his Honour meant that the Court could not have made an order that would involve the doing of an illegal act.

Further, I am of the opinion that the Court would not imply a term that C & A was obliged under the terms of the lease to obtain all relevant consents and, possibly to pursue all relevant avenues of appeal.

I am also of the opinion that the matters raised by the Notice of Contention have been made out. Clause 7 contained all the rights and obligations of the parties in relation to the wharf upon expiry of the term of the lease. Whether or not that be correct, specific performance was not an available remedy as the obligation that was sought to be enforced in specie, was no longer an extant obligation. It followed, therefore, that damages under s 68(b) of the Supreme Court Act were not available.

Damages were, in any event, an adequate remedy. I have also found that the Waterways Authority had decided to retain the wharf so that, on the construction that I have given to cl 7, no question of breach arises.

Having regard to these conclusions, it is not necessary to consider his Honour’s judgment in so far as it relates to the measure of damages of a breach of cl 7, should there remain a common law right. I should also add that there were a number of arguments advanced, none of which are relevant having regard to the conclusions that I have reached. Costs

That brings me to the question of costs. Both parties conducted the appeal on bases not raised in the Court below. C & A have succeeded on their new contentions, and in particular, on the question as to whether specific performance was an available remedy. However, for the reasons I have given, the Waterways Authority has not succeeded in its appeal, either as originally constituted or as amended. The matter proceeded over two days and the parties were required to complete the matter by way of written submissions. The point on appeal was relatively short and had the matter been confined to the manner in which the trial was conducted below, the appeal would, in my opinion, have taken no more than a day. In those circumstances, I am of the opinion that the respondent’s costs should be limited so as to be assessed on the basis of a one day hearing. It should also be disentitled to any costs relating to its preparation of the new issues raised by way of Notice of Contention.

Accordingly, I propose the following Orders: 1. Appeal dismissed. 2. The appellant is to pay the respondent’s costs of the appeal on the basis of a hearing of one day’s duration and that there be no costs allowed to the extent that such costs are attributable to the preparation of the issues of whether specific performance was available in respect of an executed obligation and whether damages were an adequate remedy.

McCOLL JA: I have had the benefit of reading Beazley JA’s judgment in draft. I agree with the orders her Honour proposes for the following reasons.

The only relief the appellant sought was the recovery of equitable damages in lieu of specific performance pursuant to s 68(b) of the Supreme Court Act 1970. The respondent successfully resisted that claim, persuading the primary judge the appellant could not have been entitled to specific performance at the date the proceedings were commenced, 17 December 1999, because: (a) As at that date the respondent was prohibited by SREP 23 from demolishing the wharf in the absence of development consent by the Minister for Ports and Waterways whose duty it was to consider any application for such consent in accordance with SEPP 56 and the Waverton Master Plan: Waterways Authority of New South Wales v Coal and Allied Operations Pty Ltd [2005] NSWSC 1285 at [119]; (b) in the absence of any relevant consent from the Minister, removal of the wharf by the respondent on that date would have been unlawful because it was contrary to statute: ibid at [122]; (c) as at the commencement of the proceedings any order of the Court directed to the respondent requiring it to perform the unfulfilled promise in cl 7 of the lease to remove the wharf would have been an order requiring the performance of an unlawful act: ibid at [123]; (d) the Court would not have made an order for specific performance on 17 December 1999; accordingly the appellant had not established the essential prerequisite for specific performance on which the viability of its claim for damages under s 68 of the Supreme Court Act was dependent: ibid at [124].

The single issue effectively raised by the appellant was that the primary judge erred in concluding that specific performance could not have been ordered because the Minister’s consent to demolition had not been obtained when the proceedings were begun. Rather, the appellant contended, a staged order for specific performance could have been made conditional upon the respondent undertaking the steps necessary to permit it to demolish the wharf: see Dougan v Ley [1946] HCA 3; (1946) 71 CLR 142 (at 148) per Rich J, (at 149, 152) per Dixon J; see also Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 (at 606) per Gibbs CJ, Murphy and Wilson JJ; Squire v Rogers (1979) 39 FLR 106 (at 341) per Deane J (Forster and Brennan JJ agreeing); see also Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (2002) Butterworths LexisNexis, Australia at [20-230]. There was an ancillary issue, namely whether the lease obliged the respondent as part of its obligation to remove the wharf to make such applications as were necessary to obtain any relevant statutory consents prior to the expiry of the lease. In my view the respondent was subject to such an obligation although nothing ultimately turns upon this.

The respondent argued the primary judge had determined the case correctly. It accepted that as a matter of principle a staged order for specific performance could be made, but contended the appellant had not sought such relief before the primary judge and could not raise the point on appeal. It also relied upon a Notice of Contention (which it amended during the appeal) containing seven alternative grounds upon which it argued the primary judge’s decision could be affirmed.

