Supreme Court New South Wales

• Medium Neutral Citation: Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380
• Hearing dates: Thursday, 22 August 2013
• Decision date: 22 August 2013
• Jurisdiction: Equity Division
• Before: White J

Decision

Amended cross-claim dismissed; defendant pay the plaintiff's costs of the proceedings, including the cross-claim.

• Catchwords: LANDLORD AND TENANT - leases and tenancy agreements - construction and interpretation - lessee operated hotel on leased premises - whether lessor obliged to consent to lessee's application to Council for extended trading hours - appropriate material to which regard can be had in construing terms of lease - meaning of expression "proper business hours" - implied terms of co-operation and non-derogation from grant - whether implied terms ousted by clause excluding implication of terms in respect of pre-contractual promises and representations - declaration - whether application for declaration concerns purely hypothetical dispute
• Legislation Cited: Liquor Act 1982
• Cases Cited: University of New South Wales v Moorhouse (1975) 133 CLR 1; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; Wickstead v Browne (1992) 30 NSWLR 1; CF & SP Pty Ltd v FAI General Insurance Co Limited (Bryson J, Supreme Court of New South Wales, 17 December 1998, unreported BC 9806746); Burns Philp Hardware Limited v Howard Chia Pty Ltd (1987) 8 NSWLR 642; Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64; Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596
• Category: Principal judgment
• Parties: Dogrow Pty Ltd (Plaintiff); Teakdale Pty Ltd (Defendant)
• Representation: Counsel: J Taylor (Plaintiff); D L Warren (Defendant); Solicitors: JDK Legal (Plaintiff)
• File Number(s): 2013/117017

Judgment

1 HIS HONOUR: These proceedings were commenced by summons filed in circumstances of some urgency on 16 April 2013.

2 The plaintiff sought an order that the defendant sign and return to it an application to modify a development consent that the plaintiff sought to lodge with the Sydney City Council. The defendant's consent to the lodgement of that application was required. The application sought the continuation for a further five years of 24-hour trading at premises known as Three Wise Monkeys in George Street, Sydney.

3 The plaintiff is the lessee and the defendant is the lessor of a licensed hotel under that name. The lease was initially entered into on 14 September 2000 for a period of ten years with an option for renewal of a further period of ten years and with a further option for another period of five years. The first option for renewal has been exercised and the current lease extends to 13 September 2020 with a further five-year option available after that. The issue raised by the plaintiff's summons was whether the defendant lessor was required to give its consent to the making of a development application that allows the plaintiff lessee to trade for 24 hours a day, seven days a week.

4 The relevant provisions of the lease that bear on that question are the clauses 6.01, 6.13, 13.05 and 13.06. Those clauses provide as follows:

"6.01 Permitted Use of the Premises

The Lessee shall not without the written consent of the Lessor use or occupy the premises otherwise than for a Licenced [sic] Hotel and will ensure that the conduct and management of the premises shall be at all times be [sic] of such a standard and will during all proper business hours keep the premises open for business and will not in any case use the premise for manufacturing.

...

6.13 Licences

The Lessee shall keep on foot all licences and permits required for the carrying on of the business carried on by the lessee in or upon the demised premises.

...

13.05 Consent or Approval of Lessor

In any case where pursuant to these presents the doing or executing of any act matter or thing by the Lessee is dependent upon the consent or approval of the Lessor such consent or approval shall not be unreasonably withheld or delayed unless otherwise herein provided.

13.06 No Covenants or Terms Other than Comprised in Lease

The covenants provisions terms and agreements contained herein expressly or by statutory implication comprise the whole of the agreement between the parties and the parties expressly agree and declare that no further or other covenants agreements provision or terms whether in respect of the demised premises or otherwise shall be deemed to be implied herein or to arise between the parties by way of collateral or other agreement by reason of any promise representation warranty or undertaking given or made by either party to the other on or prior to the execution hereof and the existence of any such implication or collateral or other agreement is hereby negatived."

