Gazcorp Pty Ltd v Woolworths Group Ltd

These proceedings concern two adjoining blocks of land in Alexandria, near Green Square Station. The land is owned by the plaintiff, Gazcorp Pty Ltd (“Gazcorp”). The blocks are located at 284-300 Wyndham Street and at 296-298 Botany Road.

Gazcorp was interested in developing the site by building a shopping centre upon it. Between about late-2004 and early-2008, Gazcorp engaged in negotiations with the defendant, Woolworths Group Ltd, formerly known as Woolworths Ltd (“Woolworths”), about a lease of space in the proposed development.

On 20 August 2007 Gazcorp lodged a development application with the Sydney City Council (“the Council”) in respect of the proposal. On 4 February 2008 the Council issued a deferred commencement approval for the development (“the 2008 Consent”). Approval was given for “construction of a part 3/part 4 storey mixed use building containing 14,949sqm of retail floor area and 10,733sqm of commercial floor area, with 3 levels of basement parking for 614 spaces.” The approved plans envisaged a Woolworths supermarket on the lower ground level.

On about 28 February 2008 Gazcorp and Woolworths entered into an Agreement for Lease (“the Agreement”) in relation to the land. The Agreement was varied in September 2008, although the parties differ as to the extent of the variation. Gazcorp says that the variation included a revision of the required Landlord’s Works so as to accommodate the inclusion of a Big W store in addition to the Woolworths supermarket. Woolworths says that the variation encompassed the extension of some dates under the Agreement but did not extend so far as to include a revision of the Landlord’s Works as alleged by Gazcorp.

The central issue in the proceedings is whether the Agreement (or the Agreement as varied) remains on foot. Gazcorp contends that the Agreement (or the Agreement as varied) has come to an end, either due to frustration or by reason of mutual abandonment.

Woolworths accepts that if the Agreement was varied as alleged by Gazcorp, then it was frustrated on 20 March 2009 when the Land and Environment Court refused a development application (lodged in July 2008) that provided for the inclusion of a Big W store. However, Woolworths maintains that if the Agreement was not varied as alleged by Gazcorp, then it remains on foot.

Gazcorp contends that if the Agreement was not varied as it alleges, the Agreement was frustrated on 17 February 2014 when the 2008 Consent lapsed, or alternatively the Agreement was abandoned at some time in the period from 1 October 2012 to 3 February 2016.

The parties have been in dispute since about early-2016 as to whether any Agreement for Lease remains on foot. Gazcorp commenced these proceedings on 15 October 2018. Declaratory relief is sought to the effect that any Agreement for Lease has been terminated and is no longer in force. Woolworths filed a Defence on 11 March 2019, and a Cross-Claim on 20 November 2019. Following a narrowing by Gazcorp of its case, Woolworths was granted leave to discontinue the Cross-Claim (with costs reserved) on the first day of the hearing. Accordingly, it is only necessary for the Court to determine Gazcorp’s claims.

The Agreement dated 20 February 2008 was entered into by Gazcorp as Landlord and Woolworths as Tenant. It took the form of a deed, and contained recitals as follows:

Clause 1 of the Agreement contained numerous definitions which were stated to apply unless the context otherwise requires. Centre was defined to mean the shopping centre to be constructed on the Land as described in the Plans and Specifications. The Premises was defined to mean the Woolworths supermarket identified in the Plans and Specifications and on the Site Plan.

Clause 2 of the Agreement, which concerns Landlord’s Works, is of central importance to the issues in this case. In particular, clauses 2.1 to 2.6 provided:

Landlord’s Works is defined to mean the works required to complete the construction of the Centre. The Landlord’s Works were required to be carried out by Gazcorp in accordance with the Plans and Specifications. Plans and Specifications is defined to mean:

As to (a), the plans and specifications contained in Schedule 2 consisted of three sheets, being plans drawn by Humphreys and Edwards, architects, in respect of a Mixed Use Development of the two blocks owned by Gazcorp.

The first plan (LE 205) is described as “Lower Ground Floor Leasing Plan”. It depicts, amongst other things, a Woolworths Supermarket and nine other Retail spaces. There are a number of notes on the plan, including the following:

The second plan (LE 203) is described as “Basement Level 1 Leasing Plan”. It depicts, amongst other things, a car park for Retail Parking. The plan contains notes in the same form as those found on LE 205. In addition, the plan contains a note which reveals that Basement Level 1 was to have 204 car spaces, Basement Level 2 was to have 228 car spaces, and Basement Level 3 was to have 182 car spaces, a grand total of 614.

The third plan (LE 202) is described as “Basement Level 2 Leasing Plan”. It depicts, amongst other things, a car park for Retail and Commercial Parking. The plan contains notes in the same form as those found on LE 205 and it contains the same note as LE 203 about the three levels of parking.

It is evident from the references to Basement Level 3, and also from the depiction on LE 205 of an “Escalator to/from Ground Level”, that the proposed development involved a building that included levels both above and below the three levels (or floor plates) that are said to constitute the Woolworths stage. The Woolworths Stage is defined in the Agreement as the area shown as such in the Plans and Specifications. The notion of the Woolworths Stage is referred to in cl 2.5(c) of the Agreement, set out above. Clause 2.5(c) itself makes it plain that there are parts of the Centre “outside of the Woolworths Stage”.

As to (b), the Site Plan in Schedule 6 to the Agreement depicts the location of the development site. The Site Plan also shows the top of the proposed new building to include some landscaped open space and an atrium. The Site Plan contains notes in the same form as those found on LE 205. Again, it is evident from the notes that the building depicted on the plan would be subject to an approval from the relevant consent authority.

As to (c), the Supermarket Plans, as defined in the Agreement, include the Woolworths Supermarket Design and Specification Briefing Kit document and the Feasibility Plan, both of which are found in Schedule 4 to the Agreement.

The Construction Program, in Schedule 3 to the Agreement, provided for a 95 week construction period from September 2008 to June 2010. It refers to various levels, including Wyndham Street Level, Level 1 and Podium Level.

The Approximate Lettable Area, referred to in cl 2.3, is defined as 3,800m2, excluding certain defined areas.

Under cl 2.4, Gazcorp was required to use its best endeavours to complete the Landlord’s Works so that so far as they relate to the Premises (the Woolworths supermarket) they reach Practical Completion by at least the eight week EIS Period before the Date of Practical Completion, and so that the Centre will reach Practical Completion no later than the Date for Practical Completion (defined as 30 April 2010, subject to any extension of the date under cl 2.12). Clause 2.12 concerns delay. It provided:

Clause 6.1 provided (subject to the other sub-clauses of cl 6) that Woolworths must commence trading in the Premises no later than the day after the EIS Period expires.

Clause 7 provides for the grant by Gazcorp and the acceptance by Woolworths of the Lease in the form contained in Schedule 5 for the Term commencing on the Commencing Date. The Term, as provided for in the Lease, was 1 year, with options to renew for further terms of 19 years and 10 years. The Commencing Date was defined as the date Woolworths commences trading in the Premises. The Lease provided for a Base Rent of $1.7 million per annum plus a Turnover Rent.

Clause 9 gave Woolworths a right of termination in certain circumstances. It provided:

Clause 14 provided:

The Approval Date was defined to mean 31 July 2008. Approvals was defined to mean “all necessary approvals, consents, permissions and licences of all relevant Government Authorities which must be obtained to carry out the Landlord’s Works.”

Access Arrangements was defined to mean “the re-design of the intersections and driveways adjacent to the Centre so as to provide pedestrian access and vehicle access to the Centre in accordance with the Plans and Specifications and any subsequent plans agreed by the parties.”

In this regard I note that on 28 February 2008, the Agreement as executed by two directors of Gazcorp (Nabil Gazal and Nicholas Gazal), was forwarded by Gazcorp’s solicitor, Mr Parry, to Woolworths’ solicitor, Mr Madden of Corrs Chambers Westgarth. The covering letter included the following:

Lastly, it should be noted that cl 15.1 of the Agreement provided a mechanism for the resolution of certain disputes by expert determination. The relevant disputes included disputes under cll 2.2 and 2.12 of the Agreement.

Big W is a brand of discount department store operated by Woolworths. Within Woolworths, the Big W business has its own division, separate from the division which deals with the supermarkets business. This separation was known to Gazcorp, through at least Nicholas Gazal (“Mr Gazal”).

Towards the end of 2007, Mr Gazal raised with Ms Tickelpenny (of Woolworths Supermarkets division) the prospect of including a Big W store in the development. Ms Tickelpenny referred Mr Gazal to Mr MacMahon (of the Big W division). It appears that Mr Gazal and Mr MacMahon thereafter discussed the possibility of a Big W store being located on Level 1 of the proposed development.

The plans that had been submitted in 2007 in support of the development application show three levels of basement for parking, a lower ground floor (to include a Woolworths supermarket), a ground floor (for retail use), Level 1 (for office use), Level 2 (for facilities including a swimming pool, gymnasium and landscaped open space), and a Level 3 (roof level). Plainly, if a Big W store was to go in on Level 1 an amendment to the approved development would be required.

Following entry into the Agreement in February 2008, discussions continued in relation to the inclusion of a Big W store. At around the same time, there were discussions about the possibility of Woolworths taking some extra space (near the supermarket) for a liquor store. Mr Hocking of Woolworths suggested to Mr Gazal that the supermarket lease might be varied to deal with that. There were also discussions about various design aspects of the proposed supermarket.

On 23 April 2008 Mr MacMahon sent a Letter of Offer to Mr Gazal in relation to a lease for the proposed Big W store. The offer was subject to, inter alia, receipt of necessary approvals “including Section 96 approval”. It was evidently envisaged at that time that the necessary approval would be obtained via an amendment to the 2008 Consent. An application to modify the consent was in fact lodged on about 7 May 2008. However, it appears that following an objection by a third party, it was decided to instead proceed by way of a fresh development application.

On about 2 July 2008 a development application was lodged for a development that would include a Big W store (“the 2008 Development Application”). In summary, it was proposed to change the use of Level 1 and part of Level 2 from commercial to retail, and add an additional basement level for car parking. The modification application (at least in relation to the Big W changes) was withdrawn on about 8 July 2008.

In the meantime, the solicitors for the respective parties commenced dealing with each other about a draft agreement for lease and lease for the proposed Big W store. The existing Agreement was used as a template for this purpose.