The appellant submitted it should have succeeded at trial because it had established that at the commencement of the proceedings the circumstances were such that the Court could have granted specific performance: Mills v Ruthol [2004] NSWSC 547; (2004) 61 NSWLR 1. The respondent submitted that in Mills , Palmer J went no further than the tentative view expressed by the High Court in Wentworth v Woollahra Municipal Council [1982] HCA 41; (1982) 149 CLR 672 at 677-678. It adopted the summary of the position in Meagher, Gummow and Lehane (at 23–040) concerning the Court’s jurisdiction to award damages in lieu of specific performance. I agree with Beazley JA’s observations (at [165]) concerning Mills and, like her Honour, approach the matter on the basis that the only date relevant to the appeal (and the question whether specific performance could have been granted) is the date the proceedings were commenced.

In the course of the hearing of the appeal the Court raised the question whether specific performance could have been granted at the commencement of the proceedings having regard to the fact that the lease was fully executed. As Beazley JA has explained (at [54]) this issue was not raised before the primary judge, however the appellant conceded that it did not raise evidentiary issues, that it was not prejudiced by the issue being argued and, indeed, fully engaged the question. This was a proper approach on the part of the appellant.

Mr M L D Einfeld of Queens Counsel, who appeared for the appellant with Mr P W Larkin, resisted this proposition. He contended that cl 7 created a continuing obligation which bound the respondent at the date the proceedings were commenced, notwithstanding expiration of the lease. Mr T T Bathurst of Queens Counsel, who appeared with Mr M Dicker for the respondent on appeal but not at trial, conceded that if the respondent was subject to a continuing obligation to remove the wharf and, if it could be shown that damages were not an adequate remedy, an order for specific performance of the contract could have been made and, accordingly, too, an order for equitable damages. However he argued that once the lease expired, the respondent was under no obligation to remove the wharf and the appellant was left to its remedies under cl 7.

Mr Bathurst’s principal submission was that raised in paragraph 2 of the amended Notice of Contention, that, in substance, cl 7 constituted a code, so that unless the appellant had itself removed the wharf, it could not recover any damages from the respondent. The primary judge rejected that argument: primary judgment (at [27] – [36]).

The nature of the rights and obligations conferred by cl 7 is critical to the resolution of the appeal. Their identification turns on the proper construction of the lease. The primary judge’s construction of cl 7

The critical provisions of the lease were: “Clause 4: That the Lessee shall to the satisfaction of the Board place and at all times during the said term keep the seawalls the reclamations and all other structures now erected or hereafter to be erected on the said demised premises in good and efficient condition and in a thorough state of repair (repair to include such painting and limewashing as may be deemed necessary by the Board) and properly cleansed and maintained in all respects in accordance with the requirements of the Board of Health and all other legally constituted Authorities having jurisdiction in respect of the said demised premises and of the Board and the said demised premises (save as hereinafter mentioned) in such condition and state of repair deliver up to the Board at the expiration or sooner determination of the said term. Clause 7: That the Lessee shall without notice from the Board so to do remove any structure now erected or at any time hereafter to be erected on the said demised premises (other than the seawalls and reclamations) at the cost of the Lessee and without compensation prior to the expiration of the said term or prior to the termination of the said term under clause 26 hereof as the case may be and shall have [sic] the said demised premises clear to the satisfaction of the Board and should any such structure or any part thereof not be so removed the Board may if it so desires retain the same without paying to the said Lessee any compensation whatsoever or itself remove and sell or otherwise dispose of the same and the Lessee shall pay to the Board on demand as and for liquidated damages the cost of such removal less the net proceeds of any such sale if made (the certificate of the Board’s Engineer-in-Chief to be conclusive evidence of the amount so payable). Clause 8: That in the event of the tenancy being determined under the provisions of Clause 27 hereof or for non-payment of rent or non-performance or non-observance of any of the terms covenants provisions or conditions hereof or under the proviso for re-entry hereinafter contained the Lessee shall if called upon by the Board at any time not later than thirty days after such determination so to do but not otherwise within six calendar months after such determination remove any structure now erected or at any time to be erected on the said demised premises (other than the seawalls and reclamations) at the cost of the Lessee and without compensation and shall leave the said demised premises clear to the satisfaction of the Board and should any such structure or any part thereof not be so remove [sic] the Board may itself remove and sell or otherwise dispose of the same and the Lessee shall pay to the Board on demand as and for liquidated damages the costs of such removal less the net proceeds of any such sale if made (the certificate of the Board’s Engineer-in-Chief to be conclusive evidence of the amount so payable) AND it is hereby agreed that at the beginning of each month during the said period of six months the Lessee shall pay to the Board such a proportionate part of the rent hereinbefore reserved as the said demised premises then actually occupied bear to the premises hereby demised.”

Pursuant to cl 26 the appellant reserved the right to determine the term of the lease without payment of any compensation if the leased premises or any part thereof were required for public purposes, including public wharfs, by giving the appellant at least six calendar months’ previous notice in writing to that effect, any such determination to be without prejudice to any right of suit or action which may have accrued to it. Clause 27 permitted the appellant to determine the term of the lease without payment of any compensation should the appellant use the leased premises contrary to the County of Cumberland Planning Scheme Ordinance or any substituted Ordinance, again without prejudice to any right of suit or action which may have already accrued to the appellant.