5 Also relevant to the construction of clause 6.01 and the meaning of "all proper business hours" is a definition of "lessor's licence" in clause 1.11 of the lease. It does not appear that the lease uses the expression, "lessor's licence". Nonetheless, it was defined in the lease as meaning the lessor's liquor licence number LIQH400102534. That licence was an hotelier's licence given under the now repealed Liquor Act 1982. It authorises the person named in the licence to sell and dispose of liquor for licensed premises in King and George Street, Sydney. (That is, not the site of the present hotel.) It licensed the hotelier to trade for extended trading hours being 24 hours a day, midnight to midnight, from Monday to Saturday; and 5.00am to midnight on Sunday.

6 The fact that the hotelier's licence provides for such extended trading hours did not in itself authorise the licensee of the hotel that has been established on the subject premises to trade during those hours. Development approval for that trading was required. An application for such development approval requires the consent of the lessor.

7 The lease was entered into pursuant to an agreement for lease made on 1 July 1998. Under that agreement the defendant had agreed to grant, and the plaintiff had agreed to accept, a lease of the George Street premises as a licensed hotel on terms that were set out in the agreement. The grant of the lease was conditional upon the lessor's obtaining development approval from the Sydney City Council for the premises to be licensed with an hotelier's licence under the Liquor Act and various other approvals. Those were obtained.

8 Neither the agreement for lease nor the lease itself contained any express term of the lease as to the hours during which the premises were to be open for trading, other than that in clause 6.01. Approval was initially obtained from the council for the premises to be able to trade from 8:00am to midnight, seven days per week, and notwithstanding the restriction of the operation of the premises to those hours, it was determined that the premises could also operate from midnight to 3.00am for seven days a week for a trial period of a year. That approval was given with effect from 22 February 1999.

9 The application for development approval lodged on 28 July 1998 had sought approval for 24-hour trading. That application was consented to by the lessor. From 23 January 2003 the council granted approval for 24 hour trading. The initial approval was for a period of five years from 23 January 2003. That approval was extended in January 2008 for a further period of five years. It can be inferred (and it was not disputed) that the defendant consented to the applications for development approval for 24 hour trading for those periods. That approval expired on 23 January 2013. The defendant refused to consent to a new development application to continue the permission for extended trading hours.

10 The plaintiff came under pressure from the council, which threatened to close its business if development consent to extended trading hours was not obtained by the plaintiff. The plaintiff needed the defendant's consent to the making of the application to that approval. The defendant provided no reason for its refusal to give its consent.

11 There were other disputes between the parties at that time. There was a dispute concerning poker machine entitlements. Moreover, when the defendant's consent to the making of the development application was sought, the defendant responded through its solicitors by saying that it was not inclined to consent to the proposal in its present form, but advised that it was prepared to enter into negotiations for a variation of the lease which would see the gross rent increased to what the defendant believed to be a market rent. It can be inferred that the defendant refused its consent, perhaps as a negotiating lever in an endeavour to resolve the dispute concerning poker machine entitlements, or sought to achieve an increased rent by obtaining the plaintiff's concession to pay such rent lest it be precluded from being able to trade as it had traded for a decade. The evidence is that the plaintiff needs to trade for that period to maximise the revenue and profits of its business.

12 It is in these circumstances that the plaintiff filed its summons seeking relief in the nature of a mandatory injunction. That application was initially resolved by the parties' entering into a deed, pursuant to which the defendant signed the necessary application form granting its consent to the development application for the continuation of extended trading hours for the premises. It did so on terms that this would be without prejudice to its right to contest in these proceedings its obligation to provide that consent. Clauses 2.1 and 2.2 of the deed provide:

"2.1 Teakdale agrees to grant its consent to the Extended Trading Hours Application in order to preserve Extended Trading Hours but such consent shall be without prejudice to Teakdale's rights to contest in the Proceedings its obligation to consent provided Teakdale complies with clause 2.2(a). The consent is subject to the terms and conditions of this Deed.

2.2 The Parties agree that:

(a) Teakdale may, within 10 days of the date of this Deed, file a Cross-Claim in the Proceedings or commence separate proceedings seeking a determination of whether Teakdale is obliged to consent to the Extended Trading Hours Application;

(b) If on final determination (including determination of any appeal) of any Cross-Claim or proceedings referred to in (a) above the Court finds that Teakdale is not obliged to consent to the Extended Trading Hours Application:

(i) Teakdale may within 21 days serve on Dogrow a written notice under this clause;

(ii) On receipt of such notice, Dogrow must within 21 days do all things and sign all documents reasonably necessary to make a further s 96 Modification Application to the Council to modify, surrender, relinquish and/or have the Council cancel the Extended Trading Hours for the Premises."