It is apparent from letters sent by Mr Parry to Mr Madden on 2 June 2008, and by Mr Gazal to Mr Hocking on 3 June 2008, that it was expected that proceeding with the Big W proposal would have the effect of requiring certain changes to the existing Agreement, including in relation to the Date for Practical Completion (of 30 April 2010). The need for such a change seems to have been accepted by Mr Madden in his letter to Mr Parry of 7 July 2008.

On 21 July 2008 Mr Parry sent an email to Mr Madden requesting that Woolworths issue a letter to Gazcorp confirming that Woolworths agreed to extend the Date for Practical Completion from 30 April 2010 to 1 October 2010. However, on 23 July 2008, Gazcorp sent a letter to Woolworths (incorrectly dated 23 August 2008) in the following terms:

On 27 August 2008 Mr Gazal sent an email to Mr Hocking (and also Mr Finlay of Woolworths) attaching five plans which were referred to as “Latest plans for leasing issue”. These plans included plans dated 1 August 2008 (C105, C107, C108 and C109) for the Lower Ground Floor, Ground Floor, Level 1 and Level 2. Almost immediately thereafter Mr Gazal sent another email to Mr Hocking and Mr Finlay attaching four plans which were referred to as “Latest plans for leasing issue 2”. These plans were for each of four levels of basement parking and were dated 4 August 2008 (C101-C104).

The parties, with the assistance of architects and other consultants, continued to discuss and work through various issues of design detail in relation to the development.

On 9 September 2008 Mr Gazal sent an email to Mr MacMahon attaching three plans dated September 2008 which were referred to as “Plans for Big W”. Various further plans referred to as “Plans for Big W” were sent by Mr Gazal to Mr MacMahon on 10 September 2008.

I interpose here to note that on 11 September 2008 and 12 September 2008 communications passed between Woolworths and Gazcorp in relation to the Agreement which are said by Gazcorp to have effected a variation of the Agreement.

It is common ground that no Agreement for Lease was ever entered into in relation to the proposed Big W store. It is also not controversial that the 2008 Development Application was deemed to have been refused on 11 August 2008, and that an appeal to the Land and Environment Court in respect of the refusal was dismissed on 20 March 2009. That effectively put paid to the Big W proposal, but of course the 2008 Consent remained in place.

I have already referred to the incorrectly dated letter sent by Gazcorp to Woolworths on 23 July 2008 (see [39] above).

On 11 September 2008, Mr Hocking sent an email to Mr Gazal which attached a letter from Woolworths to Gazcorp in response. The email stated:

It is not necessary to set out the terms of the attached letter. It is sufficient to note that it confirmed an agreement to extend the Date for Practical Completion to 1 October 2010 subject to certain terms, and stated that Woolworths would instruct its solicitors to prepare a Draft Deed of Variation of Agreement for Lease for review and signature in the near future. It should also be noted that one of the stated terms was an amendment of the Approval Date from 31 July 2008 to 30 November 2008.

Shortly thereafter, Mr Hocking sent another email to Mr Gazal, which included the following:

Later on 11 September 2008, Mr Gazal sent an email to Mr Hocking (copied to Mr MacMahon) in the following terms:

Mr MacMahon responded to Mr Gazal’s email on 12 September 2008 in the following terms:

Later on 12 September 2008 Mr Hocking sent an email to Mr Gazal in the following terms:

The attached letter dated 12 September 2008 was in the following terms:

Before proceeding further it is necessary to refer to the pleadings in respect of the variation alleged by Gazcorp. By its Statement of Claim filed on 15 October 2018 Gazcorp referred in paragraphs 17 to 21 to the communications referred to above, being the letter incorrectly dated 23 August 2008, Mr Hocking’s email of 11 September 2008 and attached letter, Mr Gazal’s email of 11 September 2008, Mr MacMahon’s email of 12 September 2008, and Mr Hocking’s email of 12 September 2008 and attached letter.

By paragraphs 18 to 21 of its Defence filed on 11 March 2019, Woolworths at least admitted that these communications were received or sent.

Paragraph 22 of the Statement of Claim reads:

Paragraph 22 of the Defence reads:

In these circumstances a question arises as to the effect of the non-admission of paragraph 22(d) of the Statement of Claim in relation to the Landlord’s Works. Gazcorp submitted that the only issue left open on the pleadings was the meaning to be given to the expression “the updated plans and specifications reflecting the revised Landlord’s Works” which appears in the 12 September 2008 letter. It was submitted that it was not open to Woolworths to contend that the 12 September 2008 letter was not intended to be legally binding, or that there was an effective variation of the three dates but no effective variation of the Landlord’s Works (for example because this aspect was uncertain, and severable).

In closing submissions, Woolworths contended that the 12 September 2008 letter “did not form an agreement as to the particular updated plans intended by the parties to be immediately binding”. It was further said that after 12 September 2008 the parties “continued to negotiate plans to include a Big W”. Woolworths also placed reliance upon parts of Mr Gazal’s affidavit evidence (which were tendered on the basis that they constituted admissions against interest), including about expecting updated plans to be included in the Deed of Variation referred to at the end of the 12 September 2008 letter.

In my opinion it is not open to Woolworths on the pleadings to assert that the 12 September 2008 letter was not intended to be immediately binding. That would be inconsistent with Woolworths’ acceptance that, by reason of the communications culminating in the 12 September 2008 letter, the Agreement was varied in a number of respects. It is not open to argue, for example, that the reference in the letter to a Deed of Variation showed that the parties did not intend to be immediately bound on the terms contained in the letter.

However, I think that the non-admission of paragraph 22(d) leaves it open to Woolworths to contend that the terms of the letter were not effective to vary the Agreement insofar as the Landlord’s Works are concerned, or that the variation of the Agreement in that regard was not to the effect of that alleged by Gazcorp in paragraph 22(d) of the Statement of Claim.

The 12 September 2008 letter deals with the Landlord’s Works in paragraph (c)(iii) which provides that Woolworths agreed to vary Schedule 2 to the Agreement by “deleting the current plans and specifications and replacing them with the updated plans and specifications reflecting the revised Landlord’s Works”. Further, paragraph (c)(iv) refers to “the new construction program reflecting the revised Landlord’s Works and milestone dates”. In my view, the references to “revised Landlord’s Works” should be understood as the works that would be required to complete construction of the shopping centre the subject of the 2008 Development Application. It was clearly recognised by the parties that pursuit of the proposed development the subject of the 2008 Development Application would delay the project and thus require amendments to the Date for Practical Completion (see, for example, Gazcorp’s letter sent on 23 July 2008, and the second paragraph of the 12 September 2008 letter).

Paragraph (c)(iii) of the 12 September 2008 letter thus refers to the deletion of the current Plans and Specifications as found in Schedule 2 to the Agreement, and the replacement of them with the updated Plans and Specifications that reflect the works that would be required to complete construction of the shopping centre the subject of the 2008 Development Application.

Gazcorp emphasised the presence in paragraph (c)(iii) of the definite article “the” in relation to updated plans. It was submitted that the updated plans were plans that concerned the 2008 Development Application. Woolworths submitted that in the circumstances it was unclear what updated plans were being referred to, and that such plans might not extend to all of the plans for the 2008 Development Application.

In my view, the reference in the 12 September 2008 letter to “the updated plans and specifications” should be regarded as a reference to the plans that had been sent by Mr Gazal to Mr Hocking on 27 August 2008 (C101-105 and C107-109). Those plans were generally described in the covering emails as “Latest plans for leasing issue”, and, although of a preliminary nature, they are plans of a character similar to those that had been included in Schedule 2 to the Agreement. They may fairly be described as updated plans that reflect the “revised Landlord’s Works”. They concern a proposed development in the nature of the development the subject of the 2008 Development Application.

It is true, as pointed out by Woolworths in submissions, that various plans were the subject of on-going discussion between the parties at that time. However, it is necessary to bear in mind the myriad tasks that were being undertaken in that period that involved working on and making adjustments to plans and specifications. It appears, for example, that plans were being considered and revised as part of the working out of the details of the design of the building, and various plans were being sent to Mr MacMahon “for Big W”. When regard is further had to the fact that at this stage Mr Gazal generally dealt with Mr MacMahon in relation to Big W issues and with Mr Hocking in relation to supermarket issues, there is good reason to think that the reference in Mr Hocking’s letter of 12 September 2008 to the updated plans and specifications was intended as a reference to the plans Mr Gazal had sent to him on 27 August 2008.

In my opinion, the meaning of paragraph (c)(iii) of the 12 September 2008 is sufficiently clear to effect a variation of the Agreement by deleting the existing plans in Schedule 2 and replacing them with the plans sent to Mr Hocking on 27 August 2008. The Landlord’s Works, which are defined in part by the plans and specifications contained or identified in Schedule 2, were thus “revised”. The Agreement was varied as alleged by Gazcorp.

A different conclusion may have been reached had it been open to Woolworths to assert that the 12 September 2008 letter was not immediately binding. Entry into a Deed of Variation was evidently envisaged, and is referred to in some of the subsequent communications between the parties. Of course, that is not necessarily inconsistent with an intention to be immediately bound by the terms of the 12 September 2008 letter, with those terms to be restated later in a form that is not different in effect (see Masters v Cameron (1954) 91 CLR 353 at 360). It is not necessary to express any concluded view on that matter.

As noted earlier, Woolworths accepts that if the Agreement was varied as alleged by Gazcorp, then it was frustrated on 20 March 2009 when the Land and Environment Court refused the 2008 Development Application. The Agreement, as varied, thus came to an end at that time.

In case that conclusion is wrong, I proceed now to consider the position on the assumption that the Agreement was not varied. That is to say, I turn to consider whether the Agreement (as executed) remains on foot as contended by Woolworths, or has come to an end through frustration or mutual abandonment as contended by Gazcorp. It is necessary, for this purpose, to consider the further dealings between the parties from September 2008.

From September 2008, discussions continued between the parties into 2009 in relation to the proposed development, including in relation to a Big W store, the inclusion of a Dick Smith electronics store and a Thomas Dux grocery store, and the addition of an area for a liquor store.