The primary judge carefully analysed cl 7. He pointed out (at [15]), that cl 7 was not concerned with “tenants’ fixtures as such” but (at [18]) with a fixture forming part of the lessor’s land. He observed (at [17]) that cl 7 did not contemplate removal, presumably his Honour meant by the respondent, after expiry of the term. In the event a structure was not removed in accordance with cl 7, he concluded the lessor had a choice: it could “retain the same” or “itself remove and sell or otherwise dispose of the same”. As the primary judge observed (at [18]) the respondent would, ordinarily, have no right to take away that part of the appellant’s land constituted by the wharf. On that basis, cl 7 did not enable the respondent to recapture something it owned but, rather to perform a service for the appellant by clearing the land of structures other than sea walls and reclamations the subject of cl 4 before the expiration of the term (at [18]). He concluded (at [20]) that the effect of cl 7 was to require the lessee to yield up and deliver to the lessor, at the expiration of the term, land in a particular state, that is, devoid of “structures” other than seawalls and reclamations.

When his Honour turned to the question whether cl 7 constituted a code, he observed (at [31]) that the “right” conferred on the appellant to retain fixtures forming part of its land was, “in reality, not a right at all” as, “[e]ven if the fixtures are tenant’s fixtures, they are the property of the landlord, although subject to a limited right of the tenant to convert them again into chattels, being a right exercisable during the term or during subsequent holding of possession: see Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 55 ATR 1”. Accordingly he sought to ascertain the significance of the retention provision. He concluded (at [33] – [34]) that its significance was that if the appellant retained the wharf the lessee was no longer under a duty, nor did it have any right, to remove the wharf. In those circumstances, there would be no default by the lessee capable of being regarded as a breach of covenant in respect of which an action for damages lay.

Having done so, however, he concluded that cl 7 did not constitute a code, saying: “34 The true effect of clause 7, it seems to me, is to preclude any right of the lessor to sue for damages if one of two things happens: the lessor elects to retain the structures or the lessor elects to remove the structures. In the first situation, for reasons I have stated, there is a revocation by the lessor of the lessee’s right to remove and therefore a relaxation or forgiving of the lessee’s duty to remove. In the second situation, it simply cannot be the case that the lessor’s contractual right to be paid by the lessee the net cost of removal by the lessor co-exists with a right to sue for damages for breach by the lessee of the covenant to remove. It is inconceivable that the lessor could both recover as against the lessee damages for breach of covenant and, having itself removed the structures, recover from the lessee under clause 7 the net cost of doing so. 35 I have said that the ordinary right to sue for damages is precluded if the lessor resorts to either of the alternatives expressly made available by clause 7. This means that, upon the proper construction of clause 7, there is no breach of contract by the lessee if the lessor acts in either of those ways. But there will be a breach of contract, actionable as such, if the lessor resorts to neither of the alternatives expressly made available by clause 7 – that is, if it does not itself remove the structures and does not take advantage of the part of the clause expressed by the words ‘may if it so desires retain the same’. 36 It follows that, in my opinion, clause 7 is not a ‘code’, in the sense for which C&A contends. I do not accept the contention of C&A that there can never be a complaint of breach of contract in relation to failure by C&A to remove structures and that the only remedy available to MSB in that eventuality is the self-help remedy made available by clause 7 itself. The correct characterisation, as I see it, is that a breach of contract will be seen to have been committed by C&A (and to be actionable accordingly) if two conditions are satisfied after the end of the term (C&A having failed to remove structures during the term): first, MSB did not act in accordance with the part of clause 7 contemplating removal of structures by it; and, second, MSB did not act in accordance with the part of the clause expressed by the words ‘may if it so desires retain the same’.” Submissions on appeal

The respondent submitted that cl 7 comprehensively dealt with the parties’ respective rights and obligations in respect of removal of the wharf. It imposed an obligation on it without notice to remove any structure erected on the leased land at the time of entry into the lease or at any time thereafter erected. It was obliged to remove any such structure at its cost and without compensation prior to the expiration of the term of the lease and to leave the demised premises clear to the appellant’s satisfaction. In the event it did not remove the wharf prior to the expiration of the term of the lease, however, the respondent submitted cl 7 exhaustively prescribed the remedies available to the appellant: it could retain the wharf without paying the respondent compensation, or remove and sell or otherwise dispose of the wharf, in which event the respondent was to pay the appellant on demand as and for liquidated damages the cost of such removal less the net proceeds of any such sale if made.

Accordingly, the respondent argued the appellant could not seek specific performance (or equitable damages in lieu) of an obligation which did not survive expiration of the lease. Equitable damages could not be awarded in any event because, as I have said, on the proper construction of cl 7 the appellant could only recover damages where it had removed the wharf. The respondent contended that its interpretation of cl 7 accorded with the practicalities in relation to the removal of structures like the wharf. If it did not remove the wharf prior to the expiration of the term then cl 7 gave the appellant the two remedies to which I have referred. A lessee which had left the demised land at the expiration of the term of the lease could have little idea as to which option the appellant might take. Accordingly cl 7 gave both parties certainty as to which course was pursued and the circumstances in which the appellant could recover any monies from the respondent if the latter had not removed the wharf.