13 On 29 April 2013 the defendant filed a cross-summons seeking the following substantive relief:

"1. A Declaration that the Cross Claimant is not obliged, or required, under the terms of the lease dated 3 November, 2011 between the Cross Claimant as lessor and the Cross Defendant as lessee of the premises described in the lease as being the whole of the land in Folio Identifier 1/87238, ('the Lease') to sign any application to modify consent, or to consent to any application, made by the Cross Defendant to the Council of the City of Sydney the effect of which is to extend the trading hours of the hotel described as The Three Wise Monkeys Hotel ('the Hotel') which hotel trades on the premises.

2. A Declaration that under the terms of the lease the Cross Claimant has an unfettered discretion whether to consent to and/or sign any application made by the Cross Defendant to the Council of the City of Sydney, the consent authority for such application, to extend the trading hours of the Hotel.

3. Alternatively, a declaration that under the terms of the Lease the Cross Claimant is obliged not to unreasonably withhold consent in signing any application made by the Cross Defendant to the Council of the City of Sydney in the nature of the application as set out in paragraph 1 hereof.

4. A Declaration that the Cross Claimant has not unreasonably withheld consent."

14 The declaration sought in paragraph 1 of the cross-summons was directed to the issue of whether the defendant is obliged or required under the terms of the lease to sign any application to modify a consent, or to consent to any application made by the plaintiff to the council for the extension of trading hours at the hotel. It did not address the question whether the defendant had been obliged to consent to the application that was submitted to it by the plaintiff. That application had been submitted on or about 3 April 2013.

15 Likewise, paragraph 2 of the cross-summons raised an abstract issue as to whether the defendant has an unfettered discretion whether or not to consent to any such applications for the extension of trading hours at the hotel. Bearing in mind that the lease has another seven years to run and potentially another 12 years to run, those declarations appear to be directed to establishing the future obligations of the defendant lessor or the future entitlement of the defendant lessor to give or withhold such consents.

16 It would not be appropriate to make declarations of that kind on an hypothetical basis without the context of any facts on which a dispute about the giving or withholding of consent might arise. It may be that no such application for consent might be made again in the future.

17 In University of New South Wales v Moorhouse (1975) 133 CLR 1, Gibbs J said:

"As a general rule, the power to make a declaration will not be exercised when the court is called upon to answer a question that is purely hypothetical: see Re Barnato, decd; Joel v Sanges [1949] Ch 258 at 270; [1949] 1 All ER 515. In accordance with that principle, the Court of Appeal in Odhams Press Ltd v London and Provincial Sporting News Agency (1929) Ltd [1936] Ch 357; [1936] 1 All ER 217, refused to make a declaration that the plaintiffs, who were unable to prove any specific infringement of copyright, were joint owners of the copyright in compilations of starting prices or betting odds made by their representatives. Lord Wright MR said (Ch at 363-4; All ER at 222-3):

'As to any further compilations of the same character which may come into existence, it would be most improper for this Court to make any general declaration as to whether they would or would not be the proper subjects of copyright. In order to bring such an issue before the Court there must be specific documents, the character of which can be established, so that the Court can determine whether or not they are the subjects of literary copyright, and appropriate evidence should be given to show that there has been an infringement of that copyright.'

Many other examples may be found in the books of cases in which a declaration has been refused because it was claimed in relation to circumstances that had not occurred and might never happen."

18 In the same case, Jacobs J said at 24:

"A declaration of right based on facts found in the particular case can certainly be made, but it is not permissible to make a declaration of right which amounts to a conclusion of fact from a hypothetical or assumed state of facts and thereby to enunciate or declare a rule of apparently general application as though it were a declaration of applicable law. A declaration of right based on hypothetical or assumed facts may be made when the assumed facts can be, certainly and exhaustively stated and when the conclusion flowing therefrom is truly a question of law but not when it is itself a conclusion of fact."

(See also Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582.)

19 As Kirby P said in a different context in Wickstead v Browne (1992) 30 NSWLR 1 at 5:

"... it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle."