On 27 January 2009 Mr Hocking forwarded to Mr Gazal a Letter of Offer in respect of an additional area to be leased by Woolworths for a liquor store. On 2 February 2009, Mr Hocking forwarded to Mr Gazal an amended Letter of Offer. It appears that this letter was signed by Mr Gazal on behalf of Gazcorp and returned to Woolworths. On 27 February 2009 Mr Finlay sent an email to Mr Gazal informing him that the property committee of Woolworths had “approved the additional area for liquor” and that solicitors would be instructed shortly “to vary the documents”.

By 10 March 2009 the parties were expecting the Land and Environment Court to soon give its judgment concerning the 2008 Development Application. As already noted, the judgment was given on 20 March 2009, and was adverse to the 2008 Development Application, and thus the proposed development that included a Big W store. In essence, it was held that the large amount of retail floor space proposed would have an adverse economic impact upon the nearby Green Square Town Centre, and not be in the public interest (see Humphrey & Edwards v City of Sydney [2009] NSWLEC 1075). Gazcorp promptly informed Woolworths of the decision, which Mr Gazal described as a “huge shock”.

However, the demise of the 2008 Development Application did not affect the continued existence of the 2008 Consent. On 29 January 2009 that consent had been modified such that it was stated to operate from 17 February 2009 and lapse on 17 February 2011.

I note in passing that it appears that on 23 March 2009 Mr Parry spoke to Mr Madden (now of Henry Davis York) about the court decision. A note apparently prepared by Mr Madden contains the following:

On 31 March 2009 Mr Gazal met with Mr Finlay and Ms Srbinovski of Woolworths. Mr Gazal deposed that in the course of the meeting he said words to the following effect:

Mr Gazal further deposed that although he could not recall the actual words used, Mr Finlay reconfirmed Woolworths’ commitment to the site.

Discussions proceeded thereafter about various options, including Dick Smith and Thomas Dux stores on the ground floor level.

By mid-April 2009, Gazcorp’s architects were preparing a section 96 application “for our proposed staging of occupation”.

On 23 April 2009 Mr Gazal sent various “indicative leasing plans” to Mr Hocking. Mr Hocking noticed that these plans did not include the liquor area. He requested that the plans be reviewed and amended. On 28 April 2009 Mr Hocking sent a Letter of Offer to Mr Gazal for his review. The offer concerned a lease of about 1200m2 of space for a Thomas Dux store on the ground level. Later on 28 April 2009 Mr Gazal sent to Mr Hocking a revised plan of the lower ground floor. Also on 28 April 2009 Ms Srbinovski sent a Letter of Offer to Mr Gazal concerning a lease of space for a Dick Smith store on the ground level.

Mr Gazal deposed that he attended a meeting with Mr Hocking, Ms Srbinovski and others on 28 April 2009. On 30 April 2009 Mr Gazal sent an email to Mr Hocking in relation to the Thomas Dux proposal. The email, which outlined the terms and conditions offered by Gazcorp, included the following:

It appears that at around that time, Gazcorp was preparing to conduct a retail leasing campaign for the proposed development, featuring a full line Woolworths supermarket.

On 23 June 2009 Ms Srbinovski sent an email to Mr Gazal informing him that Thomas Dux had pulled out of negotiations but that Dick Smith was still keen to secure space in the development.

In August 2009 Mr Gazal sought to arrange a meeting with Mr Hocking and Mr Finlay to discuss various matters including “Alexandria and the completion date” and “Alexandria Potential new plans”. On 5 August 2009 Mr Hocking sent an email to Mr Gazal in the following terms:

Mr Gazal thereafter had numerous dealings with Mr Carroll until about June 2015.

On 31 August 2009 Mr Gazal sent to Mr Carroll various plans of the proposed ground floor and proposed lower ground floor levels. The plans for the ground floor level showed a number of options. Mr Gazal’s covering email included the following:

On 14 December 2009 Mr Carroll sent an email to Mr Gazal in the following terms:

On 15 December 2009 Mr Gazal sent an email to Mr Carroll in response. Mr Gazal’s email was in the following terms:

On 26 February 2010 Mr Gazal sent an email to Mr Finlay (copied to Mr Carroll) in the following terms:

On 4 March 2010 Mr Carroll sent an email to Mr Gazal in response. Mr Carroll’s email was in the following terms:

On 8 March 2010 Mr Carroll sent an email to Mr Gazal which attached a letter from Woolworths which included the following:

Mr Gazal deposed that he did not later confirm acceptance of the matters set out in this letter.

On 14 April 2010 Mr Gazal and his brother Mr Nabil Gazal met with Mr Carroll and Mr Mellowes of Woolworths. Mr Gazal deposed that during the meeting either he or Nabil said words to the following effect:

Nabil Gazal deposed that there was a conversation at the meeting to the following effect:

A file note made by Nabil Gazal shortly after the 14 April 2010 meeting is in the following terms:

On 30 April 2010 Mr Carroll sent an email to Mr Gazal which included the following:

It may be inferred that the correspondence referred to in Mr Carroll’s email is that which culminated in the Woolworths letter of 12 September 2008, as discussed earlier.

Mr Gazal sent an email in response shortly thereafter in which he stated that he was “just about to send you an email expressing the same view!”.

At around that time Gazcorp was in communication with the Council concerning possible amendments to the 2008 Consent. It appears that it was suggested that the existing retail floor space as approved would be retained, but that various other changes would be made to the approved commercial floor space such as changing part of it to residential use.

It may be recalled that the 2008 Consent had been modified so that it would operate until 17 February 2011. It appears that by June 2010 the consent had been further modified such that it was to operate until 17 February 2014. On 3 June 2010 Mr Gazal sent an email to Mr Carroll stating that the “DA is valid until 2014”.

On 15 June 2010 Mr Gazal and Nabil Gazal attended a meeting with representatives of Woolworths. It appears from a note of the meeting taken by Nabil Gazal that Mr Carroll was present. Nabil Gazal’s file note is in the following terms:

On 16 July 2010 Mr Carroll sent an email to Mr Gazal indicating that Woolworths had obtained legal advice about the matters discussed at the 15 June 2010 meeting, and that there was a need to discuss the advice before reverting to Mr Gazal. It further appears that these matters were the subject of a conversation between Mr Gazal and Mr Carroll on 17 August 2010.

On 5 October 2010 Mr Madden sent a letter to Mr Parry in the following terms:

Mr Gazal deposed that on 15 October 2010 he had a telephone conversation with Mr Mellowes about the 5 October 2010 letter. Mr Gazal deposed that the conversation included words to the following effect:

On 8 December 2010 Mr Gazal sent an email to Mr Mellowes, asking him whether he had “any further thoughts” since their last conversation concerning Green Square.

On 9 March 2011 Mr Carroll sent an email to Mr Gazal in relation to the Alexandria (or Green Square) site and another site owned by Gazcorp known as Orange Grove. In relation to Green Square, the email included the following:

The evidence does not reveal whether the proposed meeting took place.

On 27 April 2011 Woolworths lodged a caveat against the titles for the Green Square site. Woolworths claimed an interest as lessee pursuant to the Agreement dated 20 February 2008.

The caveat was discussed at a meeting held on 5 May 2011 attend by Mr Gazal, Nabil Gazal, Mr Carroll and Mr Mellowes. Mr Gazal deposed that at the meeting he said words to the effect that “the caveat will cause us problems with our bank”. A note of the meeting made by Nabil Gazal includes the following:

On 20 May 2011 Mr Carroll sent an email to Mr Gazal stating that the caveat had been withdrawn. Mr Gazal sent an email to Mr Mellowes shortly thereafter thanking him for dealing with the caveat issue. The email also included the following:

On 28 June 2011 Mr Gazal sent an email to Mr Carroll attaching some sketch plans for the lower ground and ground floors. The sketch plans were described in the email as “the first cut plans as discussed”. Mr Gazal deposed that these plans had been discussed at a meeting held with Mr Carroll on 28 June 2011. It should be noted that the plans appear to depict a supermarket area on the ground floor rather than on the lower ground floor.

On 20 July 2011 Mr Carroll sent an email to Mr Gazal which included the following:

Mr Carroll sent a further email to Mr Gazal on 26 July 2011. This email included the following:

On 8 September 2011 Mr Carroll sent an email to Mr Gazal which referred to Woolworth’s recent assessment of Green Square. It was stated that “the population numbers are compelling”. The email continued:

Mr Gazal responded by email later that day. The email included the following:

On 22 September 2011 Mr Carroll sent an email to Mr Gazal in the following terms:

The email was stated to be subject to Woolworths Board approval.

Mr Gazal deposed that he did not ever agree to the proposal to extend the date to 1 October 2013, or indeed to any other date.

On 18 October 2011 Mr Madden sent a letter to Mr Parry in the following terms:

Also on 18 October 2011 Mr Carroll sent an email to Mr Gazal in the following terms:

On 20 October 2011 Mr Gazal sent an email to Mr Carroll which included the following:

On 31 October 2011 Mr Parry sent a letter in response to Mr Madden’s letter. Mr Parry’s letter was in the following terms:

On 3 November 2011 Mr Gazal sent an email to Mr Carroll which included the following:

On 6 December 2011 Mr Gazal sent another email to Mr Carroll. The email included the following:

On 23 January 2012 Mr Gazal sent some plans in relation to Green Square to Mr Carroll. One of the plans was a floor plan of the ground floor. Another plan was a section plan which depicted a Woolworths located on the ground floor with two levels of car parking beneath and two levels of car parking above. On 27 January 2012 Mr Carroll requested further plans from Mr Gazal. On 3 February 2012 Mr Carroll sent an email to Mr Gazal containing numerous comments on the plans provided. Mr Carroll acknowledged that it was “early days with the plans”.

Various further plans were sent by Mr Gazal to Mr Carroll in March 2012. These plans were evidently the subject of some discussion, including involving the input of architects retained by the respective parties. On 11 April 2012 Mr Gazal sent a “mock-up of what I believe the area could look like”. Mr Carroll responded by email on 13 April 2012. Mr Carroll’s email was in the following terms:

The evidence is not clear as to whether there was any discussion between Mr Gazal and Mr Carroll later that day. However, Mr Gazal sent an email to Mr Carroll during the afternoon which attached a planning proposal in relation to the Green Square Town Centre.