The respondent submitted that its construction of cl 7 did not allow it to ignore the removal obligation. Rather it would ignore that obligation at its peril. If it did not remove the wharf the appellant would do so, possibly not at the best available rate, and present it with the bill for payment pursuant to the cl 7 obligation to pay the cost of such removal on demand as and for liquidated damages. It contended that by expressly dealing with the remedies available to the appellant if the wharf was not removed, cl 7 impliedly excluded other remedies.

The appellant argued that a failure by a lessee to perform a covenant such as was comprised in cl 7 would ordinarily sound in damages. It contended that a landlord would not surrender so obvious a remedy by way of damages without expressing that exclusion in the clearest terms. The appellant resisted the respondent’s argument that exclusion of other remedies should be implied, contending that no such implication was necessary to give the lease business efficacy, nor would the parties have inevitably included such an exclusion had they turned their minds to it. Consideration

The ordinary principles of contract law apply to a lease: Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 (at 29-30) per Mason J (Wilson and Deane JJ generally agreeing and Dawson J agreeing); Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105.

The lease was to be interpreted at the date it was made. Its meaning was to be determined by what a reasonable person would have understood it to mean having regard to its text, the surrounding circumstances known to the parties and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors [2004] HCA 52; (2004) 219 CLR 165 at [40]. Being a commercial contract, the lease should be given a businesslike interpretation taking into consideration not only its language, but also the commercial circumstances it addressed and the objects it was intended to secure: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at [22] per Gleeson CJ; Wilkie v Gordian Runoff [2005] HCA 17; (2005) 221 CLR 522 (at [15]) per Gleeson CJ, McHugh, Gummow and Kirby JJ.

In construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party’s construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result it is essential that that intention be made “abundantly clear”: L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 (at 251) per Lord Reid.

The question whether a contracting party is confined to the remedies specified in the contract has been considered in a number of authorities. These establish that “clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law”: Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 at 585; [1998] 1 All ER 883 at 893; Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717 per Lord Diplock. Gleeson CJ, Gaudron and Gummow JJ cited Stocznia Gdanska and Gilbert-Ash with approval in Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312 (at [23]), adding that “an express provision for termination for breach in certain circumstances may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach”.

Cheshire and Fifoot’s Law of Contract (2002) LexisNexis Butterworths, Australia, at [21.3] refers to the principle described in Concut as the “presumption of concurrence”. Other commentators have said that the presumption: “[P]roperly understood, is designed to apply where there is some uncertainty whether the provision of one remedy (or right) in the contract actually augments, or operates to the exclusion of, another which would arise by operation of law for breach of contract. The uncertainty arises for the very reason that the parties have not specified whether this new remedy (or right) is exclusive or additional. To put it another way, the presumption is the contract law counterpoint to the expressio unius rule.” See Wayne Courtney and Ben Curtin, “Construction Goes Off the Rails: an Analysis of Wallace-Smith v Thiess Infraco ”, (2006) 22 Journal of Contract Law 287 (at 296).

While the question whether a clause is an exhaustive statement of the parties’ rights and remedies must turn upon each contract and the surrounding circumstances peculiar to it, the approach taken in authorities which have considered the point offers some guidance.

Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd concerned the question whether a clause specifying the manner in which sub-contractors should be paid excluded the contractor’s right to common law set-off in respect of breaches of contract by the sub-contractors. The clause relevantly provided: “…If the Sub-contractor fails to comply with any of the conditions of this Sub-contract, the Contractor reserves the right to suspend or withhold payment of any monies due or becoming due to the Sub-contractor. The Contractor also reserves the right to deduct from any payments certified as due to the Sub-contractor and/or otherwise to recover the amount of any bona fide contra accounts and/or other claims which he, the Contractor, may have against the Sub-contractor in connection with this or any other contract.” (emphasis added)

The Court of Appeal had held that the phrase I have emphasised confined the contractor to deducting amounts which had been determined and embodied in a judgment of a court of law or an arbitrator. Lord Diplock (at 715) regarded the Court’s conclusion as strained and clearly erroneous. He referred (at 717) to the principle of law applicable to building contracts, as well as contracts for the sale of goods, that when the buyer of the goods or the person for whom the work has been done is sued by the seller or contractor for the price, it was competent for the defendant to defend the proceedings by showing how much less the subject-matter of the action was worth, by reason of the breach of contract: Mondel v Steel (1841) 8 M & W 858, 151 ER 1288. He then said (at 717-718): “It is, of course, open to parties to a contract for sale of goods or for work and labour or for both to exclude by express agreement a remedy for its breach which would otherwise arise by operation of law or such remedy may be excluded by usage binding on the parties (cf Sale of Goods Act 1893, s 55). But in construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption. In the case of building contracts no question of usage arises to rebut the presumption … So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law, including the remedy of setting up a breach of warranty in diminution or extinction of the price of material supplied or work executed under the contract. To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract .” (emphasis added)