20 The first and second declaration sought in the cross-claim offend those principles. It is not possible to state certainly and exhaustively the facts that would be relevant to the determination of the defendant's rights or obligations in relation to the giving or withholding of consent to applications to the council for the extension of trading hours in future cases. As framed, those questions are hypothetical.

21 When the hearing of this matter commenced, this difficulty was raised with counsel for the defendant, following which the defendant sought and was granted leave to amend the cross-claim to seek the following further relief.

"2A. A Declaration that Teakdale P/L is or was not obliged to consent to the Extended Trading Hours application submitted to it by Dogrow Pty Ltd on or about 3rd April 2013.

2B. An order that, in the event that Teakdale within 21 days of the Declaration in 2A being made serves on Dogrow a written notice under clause 2.2(b) of the Deed between Teakdale P/L and Dogrow P/L dated 19 April 2013, Dogrow P/L will within 21 days of service of such notice do all things and sign all documents reasonably necessaryto make a further s 96 Modification Application to the Council of the City of Sydney to modify surrender relinquish and/or cancel the approval for Extended Trading Hours for the premises 553-555 George St Sydney."

22 It is those claims for relief that raise the real issue on the application.

23 The first question concerns clause 13.05. The defendant submitted partly by reference to the reasoning of Bryson J (as his Honour then was) in CF & SP Pty Ltd v FAI General Insurance Co Limited (Bryson J, Supreme Court of New South Wales, 17 December 1998, unreported BC 9806746) that the act of the plaintiff lessee in applying for development consent was not done "pursuant to these presents"; that is, so to say, it was a matter which was extraneous to the lease, or was extraneous to anything that the lessee was required to do under the lease.

24 The defendant also submitted that the trading by the lessee for extended hours was not dependent on the consent or approval of the defendant lessor, but rather it was dependent on the consent of the Council.

25 The operation of clause 13.05 depends on the proper construction of Clause 6.01 and 6.13. Pursuant to Clause 6.01 the plaintiff lessee is obliged to keep the premises open for business during "all proper business hours".

26 That expression is not defined. Counsel for the lessee has referred to correspondence and discussions between the parties prior to entering into the lease from which it is clear that the parties contemplated that the lessee would trade for 24 hours a day if approval for that course were obtained from the Council.

27 However I do not think that it is open to have regard to those materials in construing clause 6.01 of the lease. (See Burns Philp Hardware Limited v Howard Chia Pty Ltd (1987) 8 NSWLR 642 at 655; and Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [152]-[160] and [166].) In the latter case, Campbell JA said that the surrounding circumstances that could be used as an aid to construction of a registered lease were limited to circumstances that one could know without evidence from outside the terms of the document itself. In Burns Philp Hardware v Howard Chia Pty Ltd, Priestley JA had said that in the case of a long term lease of Torrens title land where the lease was capable of assignment, only the most obvious extrinsic circumstances could be had regard to in order to construe the lease. That is because the lease should mean the same thing between the original lessor and the original lessee and between assignees of the term or the reversion.

28 Nonetheless, I do consider that in construing the expression "proper business hours" in clause 6.01, regard can be had to the terms of the lessor's liquor lease, number 102534, which is referred to in the lease. It contemplates that there could be 24-hour trading for six days of the week. Nonetheless, I do not consider that that document governs the meaning of the expression in clause 6.01. In my view what are proper business hours within the meaning of that clause is a concept that can have an ambulatory operation, depending upon the circumstances as they exist from time to time, including what business hours from time to time are kept for like premises, and how the lessee has in fact traded from time to time. Of course, if the lessee could not lawfully trade for any period, that period could not fall within the concept of proper business hours.

29 But in the circumstances as they existed in 2013 and 2012, the lessee was in fact trading lawfully 24 hours per day. It could not be said that 24-hour trading was not the conduct of the business during proper business hours and the evidence is that for similar establishments in the vicinity of the plaintiff's establishment, 24-hour trading is normal.