Despite the apparent impasse reached on 13 April 2012, the parties continued to communicate in relation to the proposed development. It appears that around this time some urgency was introduced into the situation due to an impending change in a local environmental planning law. On 19 April 2012 Mr Carroll sent an email to Ms Kurek (a designer within Woolworths) in the following terms:

It may be inferred that “the new LEP” referred to in the email is the Sydney Local Environmental Plan 2012 (“the 2012 LEP”) which came into force later in 2012 (on 14 December 2012). The effect of clause 7.23(3) of the 2012 LEP was to prohibit, in respect of certain properties, the granting of a development consent for retail space of greater than 1,000m2. Gazcorp’s site at Alexandria was property to which clause 7.23(3) would apply.

It may further be inferred that “the DA” referred to in Mr Carroll’s email was a development application for the site that was then in the process of being prepared prior to lodgement. It appears that at least from this point in time the parties closely co-operated in order to facilitate the lodgement of a Development Application (“the 2012 Development Application”) on about 6 July 2012. The application was approved on 30 November 2012 (“the 2012 Consent”).

The proposed development the subject of the 2012 Consent was for demolition of existing structures, excavation for two basement levels accommodating 327 car parking spaces and construction of a three-storey retail and commercial development accommodating 11,452.05sqm of floor space. The accompanying plans provided for a supermarket on the ground level, not the lower ground level as was the case with the 2008 Consent. However, condition 11 of the 2012 Consent provided that no consent was given to the use or fit-out of any of the proposed retail tenancies including the supermarket.

It should be noted at this point that even if the Date for Practical Completion under the Agreement had been extended to 1 October 2010, and thus the Termination Date had been extended to 1 October 2011, the time for Woolworths to exercise any rights under cl 9 of the Agreement had expired by 1 October 2012. I interpose here to note that Gazcorp does not contend that the Agreement was mutually abandoned prior to 1 October 2012. Gazcorp contends that mutual abandonment occurred at some time in the period from 1 October 2012 to 3 February 2016.

On 5 December 2012 Mr Carroll sent an email to Mr Gazal which included the following:

Later on 5 December 2012 Mr Gazal sent an email to Mr Carroll in response. The email included the following:

There were indeed numerous changes to the plans. Numerous plans described as “updated plans” were sent by Mr Gazal to Mr Carroll in December 2012. Woolworths, for its part, subsequently provided a great deal of information to Gazcorp on various aspects relating to supermarket design, including trolley management and security. It is evident from the communications between the parties that it was envisaged that an application to modify the 2012 Consent would be lodged in due course. One such application was lodged on about 27 February 2013, seeking, inter alia, to amend Condition 11 to delete the reference to “supermarket” so as to approve use and fit-out of a supermarket. Further applications to modify the 2012 Consent were subsequently made.

On 5 April 2013 Mr Gazal sent an email to Mr Carroll attaching some preliminary sketches for the loading dock for Woolworths. The sketches appear to depict the supermarket on the ground (or Botany Road) level.

On 17 April 2013 Mr Carroll sent an email to Mr Gazal which included the following:

On 18 April 2013 the Council approved the application to modify the 2012 Consent, including by amending Condition 11 “to delete reference to supermarket and approve use and fit-out of Tenancy R.30 as part of the base building development consent”. In addition, a drawing entitled Woolworths Green Square – Concept Plan was added to the drawings that form the description of the proposed development.

Documents evidencing the Council’s assessment of the modification application reveal that in excluding Tenancy R.30, which was for a tenancy area that exceeded 1,000m2, the Council took into account cl 7.23(3) of the 2012 LEP but determined, in effect, that making an exemption for this tenancy would not be contrary to the planning considerations which underpinned the enactment of the 2012 LEP.

It appears from a letter sent by the Council to Gazcorp on 20 November 2013 that, all deferred commencement conditions having been satisfied, the 2012 Consent would operate from that date and lapse on 20 November 2018.

In early 2014, the parties were continuing to discuss plans for the development of the Green Square site. On 2 February 2014 Mr Carroll sent an email to Mr Gazal in which he expressed views that the loading dock was “overly tight” and that there were problems with the proposed location for the liquor store. Mr Carroll also stated that he was keen to work with Mr Gazal on sorting out these issues. The parties continued to deal with each other concerning proposed plans and associated issues throughout 2014.

It should be noted that on 17 February 2014 the 2008 Consent lapsed and thus ceased to have effect. The lapsing of the 2008 Consent was a matter known to both parties but the event does not appear, on the available evidence, to have been the subject of any particular communication between the parties. Gazcorp contends that the combination of the lapsing of the 2008 Consent and the effect of cl 7.23(3) of the 2012 LEP had the effect that the Agreement was frustrated.

By late-2014 the plans that were the subject of discussion between the parties appear to relate to a development that would include a significant residential component.

On 16 February 2015 Mr Gazal sent an email to Mr Carroll which included the following:

Mr Carroll responded by email shortly thereafter. Mr Carroll’s email included the following:

Discussions about the Green Square development continued between Mr Gazal and Mr Carroll on at least an intermittent basis throughout 2015 until Mr Carroll ceased his role with Woolworths in early July 2015. On 30 June 2015 Mr Carroll sent an email to Mr Gazal which included the following:

On 9 July 2015 Mr Gazal met with a number of representatives of Woolworths including Mr Rowles. It appears from an email from Mr Rowles to Mr Kemmler (the Director of Property at Woolworths) that during the meeting Mr Gazal undertook to deal only with Woolworths “due to the longstanding involvement”. Mr Gazal deposed that during the course of the meeting there was discussion concerning the latest plans for the development, rental expectations for the Woolworths supermarket, and the possibility of a further application to the Council to modify the development consent (the 2012 Consent).

On 23 July 2015 Mr Gazal sent an email to Mr Rowles in which he stated that there had been a “great meeting with Council this morning” and that Gazcorp were now going ahead with the modification application. Mr Gazal provided the “first cut” of the detailed drawings for that application to Ms Munro of Woolworths on 11 September 2015. These drawings depicted a Woolworths supermarket on the ground (or Botany Road) level. On 22 September 2015 Mr Gazal provided updated plans to Mr Finlay. Mr Finlay responded by email on the following day stating that he and Ms Kennedy of Woolworths would review the plans and respond as soon as possible. There were various communications between the parties concerning the plans thereafter.

On 14 October 2015 Mr Gazal sent an email to Mr Champion of Woolworths in the following terms:

Mr Champion responded by email later that day stating that he would speak to Mr Finlay in the following week and provide a response as soon as possible. On 21 October 2015 Mr Champion sent a further email to Mr Gazal in the following terms:

On 21 October 2015 Mr Gazal received an email from Mr Brad McAndrew of Woolworths. Mr McAndrew introduced himself as Mr Gazal’s “new Woolworths contact”. Mr McAndrew stated in his email that he and Mr Finlay would like to have a meeting with Mr Gazal to discuss the proposed development. Mr McAndrew also posed numerous questions to Mr Gazal about the proposal. Mr Gazal provided some answers to those questions on the following day. Discussions concerning the plans for the proposed development continued thereafter.

On 11 December 2015 Mr McAndrew sent an email to Mr Gazal in which it was stated that he and Mr Champion of Woolworths would like to have a meeting with Mr Gazal in the following week to discuss “the project and commercial terms”. The evidence is not clear as to whether such a meeting occurred. However, it appears from an email sent by Mr McAndrew to Mr Champion on 18 December 2015 that there may have been a meeting with Mr Gazal planned for that day, and that a “key point” for Mr Gazal was that “AFL remains on foot”. However, Mr Gazal did not give any evidence about such a meeting and neither did any witness called by Woolworths. It was not put to Mr Gazal in cross-examination that there had been such a meeting, or that it had been suggested to him in December 2015 that the Agreement was still on foot. Mr Gazal seemed to indicate in the witness box that from the time of his dealings with Mr Carroll the first time Woolworths told him (at least in writing) that the AFL was on foot was by means of a letter sent by Woolworths on 3 February 2016. In these circumstances it seems to me unlikely that Mr Gazal was told by anyone on behalf of Woolworths in December 2015 that the Agreement remained on foot.

The letter dated 3 February 2016, referred to above, was sent by Mr McAndrew to Mr Gazal by email on that date. The letter is lengthy and may fairly be described as a detailed letter of offer. Importantly for present purposes, the letter commenced with the following:

Mr Gazal did not immediately respond to Woolworths’ letter of 3 February 2016. It appears that Mr Gazal wanted to obtain further legal advice, including from a Senior Counsel, and it was also a very busy time with Gazcorp opening a new development at Liverpool. I note, however, that on 5 February 2016 Mr Gazal sent an email to Mr Murray of Coles, with whom he had been dealing since about December 2015, in the following terms:

On 29 April 2016 Mr Gazal sent an email to Mr McAndrew which attached a response to Mr McAndrew’s letter of 3 February 2016. The attached letter included the following:

Woolworths responded by letter dated 18 May 2016. The letter, which was signed by Mr McAndrew, contained the following:

Mr Gazal responded to the above letter on the following day. His response included the following:

The parties thereafter continued to communicate in relation to the Green Square site. It can be said that neither side departed in that correspondence from the positions that had emerged in 2016. That is to say, Woolworths continued to assert that the Agreement remained on foot, and Gazcorp continued to assert that the Agreement had been terminated. I have considered that further correspondence, but it is not necessary to here set out any of its details.

On 14 October 2016 the Council gave approval for a further modification application in respect of the 2012 Consent. The approved development was now described as:

The Woolworths Green Square-Concept Plan remains one of the drawings that describes the proposed development. The approved plans show a supermarket on the ground (or Botany Road) level.

On 3 February 2017 solicitors acting for Woolworths sent a letter to Mr Gazal stating, in effect, that Woolworths consented to all variations to the Plans and Specifications (as that expression is defined in the Agreement) as reflected in the plans approved when consent was given to the modification application in October 2016. Woolworths solicitors suggested that the approved plans could therefore be substituted into the Agreement in place of the plans that previously formed the Plans and Specifications.

Also on 3 February 2017, Woolworths lodged another caveat against the titles to the land at the Green Square site. The caveat (AM129767) remains on the titles.

Notwithstanding further attempts, the parties have been unable to reach an agreement in relation to the Green Square site. Gazcorp commenced these proceedings on 15 October 2018.