In Stocznia Gdanska SA v Latvian Shipping Co , the House of Lords considered whether, as the purchasers contended, cl 5.05 of a shipbuilding contract was an exhaustive code governing the sellers’ rights and remedies in the event of rescission, excluding their common law rights to sue defaulting purchasers for unpaid instalments as a debt. Clause 5.05 relevantly provided: “[1] If the Purchaser defaults in the payment of any amount due to the Seller under sub-clauses (b) or (c) or (d) of Clause 5.02 for twenty-one (21) days after the date when such payment has fallen due the Seller shall be entitled to rescind the Contract. [2] In the event of such rescission by the Seller of this Contract due to the Purchaser's default as provided for in this Clause, the Seller shall be entitled to retain and apply the instalments already paid by the Purchaser to the recovery of the Seller's loss and damage and at the same time the Seller shall have the full right and power either to complete or not to complete the Vessel and to sell the Vessel at a public or private sale on such terms and conditions as the Seller deems reasonable provided that the Seller is always obliged to mitigate all losses and damages due to any such Purchaser's default.[3] The proceeds received by the Seller from the sale and the instalments already paid and retained shall be applied by the Seller as mentioned hereinabove as follows: [i] First, in payment of all reasonable costs and expenses of the sale of the Vessel. [ii] Second, if the Vessel has been completed, in or towards satisfaction of the unpaid balance of the Contract Price, or if the Vessel has not been completed in or towards satisfaction of the unpaid amount of the cost incurred by the Seller prior to the date of sale on account of construction of the Vessel, including work, labour and materials which the Seller would have been entitled to receive if the vessel had been completed and delivered. [iii] Third, the balance of the proceeds, if any, shall belong to the Purchaser and shall forthwith be paid over to the Purchaser by the Seller. [4] In the event of the proceeds from the sale together with payments retained by the Seller being insufficient to pay the Seller, the Purchaser shall be liable for the deficiency and shall pay the same to the Seller upon its demand.”

Lord Goff of Chieveley (at 617) noted the serious consequences of accepting the purchaser’s argument, namely that “the basis for winding up the purchaser by reference to the unpaid instalment could be lost; a guarantor of the instalment might cease to be liable under his guarantee; and an assignment or charge of the debt to a third party could lose its value”, then said: “Considerations such as these lend added weight in this context to the familiar principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law: see eg Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1973] 3 All ER 195 at 215, [1974] AC 689 at 717 per Lord Diplock. I can find no such expression of intention on the part of the seller that he should, by exercising his right of rescission under cl 5.05[2], abandon his right at common law to recover as a debt unpaid instalments of the price which have already accrued due. I would, however, go further. For I am satisfied that, on a true construction of cl 5.05, the recovery of such instalments is consistent with the provisions of the article applicable in the event of a rescission.”

In Berry v Mahoney [1933] VLR 314, cl 12 in a contract for sale of land provided that in the event of the purchasers committing any breach, all moneys paid by them under the contract should be forfeited to the vendors who were entitled, on giving the purchasers seven days’ notice in writing, to rescind the contract, enter upon the property sold and resell it and recover the deficiency in price from the purchasers as liquidated damages. The Full Court held cl 12 did not exclude or restrict other rights or remedies available to the parties apart from the special conditions. Mann ACJ (with whom Lowe and Gavan Duffy JJ agreed) said (at 321): “We think that the provision as to resale and as to the recovery of the difference between what is obtained by resale and what was contracted to be paid is a provision in the vendor’s favour to enable him to determine, if he so desires, in a simple and convenient way the amount of his damages, instead of having recourse to a Court of law to ascertain them … the presence of clause 12 of the conditions of sale does not exclude other remedies available upon general principles to the vendor or the purchaser apart from and outside of this special condition.”

Lowe J (at 324), in some additional remarks, described cl 12 as “an enabling clause introduced for the benefit of the vendor” which did not restrict the rights he had apart from that clause.

In Taylor v Raglan Developments Pty Ltd [1981] 2 NSWLR 117 (at 135) Powell J followed Berry v Mahoney in rejecting the purchaser’s submission that that cl 16 of the standard Contract for Sale of Land restricted or removed the vendor's ordinary rights at common law in the event of default by the purchaser. His Honour described the submission as “bold and startling”, observing that: “I say this since, the contract not having been rescinded but, rather, terminated in futuro for breach, and since the right to retain the deposit and the right to damages for breach are the normal rights of an innocent vendor, it would mean giving to cl 16 of the contract a meaning which, far from enlarging, or even protecting, the rights of an innocent vendor, would, at the very least severely limit, if not totally remove, the rights which, in the absence of cl 16 he would otherwise have.” Taylor was referred to with approval in Concut (at [23], footnote 19) and was recently described as “[t]he locus classicus as to the relationship between the alternative regimes prescribed by clauses such as cl 9.3” in the Standard Contract for the Sale of Land - 2000 ed: see Zografakis v McCarthy [2007] NSWSC 144 (at [11]) per Hamilton J.

In Progressive Mailing House v Tabali , the lessee argued that cl 10 of a lease dealing with “Default, Termination etc”, exhaustively defined the lessor’s rights, so that, having re-entered, the lessor could not rely upon the rights it would have had if it had accepted the repudiation of the contract or rescinded on the ground of breach of an essential term.

Mason J (at 30) rejected that submission saying: “If it be accepted that the principles of contract law apply to leases, it is not easy to see why the mere presence of an express power to terminate should be regarded as excluding the exercise of such common law rights as may otherwise be appropriate. It is, of course, open to the parties by their contract to regulate the exercise of the common law right to determine for repudiation or fundamental breach. But in this case the parties have not attempted to do so.”

His Honour (at 32) identified the weakness in the appellant’s argument as being that cl 10 did not exclude liability for non-performance of obligations accruing after the date of re-entry but, rather, explicitly preserved “any claim the lessor might have had against the lessee in respect of any breach of covenants and provisions.”

In Gimtak Pty Ltd v Cathie [1998] VSC 6; [2001] V ConvR ¶54-645 (to which the primary judge referred (at [28]ff)) cl 8.2(b) of a lease to the Minister administering the Education Act 1958 in respect of the Preston College of T.A.F.E. gave the lessor option in the event the lessee had not removed fixtures or fittings to cause them to be removed and recover the costs from the Lessee as a liquidated debt payable on demand. The lessor sought damages from the Minister and the State of Victoria (the “lessee”) in respect of the lessee’s failure to comply with the lease obligations to make good the premises on departure. The lessee argued that cl 8.2(b) constituted a regime to deal with the consequences of its failure to remove fixtures and fittings or to re-alter alterations when requested to do so and that the lessor was obliged to incur the cost of the making good exercise before it was entitled to recover damages. Smith J rejected that submission. He held that cl 8.2(b) gave the lessor an option, which it might or might not exercise, to remove the fixtures, fittings and floor coverings and re-alter the alterations. If it did so then it could recover the costs incurred as a liquidated debt payable on demand, but if it did not it was left with its rights under cl 8.2(b) to seek damages for breach of the obligations set out in that clause.

In Leighton Contractors Pty Ltd v East Gippsland Catchment Management [2000] VSC 26, Byrne J considered an argument that a contractual provision permitting limited rights of deduction excluded a right to raise an equitable set off. After noting (at [23]) that the argument depended upon an expressio unius inference, his Honour applied Gilbert-Ash to hold that the removal of the right to defend required “something more explicit than an inference of this kind”.

Finally I turn to Concut v Worrell. That case concerned the question whether a service agreement Concut entered into with Mr Wells on 1 December 1986 replaced an anterior oral contract of employment. Concut summarily dismissed Mr Wells in 1988. He brought an action in the Supreme Court of Queensland for damages for wrongful termination of his employment. Concut resisted the claim on the basis that Mr Wells had breached his conditions of employment in a manner which gave it the right to dismiss him without notice and without the payment of any penalties. The primary judge dismissed Mr Wells’ claim. He concluded that the dismissal was justified on the basis of serious misconduct on Mr Wells’ part which most probably occurred prior to 1 December 1986.

The Queensland Court of Appeal (by majority) upheld Mr Wells’ appeal, holding, relevantly, that the service agreement became the exclusive charter of the contractual rights and duties of the parties, and that subsisting rights and liabilities under the prior contract, including those arising by reason of breach thereof, were compromised or released: see Concut (at [8], [20]).

The service agreement contained a provision (cl 6) dealing with dismissal for misconduct: Concut (at [13]). In the High Court the respondent argued, inter alia, that cl 6(a) (which dealt with serious misconduct) had a prospective and exclusive operation so that Concut was precluded from dismissing Mr Wells during the currency of the service agreement for misconduct anterior to the date of the service agreement: see Concut (at [21])

The appeal was allowed. Gleeson CJ, Gaudron and Gummow JJ concluded (at [18]) that the Court of Appeal’s interpretation of the service agreement as a new and discrete contract of employment which had the effect of terminating and replacing the anterior oral agreement between Concut and Mr Wells did not accord with the manifest intention of the parties. Their Honours noted (at [23]) that contracts between master and servant were a typical class of contract in which terms would be implied by law. They recognised that the parties could exclude the implication of terms typically implied in contracts between master and servant, they held, applying Stocznia Gdanska and Gilbert-Ash , that “clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law”.

In their Honours’ view (at [23] – [24]), however, cl 6(a) operated prospectively and was a provision of the nature of that referred to by Powell J in Taylor (at 135), designed to augment rather than to restrict or remove the rights at common law which Concut otherwise would have had in respect of a breach of any term implied by law, in particular Mr Wells’ contractual and fiduciary obligations to act in a manner compatible with the due and faithful performance of his duty, or consistently with the confidential relation between himself and the appellant. Nor did cl 6(a) release or compromise such rights as Concut may have had at the time of the execution of the service agreement by reason of Mr Wells’ past misconduct.