There was no real dispute as to the applicable principles concerning frustration of contracts. A good starting point is the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. At 357, Mason J expressed agreement with the earlier acceptance by Stephen J (in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143) of the approach adopted by Lord Reid and Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696. Mason J continued:

In oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255 Nettle JA dealt with the test for frustration at [63]-[74]. After referring to the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra), his Honour stated at [70]:

At [72]-[74] Nettle JA considered the role of foreseeability in relation to circumstances said to amount to frustration. His Honour said at [74]:

Reference should also be made to recent statements to similar effect in the Court of Appeal in this State in Chinatex (Australia) Pty Ltd v Bindaree Beef Pty Ltd [2018] NSWCA 126 at [42]-[44] and Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53 at [56].

Again, there was no real dispute as to the applicable principles concerning the mutual abandonment of a contract. Reference was made to DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434 where it was stated:

In Técnicas Reunidas SA v Andrew [2018] NSWCA 192 Leeming JA (with whom Bathurst CJ and White JA agreed) stated at [50]-[52]:

Reference was also made to other authorities that contain statements of principle to the effect that the question of whether there has been an abandonment of contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties, and that subjective intention or understanding is not relevant (see, for example, Clifton v Kerry J Investment Pty Ltd [2020] FCAFC 5 at [324]-[328]).

In Ryder v Frohlich [2004] NSWCA 472 McColl JA (with whom Hodgson and Ipp JJA agreed) stated at [135]-[137]:

The parties provided detailed written submissions, both in opening and closing, and developed those submissions orally at the hearing. It is not necessary to record them all in detail. What follows is a summary of the principal submissions made.

Gazcorp submitted that the terms of the Agreement were of central significance to the determination of whether the Agreement has been terminated by frustration, and also whether it should be inferred that the Agreement has been abandoned. The provisions of the Agreement were analysed in some detail in submissions, with particular focus upon what was said to be four key groups of provisions, namely:

As to (a), it was emphasised that Gazcorp undertook to cause the Landlord’s Works to be carried out (i.e. the works required to complete construction of the Centre) in accordance with the Plans and Specifications and in accordance with all laws and consents, and was required to use its best endeavours to complete the works within the times specified in clause 2.4. It was noted that clause 2.4 distinguished between completion of the Premises (i.e. the Woolworths supermarket) and completion of the Centre (i.e. the shopping centre as described in the Plans and Specifications).

As to (b), it was submitted that clause 2.5 allowed Gazcorp to alter the Landlord’s Works in the limited circumstances described in the clause, but that Gazcorp had otherwise no unilateral right to change the Landlord’s Works. It was noted that clause 2.6, which gave Woolworths rights to request amendments to the Supermarket Plans, did not extend to amendments to the Centre more broadly. In relation to clause 2.12 it was noted that (apart from clause 2.12(g)) it addressed matters that were beyond the control of Gazcorp. It was submitted that clauses 2.5, 2.6 and 2.12 delimit the variations that either party could unilaterally make to Gazcorp’s obligations in relation to the construction of the Centre and the supermarket. Accordingly, any other changes would require the parties to agree to either vary the Agreement or enter into a new agreement.

As to (c), it was submitted that clause 9 was an exhaustive statement of Woolworths’ right to claim damages for any failure to carry out the Landlord’s Works. Woolworths was restricted to a claim for recovery of costs and expenses, and any such claim was required to be notified to Gazcorp within 1 year of the Termination Date. It was noted that no such claim has ever been made by Woolworths, and neither did Woolworths ever seek to terminate (whether under clause 9 or under clause 14.2).

As to (d), it was noted that the lease to be granted was for a term that commenced when Woolworths commenced trading in the Premises (the supermarket).

Gazcorp submitted that the Agreement clearly distinguished between the Premises, the Woolworths Stage (lower ground floor and basement levels 1 and 2), and the Centre (being the shopping centre), as starkly shown by clause 2.5(c) (see also the defined terms in clause 1.1, and also clauses 2.11(c), 3.2 and 9), and reinforced by clause 2.4 which provides for different completion dates for the Premises and the Centre.

It was submitted that the Centre, being the shopping centre to be constructed as “described” in the Plans and Specifications (which include the plans and specifications for the construction of the Centre contained or “identified” in Schedule 2), was a building that had a number of levels in addition to those that make up the Woolworths Stage. It was submitted that the plans in Schedule 2 plainly showed that the Centre was comprised of levels beyond the levels depicted on those plans. It was further submitted that in circumstances where the parties were aware of the 2008 Consent when the Agreement was made, the parties can be taken to have understood that the Centre was a shopping centre of the character of that which is the subject of the consent.

From that foundation, Gazcorp developed its submissions on frustration as follows. First, it was submitted that the parties entered into the Agreement on the common assumption that Gazcorp would continue to be able to lawfully carry out the Landlord’s Works. Secondly, it was submitted that under the Agreement neither party took responsibility for the continuation of that state of affairs, there being no provision which imposes such an obligation or even deals with a situation where carrying out the Landlord’s Works ceased to be lawful. Thirdly, it was submitted that the common assumption has proven to be mistaken in circumstances where the 2008 Consent lapsed on 17 February 2014 and the existence of clause 7.23(3) of the 2012 LEP meant that a fresh consent for a similar development would no longer be possible. Gazcorp submitted that the 2012 Consent (including as later modified) does not permit Gazcorp to carry out the Landlord’s Works as defined in the Agreement. Gazcorp noted that Woolworths admitted in its Defence that Gazcorp is not lawfully entitled to carry out the Landlord’s Works as specified in the Plans and Specifications (in their form at the time of entry into the Agreement). Gazcorp submitted that the situation that came about is radically different from the state of affairs contemplated at the time of entry into the Agreement.

Turning next to mutual abandonment, Gazcorp submitted that well prior to 1 October 2012 (when any rights of Woolworths under clause 9 came to an end) the parties had commenced to negotiate a new agreement for lease. It was submitted that these negotiations commenced shortly after the adverse Land and Environment Court decision in March 2009, when Mr Gazal made it known that changes would need to be made to the development the subject of the 2008 Consent. It was noted that in July 2011 Mr Carroll was speaking of effecting a “recut” of the deal, and seeking a workable plan so “we can thrash out some rental numbers”.

Gazcorp submitted that whilst Woolworths, through its lawyers, was taking the position in October 2011 that it relied upon the Agreement and reserved all its rights under it, its commercial position was to downplay the significance of the statements made by the lawyers, and Woolworths made no claim against Gazcorp by 1 October 2012 when its rights under clause 9 expired.

Gazcorp submitted that the communications after 1 October 2012 between Mr Gazal and Mr Carroll were clearly concerned with making a new agreement for lease, and Mr Carroll expressed a keenness to “secure the site”. This (as well as other statements made by Mr Carroll) was said to demonstrate that, viewed objectively, Woolworths had abandoned the Agreement and was instead pursuing a new agreement. Gazcorp submitted that Woolworths, knowing that the 2008 Consent would lapse in February 2014, made no attempt to insist upon performance of the Agreement.

In summary, Gazcorp submitted that from the time of the Land and Environment Court decision, neither party performed the Agreement or required the other party to do so, and it should be inferred from the long period of inactivity that the parties mutually abandoned the Agreement. Finally, Gazcorp submitted that this conclusion is reinforced or corroborated by numerous internal Woolworths documents from about early 2014 that contain admissions to the effect that there was no agreement for lease on foot.

Woolworths submitted that even after the Land and Environment Court decision in March 2009, the communications between the parties showed that they continued to regard the Agreement as being on foot. Numerous examples were given, including:

Woolworths submitted that the parties continued to work closely together in relation to revised plans for the Centre, the lodgement of the 2012 Development Application on about 6 July 2012, further revised plans thereafter, and the making of further modification applications. It was submitted that this continued until at least early 2016, at which time Woolworths sent its letter of offer of 3 February 2016 which effectively asserted the continued existence of the Agreement. Woolworths described Mr Gazal’s response on 29 April 2016 as a change of position on the part of Gazcorp, and the first time Gazcorp had told Woolworths that it viewed the Agreement as no longer on foot.

In relation to the terms of the Agreement, Woolworths emphasised that the plans and specifications contained in Schedule 2 consisted of only three plans, being the supermarket level and two levels of basement car park. It was submitted that this suggested that the layout of the other floors was not the subject of the Agreement. This was said to be significant “in circumstances where the plans for all of the other levels of the Centre had already been prepared and submitted to Council” as part of the development application lodged in 2007. Reference was made to clause 2.3, which provided that the Centre must include a Woolworths supermarket, and clause 2.1 which provided that Gazcorp must carry out the Landlord’s Works in accordance with the Plans and Specifications (as defined). Woolworths also referred to clause 2.2 which provided for expert determination of disputes between the parties over inconsistencies between the Landlord’s Works and the requirements of Woolworths under clause 2.3. Further, it was noted that clause 9, which gave Woolworths rights to terminate and seek reimbursement of costs and expenses, concerned the Landlord’s Works only insofar as they related to the Premises and the Woolworths Stage.

On the question of frustration, Woolworths submitted that the Agreement has not been frustrated so long as the commercial purpose of the Agreement remains possible. This commercial purpose was described as the grant of a lease in the Centre to Woolworths for a “full line” supermarket (of about 3,800m2 in area). Woolworths submitted that the 2012 Consent (as subsequently modified) allows that commercial purpose to be fulfilled. Woolworths noted that the 2012 Consent concerns a development that is described in part by reference to the Woolworths Green Square – Concept Plan. Woolworths thus submitted that there has been neither a “legal” nor a “commercial” frustration of the Agreement.

It was put that there was a high threshold to meet before a court will hold that a contract has been frustrated, and this is particularly the case where, as here, the contract concerns the grant of a valuable interest in property. It was submitted that it was not enough that an intended means of performance is no longer available if other means may be employed consistently with the contract. It was further submitted that when the Agreement was made, it was clearly foreseeable that the plans for the Centre could change yet still permit the envisaged supermarket and associated car parking areas. It was noted that the Agreement provided for changes to the Plans and Specifications, and contained no “sunset date” for completion of construction.

Woolworths submitted that there were no provisions in the Agreement that required the parts of the Centre beyond the Woolworths Stage to be maintained, or required that there be a certain number of retail/commercial levels or car park levels in the Centre. It was only necessary that there be a supermarket of about 3,800m2 in area (and that the ratio of car spaces to Gross Floor Area be about 1:42). It was submitted that the plans under the current consent allow for such a supermarket, and that these plans are “strikingly similar” to the original plans in Schedule 2 to the Agreement.