McHugh J also held that the Court of Appeal had erred and (at [41], [44]) that there was only one contract of employment between Concut and Mr Wells. Kirby J also concluded that Concut’s right to dismiss Mr Wells for pre-1 December 1986 misconduct survived execution of the service agreement. In his Honour’s view (at [54] – 55]) “it would be yet another illustration of impermissible expressio unius reasoning to conclude that the express provisions of the service agreement, such as cl 6, were intended to replace whatever legal consequences flowed from the previous oral agreement between the parties, including for any breach of such agreement”. Rather, the “better, more practical and commercially realistic view [was] that the service agreement was intended to vary and supplement the oral employment agreement between the parties, not to rescind it”. His Honour added (at [56]) that: “It would take much more explicit provisions in the service agreement to persuade me that it was intended, objectively, to deprive the employer of the remedies normal to the discovery by it of such a breach by a senior employee of one of the most basic terms ordinarily implied in an employment contract. This is particularly so given the essential character of an employment relationship recognised by the common law, which continued from the commencement of the oral contract until the employee's dismissal, regardless of the intervening execution of the service agreement.”

The description of the principle of concurrence as “the contract law counterpoint to the expressio unius rule” (Courtenay and Curtin, above), and the reference in both Concut and Leighton’s to the rule as an analogical reasoning tool in interpreting a contract calls to mind the increasing convergence of principles of statutory and contractual interpretation: see Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812; (2005) 56 ACSR 263; approved on appeal in Lion Nathan Australia Pty Ltd (ACN 008 596 370) v Coopers Brewery Ltd (ACN 007 871 409) and Others [2006] FCAFC 144; (2006) 156 FCR 1; The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207 (at [63] ff) per McColl JA (Mason P agreeing); Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 (at [13]) per Spigelman CJ. Application of the expressio unius rule in the contractual context should be approached with the same caution adopted in statutory interpretation: see generally the discussion in Pearce & Geddes, Statutory Interpretation in Australia (2006), Australia, LexisNexis, at [4.28] ff. Construction of cl 7

It is convenient at the outset to deal with the appellant’s argument that cl 7 imposed a continuing obligation on the respondent which survived the expiry of the lease. In my opinion that submission should be rejected. The respondent’s obligation to remove the wharf was expressly limited to it doing so prior to the expiration of its term. That obligation did not survive the expiry of the lease. There is no sensible reason to conclude that the parties intended any other scenario. Cessation of the respondent’s obligation on expiration of the term of the lease is consistent with the fact that once the lease expired the respondent had to give up possession of the property comprised in the lease: Woodfall’s Law of Landlord and Tenant , Sweet & Maxwell, Vol 1 at [17.002]. Thereafter it had no legal right to enter the premises it had formerly occupied. Clause 7 recognised that the respondent’s obligation did not, and could not, survive expiry of the lease, and that the only (former) party to the lease which thereafter had control of the land and the legal right to deal with the wharf was the appellant.

Further, in my view cl 7 was intended to deal exhaustively with the parties’ obligations and rights in relation to the wharf. The clause established a regime dealing with each party’s obligations, the time when each was to be performed and the consequences in terms of payment by either party or their respective entitlements to compensation in the event that a particular step was taken. Thus the respondent was obliged to remove the wharf prior to the expiration of the term of the lease at its cost and without compensation. If it did not remove the wharf or any part of it by the time the lease had expired then the appellant could retain the wharf (or any part thereof) and not pay compensation. Alternatively it could remove and sell or otherwise dispose of the wharf and recover the cost of so doing from the respondent on demand in a claim for liquidated damages, after deducting the net proceeds of any sale of the wharf.

Clause 7 modified the situation which would ordinarily exist between landlord and tenant in relation to structures erected on the land. The wharf, being fixed to the land on which it stood by timber piles sunk into the bed of the harbour (primary judgment at [7]) was undoubtedly a landlord’s fixture. Once fixed, it became part of the land and was owned by the appellant as long as it remained fixed: Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454 (at 473) per Lord Browne-Wilkinson. Fixtures which form part of the realty pass with the land: North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) [1940] HCA 7; (1940) 63 CLR 52 at 68 per Dixon J; Wincant Pty Ltd v South Australia (1997) 69 SASR 126 (at 142) per Olsson J (with whose observations in relation to the law of fixtures Doyle CJ agreed), primary judgment (at [31]). The tenant is not entitled to remove them.

However parties to a lease may provide for the tenant to remove fixtures it would not otherwise have been entitled tor remove: Melluish . This, as the primary judge held, was, in part, the purport of cl 7. It was intended to ensure the leased premises were left clear of structures, whether erected at the time of the lease or during its term. It imposed an obligation on the respondent, and granted it permission, to do an act otherwise prohibited.

Thus cl 7 was framed specifically with a view to adjusting what otherwise would have been the parties’ rights. Without cl 7 the respondent could have walked away from the land at the expiration of the term leaving the wharf in situ . The appellant could not have required it to remove it, nor sought compensation for it remaining: it formed part of its land. Clause 7 conferred a benefit on the appellant, enabling it to have the wharf removed at the respondent’s cost, whether because the respondent complied with its obligation to do so prior to the expiration of the lease or because the appellant removed it after the term expired. It also gave the appellant the option to retain the wharf without paying the respondent compensation.

The conclusion that cl 7 exhaustively defined the parties’ rights and remedies is also supported by cl 8. That provision gave the appellant the option, in the event of early determination of the lease, to require the respondent to remove the wharf at its cost, and, in the event of non-compliance gave the appellant the option to remove the wharf and recover the cost from the respondent. Once again an express regime was formulated for removal of the wharf, spelling out each party’s rights and obligations.

It might be accepted, as the primary judge did (at [32] – [33]), that “at the time … the lease[s] [was] executed no one could tell whether removal of the improvements immediately prior to the determination of the term would be more advantageous to the lessors or to the lessee”: Starline Drive-In Theatre Ltd v Federal Commissioner of Taxation [1964] HCA 68; (1964) 112 CLR 458 (at 460) per Kitto J. Accordingly, while the respondent accepted the obligation to bear the cost of the wharf being removed, whether before or after the term expired (the only difference being who carried out that task), the appellant was entitled to retain the wharf, an option it would no doubt exercise if it determined that course was advantageous to it.

Once the respondent left the premises however it could have no control over the fate of the wharf, nor any idea what the appellant’s intentions were in relation to it. The mere fact that the wharf remained in situ post expiration did not necessarily mean the appellant had decided to retain it. As the facts of this case indicate, reasonable minds may differ as to the question whether the fact the wharf has not been removed means the appellant has decided to retain it. The primary judge concluded (at [44]) it had not. Beazley JA (at [162]) has reached the opposite conclusion, with which Campbell JA agrees. For my part I would, with respect, prefer the primary judge’s finding. As he clearly demonstrated, the position the appellant found itself in at the time the proceedings were commenced in relation to the wharf was reached more by a process of attrition than active desire on its part to retain the wharf – whose demolition it had been seeking even before the lease expired.

It can be assumed that the parties were alive to the uncertainty which might flow to decide if the consequences of the respondent’s breach of cl 7 at the expiration of the lease were determined from the mere fact that the wharf continued to remain on the land. The respondent would have been in breach of its cl 7 obligation. It is plain, in my opinion, that the parties turned their minds to the possibility of the respondent being exposed to a claim for damages in respect of that breach. They sought to limit the uncertainties which might bedevil such a case by prescribing a regime for the appellant to recover damages for breach from the respondent: they were only recoverable if the appellant had removed the wharf and the (net) cost of so doing had been quantified.

In my opinion by expressly dealing with the circumstances in which the appellant could recover damages in respect of the respondent’s breach of its cl 7 obligation, the parties manifested their intention that the appellant would not be entitled to recover damages if it had not removed the wharf. The regime they created makes it plain they intended to exclude any right on the appellant’s part to recover damages other than in the circumstances cl 7 prescribed.

Such an interpretation gave the parties certainty at the commencement of the lease in 1972 as to the consequences of non-removal of the wharf twenty-seven years later on 31 December 1999 when the lease was to expire. It addressed the parties’ commercial interests in a practical and commercial manner.

The conclusion that cl 7 constitutes a code is consistent with the authorities dealing with the principle of concurrence. I start with the general proposition that the ordinary consequence of the breach by the respondent of its obligation to remove the wharf prior to the expiration of the term of the lease would be that the appellant would have a cause of action for damages against the respondent in the nature of the secondary obligation referred to by Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 at 350; see also Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 849–850.

However, as I have sought to explain, cl 7 was an exceptional provision to be found in a lease. Clause 7 was not merely a provision in the appellant’s favour designed to augment existing rights: cf Concut , Berry, Taylor, Gimtak . Rather it represented an adjustment of the parties’ rights in circumstances where an obligation was imposed upon the respondent which it would not ordinarily have been required to undertake. Concluding that cl 7 is an exhaustive statement of the parties’ rights and remedies does not, therefore, do violence to the implication of terms which are fundamental to the relationship between landlord and tenant: cf Gilbert-Ash , Stocznia Gdanska SA , Concut.

Further the interpretation I favour does not substantially limit the appellant’s rights. It ensures that it can recover damages for the respondent’s breach if it has itself acted to restore the land to the condition it would have been in had the respondent performed its cl 7 obligation. To that extent, cl 7 reflects the general principle that damages in contract are awarded with the object of placing the plaintiff in the position in which it would have been had the contract been performed: Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 (at 11-12); Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64.

In my opinion, with respect, the primary judge erred in concluding that cl 7 did not exhaustively contain the parties’ rights in respect of the removal of the wharf at, or after, the expiration of the term of the lease.

The conclusion that the appellant could not recover damages unless the wharf had been removed means the Court would not have granted specific performance at the date proceedings were commenced. The primary judge’s decision should be affirmed on the basis of Ground 2 in the Amended Notice of Contention.

In writing the above I have assumed that the respondent’s failure to remove the wharf constituted a breach of cl 7 on its part. I am conscious that the respondent sought to argue that its failure to remove the wharf did not constitute a breach in circumstances where it had attempted unsuccessfully to obtain consent to demolish the wharf prior to the expiration of the term. Having regard to the conclusion I have reached on the interpretation of cl 7, it is unnecessary to decide this question.

I agree with the orders Beazley JA proposes.

CAMPBELL JA : I agree with Beazley JA.