As for mutual abandonment, Woolworths submitted that when the whole of the conduct of the parties is considered objectively, it is apparent that:

It was submitted that the subjective intention or understanding of the parties was not relevant, at least where the intention or understanding was not communicated to the other party. In this regard, Woolworths submitted that there was no evidence that it had at any time expressed to Gazcorp an intention to abandon the Agreement. It was also put that years of no contact between the parties would be needed before the Court would infer an abandonment of the Agreement.

Woolworths referred to certain evidence given by Mr Gazal in cross-examination, including evidence to the effect that as at 5 February 2016 he was “not quite ready to walk away” until he had obtained the opinion of a senior counsel. It was said that this evidence amounted to an admission that showed that as at 5 February 2016 Gazcorp had not abandoned the Agreement. Finally, it was submitted that Gazcorp’s unilateral desire to abandon the Agreement, first stated on 29 April 2016, was insufficient to establish Gazcorp’s own abandonment of the Agreement let alone the mutual abandonment of the Agreement.

Gazcorp was correct to submit that in approaching the questions of frustration and abandonment it is necessary to commence with a focus upon the terms of the Agreement. Those terms, properly construed, define the rights and obligations of the parties, and those rights and obligations must be kept firmly in mind when seeking to apply the relevant principles.

In this regard, a key point of difference between the parties concerned the nature and extent of Gazcorp’s obligations to cause the Landlord’s Works to be carried out. Gazcorp submitted that the Agreement as executed provided for Gazcorp to construct a shopping centre essentially in accordance with the plans the subject of the 2008 Consent. That is, in short, a part 3/part 4 storey building with three levels of basement parking, with space for a Woolworths supermarket on the lower ground level. The Agreement should thus be seen as an agreement by Gazcorp to grant a lease to Woolworths in respect of a part of that shopping centre (referred to in the Agreement as “the Centre”).

Woolworths submitted that the Agreement should not be so characterised. It placed emphasis upon the fact that the plans and specifications contained in Schedule 2 were of only the supermarket level and two levels of basement car park. It was thus suggested that Gazcorp was obliged only to construct a shopping centre that would accommodate the envisaged Woolworths supermarket and associated parking areas. It was put that it was not necessary that Gazcorp construct a shopping centre essentially in accordance with the 2008 Consent; it was sufficient that Gazcorp construct a shopping centre that could accommodate a full line supermarket and associated parking (such as that provided for in the 2012 Consent), and grant a lease to Woolworths over an area within it for its supermarket.

The submissions of Gazcorp on this issue are to be preferred. The terms of the Agreement should be construed such that the Centre (being the key concept in relation to the obligation to carry out the Landlord’s Works) is regarded as a shopping centre essentially as envisaged by the 2008 Consent.

The Centre is a shopping centre to be constructed on the site as described in the Plans and Specifications. The Plans and Specifications, as defined, are not confined to the plans and specifications for the construction of the Centre contained in Schedule 2. They extend to plans and specifications “identified” in Schedule 2. As stated earlier (at [14]-[17]), it is evident from the plans and specifications that are contained in Schedule 2 that:

In addition, I am satisfied that at the time the Agreement was entered into, the parties were aware of the content of the development application that had been lodged in 2007, and the existence of the 2008 Consent that was consequently issued on 4 February 2008. Mr Gazal informed relevant Woolworths personnel of the lodgement of the development application and said that he would keep them informed of progress. In that regard, there is evidence that Mr Gazal informed Woolworths when the application was publicly exhibited. His email of 10 September 2007 to Ms Tickelpenny included a link to the relevant Council website. Moreover, on 28 February 2008 Mr Parry, when sending the Agreement as executed by Gazcorp to Mr Madden, referred to the development application having been approved.

In the above circumstances, the plans and specifications for the construction of the Centre “identified” in the Plans and Specifications contained in Schedule 2 must be taken to include the plans and specifications for the construction of the building the subject of the 2008 Consent. It should not be overlooked that Gazcorp’s obligations in respect of the Landlord’s Works, being the works required to complete the construction of the Centre, included an obligation that the works be carried out in accordance with all laws and consents.

I therefore conclude that the Centre, being the shopping centre to be constructed on the site as described in the Plans and Specifications, is a shopping centre essentially as envisaged by the 2008 Consent. Gazcorp’s obligations in respect of the Landlord’s Works must be understood as obligations in respect of the works required to complete construction of such a shopping centre. That is the Centre that must include a Woolworths Supermarket (see cl 2.3).

The Agreement provided room for changes to be made to the Landlord’s Works, but these are essentially confined to the specific circumstances identified in cll 2.5 and 2.6 (and the definition of Supermarket Plans which allows for updating of plans). Clause 2.5 allows Gazcorp (but does not require it) to make changes in some circumstances, and cl 2.6 allows Woolworths to request changes to the Supermarket Plans, which changes must be made in some circumstances. I note that the Supermarket Plans form only part of the Plans and Specifications, and are largely if not entirely concerned with the design details of the supermarket itself. Reference should also be made to cl 2.2 which provides that certain inconsistencies between the Landlord’s Works and the requirements of Woolworths in respect of its supermarket would, unless resolved by agreement, be referred for Expert Determination under cl 15. It is conceivable that some changes to the Landlord’s Works, insofar as they bear upon the Woolworths supermarket, might be altered as part of this process to overcome such an inconsistency.

The Agreement does not otherwise contemplate changes to the Landlord’s Works. I cannot accept that Gazcorp’s obligations in that respect were to construct a shopping centre that would accommodate the envisaged Woolworths supermarket and associated parking areas. The obligations were more specific than that. They were to carry out the works to construct the Centre (as understood in the manner set out above) such that it would include a Woolworths Supermarket on the lower ground level. That supermarket area was to become the Premises the subject of the lease Gazcorp was required to grant to Woolworths pursuant to cl 7 of the Agreement.

It seems to be logical to deal first with the question of abandonment. Gazcorp alleges that the Agreement was mutually abandoned at some time in the period from 1 October 2012 to 3 February 2016, whereas it alleges that the Agreement was frustrated on 17 February 2014. So, on Gazcorp’s case, the Agreement may have come to an end through abandonment prior to the date of the alleged frustration.

In considering the question of abandonment, I have examined the entirety of the conduct of the parties since the making of the Agreement. As urged by Woolworths in submissions, I have not confined attention to the 1 October 2012 to 3 February 2016 period nominated by Gazcorp as the period within which abandonment occurred.

I agree, however, that there was no abandonment prior to 1 October 2012. Woolworths had expressly reserved its right to invoke cl 9 to terminate the Agreement and make a claim for costs and expenses. Any exercise of such rights could occur up to 1 October 2012, which is 1 year from the Termination Date of 1 October 2011. I think that Woolworths at least evinced an intention to keep the Agreement alive for that purpose.

Nonetheless, it seems clear that for a considerable time beforehand, Gazcorp made it known that it was not going to commence the development the subject of the 2008 Consent. At a meeting on 31 March 2009 (shortly after the adverse Land and Environment Court decision) Mr Gazal stated, in effect, that Gazcorp was unable to build the development as approved, and would need to make an application for a staged construction of the site and other layout changes. Whilst it seems that both sides confirmed their commitment to the development of the site, there was (or was soon to be) a tacit acceptance that the approved development was not going to be commenced, at least at that time. This is reflected in the ongoing discussions from about April 2009 about various revised plans. In December 2009 there were communications between Mr Carroll and Mr Gazal about the reasons for the delays in the development. It was understood that at least one of the reasons concerned issues Gazcorp had in obtaining finance. In the course of these communications, Mr Carroll stated that there was an Agreement for Lease in place.

I note in passing that the delays did not necessarily mean that Gazcorp was in breach of the Agreement. By cl 2.1(c), Gazcorp was required to carry out the Landlord’s Works as expeditiously as possible, and cl 2.4 imposed an obligation upon Gazcorp to use its best endeavours to complete the Landlord’s Works by certain times – including that the Centre reach Practical Completion by the Date for Practical Completion.

I further note that in these communications Mr Gazal stated that “our DA” (the 2008 Consent) was to expire in February 2011, but that an application was to be made to extend that to February 2012. Mr Gazal also stated that Gazcorp was investigating what works would need to be done to achieve “substantial development” so that the DA would not be lost (see also Mr Gazal’s email of 26 February 2010).

In the period from February to April 2010 there were discussions between the parties about possible variations to the Agreement (including in relation to Practical Completion), or entry into a new agreement. The evidence given by Nabil Gazal concerning the meeting held on 14 April 2010 reveals that Gazcorp made it known to Woolworths that “the current DA does not stack up”, and that Gazcorp could not build the shopping centre “in its current form”. Gazcorp thus stated that it would not be proceeding with the development the subject of the 2008 Consent. In this context, Mr Mellowes of Woolworths floated the idea of moving the supermarket up to the Botany Road (ground) level. There was also discussion about Woolworths’ rights under the “termination clause” (i.e. cl 9), and Gazcorp informed Woolworths on 3 June 2010 that the “DA is valid until 2014”.

Despite Gazcorp’s stated position about not proceeding with the development the subject of the 2008 Consent, Woolworths did not thereafter call upon Gazcorp to commence works or suggest that its obligations under the Agreement required it to do so. Woolworths did, however, reserve its rights in that respect by means of Mr Madden’s letter of 5 October 2010. That letter referred specifically to cl 9 of the Agreement, but the reservation of rights extended beyond it to all rights at law, including to recover damages “if the Landlord’s Works have not reached Practical Completion by 1 October 2011”. I should add that for a short time in April/May 2011, Woolworths maintained a caveat over the titles to the site claiming an interest as lessee pursuant to the Agreement.

By June 2011, discussions had commenced in relation to plans for a supermarket on the ground floor. In the communications that followed, Mr Carroll spoke of Woolworths’ desire to “recut the deal”.

In September 2011 Woolworths sought Gazcorp’s agreement to a 3 year extension of the Date for Practical Completion, and hence the Termination Date, under the Agreement. No consensus was reached about any extension. The parties may be taken to have proceeded on the basis that the Termination Date remained 1 October 2011 and that Woolworths’ rights under cl 9 would therefore expire on 1 October 2012.

Mr Madden’s letter of 18 October 2011 noted that the Landlord’s Works remained incomplete, and again referred to Woolworths’ rights under cl 9. Mr Madden again reserved Woolworths’ rights under the Agreement and at law in respect of Gazcorp’s failure to complete the Landlord’s Works in accordance with the Agreement. There was a reservation of rights even if Mr Carroll, no doubt in the perceived interests of Woolworths in the ongoing commercial discussions with Gazcorp, described the letter as merely “mechanical” and something that “should not cause any distress”.

The discussions between the parties in relation to various plans for the site continued into 2012 and throughout that year. On 13 April 2012 Mr Carroll seemed to express some frustration with progress, stating in his email to Mr Gazal that “we will never in a million years get this signed off”. He again referred to the existence of the signed Agreement. At about that time, the impending introduction of the 2012 LEP appears to have introduced an element of urgency into the discussions, at least from Mr Carroll’s point of view. In any case, it is clear that the parties thereafter worked closely together in order to facilitate the lodgement of the 2012 Development Application on about 6 July 2012.

That application was for a development involving a three-storey building with two basement levels for car parking, with a supermarket on the ground level. It is plainly a development that differs significantly from the development the subject of the 2008 Consent. Approval was given on 30 November 2012, shortly prior to the commencement of the 2012 LEP. In the meantime, any rights Woolworths may have had under cl 9 of the Agreement would have expired on 1 October 2012.

It can be seen that from December 2012 all of the dealings between the parties were directed towards advancing a development in accordance with, or at least based on, the 2012 Consent. There was certainly no call for the commencement of the development the subject of the 2008 Consent. The parties were aware that this consent would lapse in February 2014. (A file note discovered by Woolworths, said to be dated 3 May 2011, records that the DA lapses on 17 February 2014.)

Further, Mr Carroll’s conduct towards Gazcorp from December 2012 is consistent with and in at least one respect suggestive of a recognition on the part of Woolworths that a new deal would be needed in order for Woolworths to “secure the site”. He used that expression in his email of 17 April 2013. Earlier, in December 2012, Mr Carroll evidently wanted to discuss commercial terms with Mr Gazal. Mr Carroll suggested that he might “commence with a Letter of Offer”.

As the discussions between the parties continued throughout 2013 (largely directed towards plans for the site rather than commercial terms), it remained the position that there were no calls for the commencement of the development the subject of the 2008 Consent. The parties, each of whom was aware that the 2008 Consent was to lapse in February 2014, instead remained concerned with a development in accordance with, or based upon, the 2012 Consent. An application to modify that consent in relation to the proposed supermarket tenancy was approved in April 2013.

By about the beginning of 2014 the parties must have realised, or would have realised had they turned their minds to it, that as a practical matter there was no realistic possibility that works would commence in relation to the 2008 Consent so as to prevent its lapse in February 2014.

In circumstances where:

The conduct of the parties, viewed objectively in the light of the Agreement and in particular the rights and obligations of the parties concerning the carrying out of the Landlord’s Works, reveals that there was a lengthy period of time, from about April 2010 until about January 2014, during which Gazcorp made no attempt to proceed with the Landlord’s Works and indeed made it known that it had no intention of doing so, and Woolworths made no call upon Gazcorp to do so. The carrying out of the Landlord’s Works is of course a most important aspect of the Agreement. Moreover, for a lengthy period (from about June 2011), all of the dealings between the parties were directed towards advancing a development that differs significantly from the development the subject of the 2008 Consent. Throughout this period, each party stood by until a point was reached where it must have been known that the Agreement could not in any event be performed because the 2008 Consent was about to lapse.

It does not seem to me to matter what beliefs the parties held during that period as to whether Gazcorp was obliged to carry out the Landlord’s Works, or was not so obliged because, for example, best endeavours would not require it. Either way, the conduct objectively demonstrates that over a long period Gazcorp took no steps towards performance of the Agreement and Woolworths made no calls upon Gazcorp to perform. It is true that in October 2010 and October 2011, Woolworths reserved its rights in relation to any failure by Gazcorp to carry out the Landlord’s Works. However, this is of little moment as any rights under cl 9 would have expired on 1 October 2012, and any rights arising from a breach by Gazcorp concerning the Landlord’s Works would have accrued to Woolworths so as to survive a discharge of the Agreement through abandonment.

It remains the case that a lengthy period of time elapsed during which neither party manifested any intention to perform the Agreement. In my opinion, the inference should be drawn that the parties mutually agreed to discharge the Agreement. By no later than about January 2014 each party would be reasonably entitled to assume that the Agreement was “off altogether”. It is not necessary that the parties communicate in express terms that the Agreement had come to an end, or expressly state an intention to abandon the Agreement.

I should add that I do not think that anything in the later dealings between the parties, including their dealings in 2016, suggests that a different conclusion should be reached. In that regard, Mr Gazal’s evidence about being “not quite ready to walk away” until he had obtained the opinion of a Senior Counsel, does not take the matter any further. The cross-examination did not explore precisely what was meant by walking away. Mr Gazal may have been referring to negotiations with Woolworths as opposed to a binding agreement with Woolworths. In any event, the mere fact that Mr Gazal was not completely certain that the Agreement had come to an end does not amount to an admission that the Agreement had not been mutually abandoned. Also, I note that Mr Gazal had stated in his 5 February 2016 email to Mr Murray of Coles that Gazcorp was “firmly of the belief” that the Agreement “is now void”. It was not put to Mr Gazal that he did not actually hold such a belief at that time.

I should also say something about the submissions of Woolworths referred to above at [190]. It is correct that over many years the parties were more or less continuously working together on plans for the site, and it appears that Gazcorp kept Woolworths informed about the associated applications that were made to the Council. It is also correct that the parties were from time to time involved in negotiating commercial terms in the context of a development of the site in accordance with the plans then under discussion. These negotiations were not explicitly undertaken on the basis that they were without prejudice to the existing Agreement. Woolworths, through Mr Madden’s letters in October 2010 and October 2011, certainly reserved its rights under the Agreement, and there were statements made by Woolworths (in particular by Mr Carroll) that referred to the existence of the Agreement. The discussions about possible claims by Woolworths under cl 9 of the Agreement, the lodgement of the caveat in April 2011, and the communications between Mr Gazal and Mr Carroll on 2 May 2011 and 3 May 2011 were also clearly consistent with a recognition that the Agreement remained on foot. However, conduct of that nature did not continue after 2011, or at least after the expiry of Woolworths’ cl 9 rights on 1 October 2012. Further, I do not think it can be said that Woolworths did not exercise any rights of termination because it wanted to have the Agreement performed. Woolworths did not point to any evidence that might support that proposition. Even if Woolworths had decided not to exercise a right of termination for the reason that it wanted the Agreement performed, this was not communicated to Gazcorp.

I have reached my conclusion concerning mutual abandonment of the Agreement based upon an objective assessment of the conduct of the parties, including the conduct of the parties in relation to each other after January 2014. I have not taken into account the statements contained in numerous internal Woolworths documents (for a period from about February 2014) to the effect that no agreement for lease was in place in respect of Gazcorp’s site at Green Square.

The conduct of the parties towards each other after January 2014, at least until early 2016, is in my view consistent with an acceptance that the Agreement was no longer on foot. No statements were made in that period to the effect that the Agreement remained in existence. The ongoing discussions about the Green Square site, following the lapse of the 2008 Consent, were directed towards reaching a new agreement based upon different plans. Mr Carroll, in his email to Mr Gazal on 16 February 2015 spoke of being very keen to “bed down” a deal in relation to the site, and expressed some concern about being “left behind if someone gets a rezone on another site”. Shortly before his departure from Woolworths, Mr Carroll told Mr Gazal that he regretted that he would not be around “to finalise Green Square with you”.

The conduct of the parties in and from February 2016 is of little relevance to the question whether the parties had abandoned the Agreement some two years earlier. In their dealings from 2012, neither party expressly stated that the Agreement was, or was not, on foot. That situation ended on 3 February 2016 when Woolworths sent its letter of offer to Gazcorp. The letter referred to a “surrender” of the “existing Agreement for Lease”. The assertion of an existing agreement was not accepted by Gazcorp, which contended that no binding agreement had been in existence “for some time”. The parties were thus in dispute on the issue. The making of these rival assertions, which have been maintained ever since, really sheds no useful light upon the character of the conduct of the parties in the period up to early 2014. Woolworths was keen to characterise Gazcorp’s letter of 29 April 2016 as a change of position on its part. It is true that the letter is Gazcorp’s first express statement that the Agreement had come to an end. However, it is also true that Woolworths’ letter of offer of 3 February 2016 was its first express statement since 2011 that the Agreement remained on foot.

In case my conclusion concerning mutual abandonment of the Agreement is incorrect, I turn now to consider the question of frustration of the Agreement.

Gazcorp’s submissions on frustration are summarised above at [179]. The starting point is the proposition that the parties entered into the Agreement on the common assumption that Gazcorp would continue to be able to lawfully carry out the Landlord’s Works. I accept that is so. The terms of the Agreement obliged Gazcorp to cause the Landlord’s Works to be carried out. The Landlord’s Works essentially means the works required to complete the construction of the Centre. The Agreement provided that Gazcorp must cause the Landlord’s Works to be carried out in accordance with all laws and consents, and complying with the requirements of all government authorities (see cl 2.1(b)). By cl 14.1, Gazcorp was required to use its best endeavours to obtain (by the Approval Date) all necessary approvals and consents in order to carry out the Landlord’s Works. When the Agreement was entered into, Gazcorp had already obtained the 2008 Consent. It was plainly envisaged that the construction of the Centre would be carried out and completed in a lawful manner.

Indeed, Woolworths did not explicitly take issue with the proposition that there was a common assumption that Gazcorp would continue to be able to lawfully carry out the Landlord’s Works. That is not surprising. It could hardly be said that the parties contemplated that Gazcorp could fulfill its obligations to construct the Centre by building an unlawful structure on the site and granting a lease of part of that structure to Woolworths.

There was also no explicit challenge to Gazcorp’s second proposition, namely, that under the Agreement neither party took responsibility for the continuation of a state of affairs where Gazcorp was able to lawfully carry out the Landlord’s Works. I accept this proposition too. Whilst Gazcorp is required to seek the necessary approvals, and use its best endeavours to obtain them, the provisions of the Agreement do not address a situation where, approvals having been obtained, the carrying out of the Landlord’s Works later ceases to be lawful. Neither party warranted that the Landlord’s Works would be able to be lawfully carried out, or would continue to be able to be lawfully carried out; and neither party became liable under the Agreement if those circumstances did not exist. Further, I do not think that the parties should be taken to have foreseen circumstances that would cause the carrying out of the Landlord’s Works to become unlawful. Where the 2008 Consent had been obtained, they should not be taken to have foreseen such circumstances as likely to occur or even as a real possibility (see oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (supra) at [74]). The degree of foreseeability of such circumstances arising could not be described as very substantial. For these reasons, it cannot be said that either party assumed responsibility under the Agreement for the continuation of a state of affairs where Gazcorp was able to lawfully carry out the Landlord’s Works.

Gazcorp’s third proposition, that the common assumption proved to be mistaken, is also made out. The carrying out of the Landlord’s Works requires construction of the Centre. As I have said, the Centre is a shopping centre essentially as envisaged by the 2008 Consent. It is clear that once the 2008 Consent lapsed on 17 February 2014, it was no longer lawful to construct the Centre.

Gazcorp dealt with this issue in paragraphs 47 to 49 of its Statement of Claim. Paragraph 47 refers to the lapsing of the 2008 Consent. In paragraph 48, Gazcorp alleged that it was not lawfully possible for it to obtain Approvals in relation to the Landlord’s Works as specified in the Agreement as at the date of entry. That allegation rests in part upon the effect of cl 7.23(3) of the 2012 LEP. Gazcorp then alleged in paragraph 49 that by reason of the matters in paragraphs 47 and 48, it is not lawfully entitled to carry out the Landlord’s Works as specified in the Agreement. In its Defence, in answer to paragraph 48, Woolworths admitted that Gazcorp is not lawfully entitled to carry out the Landlord’s Works as specified in the Plans and Specifications in their form at the time of entry into the Agreement. In answer to paragraph 49, Woolworths repeated that admission. Woolworths went on to say, however, that Gazcorp is able to lawfully grant a lease to it “for a Woolworths supermarket at the Centre in accordance with the Approved Plans”. The Approved Plans referred to are the plans in relation to the modification of the 2012 Consent that was approved on 14 October 2016. Woolworths otherwise denied paragraph 49.

It therefore seems that Woolworths accepts that it is no longer lawful to construct a shopping centre on the site that accords with the 2008 Consent, but says that it would be lawful to construct a shopping centre on the site that accords with the 2012 Consent (as modified). Woolworths then submitted that constructing the shopping centre the subject of the 2012 Consent (which provides for a full line Woolworths supermarket on the ground level and two levels of basement parking) would allow the commercial purpose of the Agreement to be fulfilled. Accordingly, it was submitted that the lapse of the 2008 Consent did not have the result that the performance called for under the Agreement was rendered radically different from that which was undertaken under the Agreement.

I am unable to accept that submission. The commercial purpose asserted by Woolworths is in fact contrary to the terms of the Agreement. The achievement of a full-line supermarket of about 3,800m2 in area in a building on the site, and for associated car parking below, may well have been a commercial objective of Woolworths in entering into the Agreement. However, the Agreement provided for a particular shopping centre to be constructed, with a particular part of that shopping centre to be the subject of a lease to Woolworths for a supermarket. As I have sought to explain, the terms of the Agreement provide for the construction of a shopping centre essentially as envisaged by the 2008 Consent. Gazcorp’s obligations in respect of the Landlord’s Works were obligations in respect of the works required to complete construction of such a shopping centre (referred to in the Agreement as “the Centre”). Gazcorp was obliged to construct that Centre, and grant a lease to Woolworths over a particular part of that Centre. Whilst the Agreement allowed for some changes to be made to the Landlord’s Works, it did not provide for significant differences such as the deletion of levels, or provision for a supermarket on a different level. Changes of that character would need to be the subject of a further agreement (whether a fresh agreement or a variation of the Agreement).

The 2012 Consent (as modified) does not permit the construction of the Centre. Since the lapse of the 2008 Consent the carrying out of the Landlord’s Works under the Agreement has been, and remains, unlawful. In my opinion, to carry out the Landlord’s Works in an unlawful fashion would amount to performance of Gazcorp’s obligations that is radically different from that which was undertaken under the Agreement. It would be antithetical to the obligation that Gazcorp carry out the works in accordance with all laws and consents.

Woolworths submitted that it was not enough that an intended means of performance is no longer available if other means may be employed consistently with the contract. Here, the intended means of performance in relation to the Landlord’s Works has become unlawful. Moreover, there is no lawful manner in which the Landlord’s Works can be undertaken. Construction of a shopping centre in accordance with the 2012 Consent (as modified) is not another means of performance that could be employed consistently with the contract. It is no answer to say that it was foreseeable when the Agreement was made that the plans for the Centre could change. Absent a further agreement, there was only limited room under the Agreement for changes to the Landlord’s Works. The Agreement is not “wide enough” to apply to the situation that arose when the 2008 Consent lapsed.

Woolworths also referred to the fact that under the Agreement there was no “sunset date” for completion of construction. That is true, but it should not be overlooked that the Agreement provided for the seeking of all necessary approvals, and gave Woolworths the right to terminate (under cl 14.2) if the approvals were not obtained or were not satisfactory to Woolworths by the Approval Date (initially 31 July 2008). The Agreement does not contemplate a situation where approvals are obtained but later lapse, with the consequence that the carrying out of the works is no longer lawful.

In summary, when the 2008 Consent lapsed in February 2014 it was no longer possible for Gazcorp to lawfully carry out the Landlord’s Works under the Agreement. The lapsing of the Consent was an event that brought to an end a state of affairs the parties had assumed would continue to exist during the life of the contract. Neither party took contractual responsibility for the continuation of that state of affairs. The common assumption proved to be mistaken, and this meant that performance of Gazcorp’s obligations in respect of the Landlord’s Works was no longer possible. Gazcorp was required to carry out the works in a lawful manner. To carry them out in an unlawful manner would be radically different from the manner provided for in the Agreement.

Accordingly, it is my opinion that if the Agreement had not already been mutually abandoned, it was terminated by frustration on 17 February 2014 when the 2008 Consent lapsed.

Reference has already been made to the existence of numerous internal Woolworths documents that contained statements to the effect that no agreement for lease was in place in respect of Gazcorp’s site at Green Square. These documents were mostly brought into existence in a period from about February 2014 to about November 2015. The statements in these documents no doubt reflect views held by Woolworths personnel who were involved, either directly or indirectly, in the dealings with Gazcorp. However, neither the documents nor the statements themselves were disclosed to Gazcorp. In these circumstances the evidence would not be relevant to the question of mutual abandonment unless, perhaps, the statements were regarded as admissions by Woolworths. Even then, I do not think that the evidence would be of much assistance in the resolution of the question. As it happens, I have been able to reach my conclusion as to mutual abandonment without placing any reliance upon this evidence.

I should record, however, that I am satisfied that both of the witnesses called by Woolworths, Mr Kemmler (Director of Property) and Mr Finlay (Head of Property, with responsibility for NSW supermarkets between August 2015 and December 2016) read some of these documents around the times they were brought into existence, and would have appreciated that the documents contained statements to the effect that no agreement for lease was in place. In Mr Kemmler’s case, I am satisfied that he would have had that appreciation from at least the “heat sheet” attached to the email dated 7 August 2015 he received from Mr Macmillan. In Mr Finlay’s case, I am satisfied that he would have had that appreciation from at least his review of that “heat sheet” prior to it being forwarded to Mr Kemmler. Both witnesses appeared to be at pains to distance themselves from these types of documents and the statements recorded in them, even when it was plain that they received the documents and had every reason to read them as part of the proper performance of their roles. The evidence given by both Mr Kemmler and Mr Finlay in this regard was in my view evasive and less than satisfactory.

In these circumstances, it is difficult to accept the evidence, given by each of them, to the effect that they always understood that the agreement for lease was binding. However, as this matter of subjective belief has little or no bearing on the determination of the issues in dispute, and as the understanding of the legal position may depend upon matters quite apart from the contents of these documents, I am not prepared to find, as I was invited to do by Gazcorp, that either Mr Kemmler or Mr Finlay gave deliberately false evidence on this matter.

Lastly, there remains the question of the admissibility of the approval given by the Council on 27 August 2019 to a further modification of the 2012 Consent. The document was tendered by Woolworths and was said to be relevant to show what development may be carried out on the Green Square site in accordance with the 2012 Consent (as modified). Woolworths’ Defence to paragraph 49 of the Statement of Claim refers only to the modification that was approved on 14 October 2016. Strictly, the modification approved on 27 August 2019 is beyond the pleaded defence, but it is not said by Woolworths to be qualitatively different to the earlier modifications. On that basis, I would admit the document for the purpose of showing that the position as it arises from the 14 October 2016 modification remains essentially the same today.

I have found that the Agreement, as varied in September 2008, was terminated by frustration on 20 March 2009 when the Land and Environment Court refused the 2008 Development Application. If that is wrong, the Agreement was terminated by mutual abandonment no later than about the beginning of 2014. If that is incorrect, the Agreement was terminated by frustration on 17 February 2014 when the 2008 Consent lapsed. In all events, the Agreement (whether as varied or as executed) is no longer on foot. A declaration to that effect should be made.

It would also be appropriate that the caveat lodged by Woolworths on 3 February 2017 (AM129767) be removed forthwith. The caveat itself is not in evidence but it is clear from a letter sent by Woolworths at the time of its lodgement that the interest claimed in the caveat is based upon the existence of the Agreement. The caveat cannot be sustained in light of the above conclusions. Moreover, it is not open to Woolworths to assert such an interest in the land in circumstances where it seeks no relief in these proceedings, including relief in the nature of specific performance of any agreement for lease.

As to costs, there is no apparent reason why costs should not follow the event. However, Gazcorp has indicated that it wishes to heard on costs, regardless of the outcome, and costs have been reserved in respect of Woolworths’ Cross-Claim which was discontinued on the first day of the hearing. Accordingly, directions will be made for the parties to file and serve brief written submissions and any evidence on the question of costs, with a view to that matter being dealt with on the papers.