30 Clause 6.13 requires the plaintiff lessee to keep all licences and permits required for the carrying on of the business carried on by it in the premises on foot. The business being carried on by the lessee from 2003 to 2013 was the hotel business carried on 24 hours per day. For that business to continue to be carried on, the lessee needed the consent of the Sydney City Council. In my view such consent was a permit within the meaning of clause 6.13 that the lessee was required to keep on foot through the combined operation of 6.01 and 6.13. I consider that the plaintiff lessee was required to attempt to continue to have the benefit of the approval of extended trading hours for which it needed the Council's consent to a development application.

31 The obtaining of that consent was dependent on the defendant lessor giving its consent or approval to the making of the development application. I do not accept the submission of counsel for the defendant that clause 13.05 applies where, and only where, the lessor's consent is the only thing required but does not apply if the lessor's consent is one of a number of requirements.

32 The fact that extended trading required the consent of the Council does not mean that both keeping the business open pursuant to clause 6.01 and keeping the permits on foot under clause 6.13 was not dependent on the lessor's consent. There is no warrant for reading the words "is dependent" in clause 13.05 as if they meant "is solely dependent".

33 Having regard to the lessee's obligation under clauses 6.01 and 6.13, steps for which the lessor's consent was required were things to be done pursuant to the lease. Those clauses distinguish this case from CF & SP Pty Ltd v FAI General Insurance Co Limited. Otherwise the circumstances of that case bear a close similarity to the present.

34 CF & SP Pty Ltd v FAI General Insurance Co Limited involved the lease of a nightclub. The hours of operation of the premises were not contractually regulated. There was no indication in the judgment of Bryson J that the lease contained a clause in the same terms as clause 6.13. The lessee applied to the Sydney City Council for development approval for extended trading hours. The landlord's consent to the application for approval was required but was withheld.

35 Clause 28 of the lease in that case was in similar terms to clause 13.05. Bryson J said of that clause that the clause applied:

"... where an act by the lessee is, pursuant to the lease ... dependent on the consent or approval of the lessor. In my view [the clause] does not deal with consents by the lessor to applications to public authorities the making of which is not provided for by the lease."

36 In contrast, in the present case, the effect of clauses 6.01 and 6.13 is that the lessee is obliged, pursuant to the lease, to make application to the public authority and the lessor's consent is required for that purpose.

37 The defendant was not entitled to withhold its consent unreasonably. The defendant made no submission to support the reasonableness of its withholding of consent.

38 In my view the attempted use of the withholding of consent to the application was unreasonable. It was an apparent attempt to extort a higher rent than that to which the lessor was entitled under the lease. Nor do I think that it was reasonable for the lessor to attempt to withhold its consent as some sort of lever concerning its dispute with the lessee concerning poker machine entitlements.

39 The plaintiff also contended that the defendant was required to consent to the application by reason of an implied term of the lease: either an implied term of co-operation, or an implied term that the lessor would not act in derogation of the grant.

40 The defendant submitted that because of clause 13.06, neither term could arise in this case. I do not agree. Clause 13.06 excludes the implication of terms, whether in respect of the demised premises or otherwise, by reason of any promise, representation, warranty or undertaking given or made by either party to the other prior to the execution of the lease; and it excludes the implication of terms that might arise between the parties by way of collateral or other agreement, by reason of any such promise, representation, warranty or undertaking.

41 The final words of the clause, negative the existence of any "such implication or collateral or other agreement". It is not every implication of a term that is excluded, but only such as might arise out of promises, representations, warranties or undertakings given prior to the execution of the lease. That is to read the words "by reason of any promise, representation etc." as qualifying both the phrase "no further or other covenants, agreements, provision or terms whether in respect of the demised premises or otherwise shall be deemed to apply herein" and those matters as may "arise between the parties by way of collateral or other agreement". In my view that is the natural reading of the clause. In the case of an ambiguity, it is the preferred reading. A term against derogation from the grant and an implied term of co-operation should only be excluded by express and clear provision.

42 This was the construction given by Bryson J to a similar clause in CF & SP Pty Ltd v FAI General Insurance Co Limited. Although construction of a particular clause of an agreement, or a lease, rarely carries any value as a precedent, nonetheless, I agree with the construction of the cognate provision made by Bryson J in that case. There is no relevant ground of distinction. In the present case the clause refers not only to "covenants and provisions" but also "terms and agreements" and although there is a superfluity of expression, there is no change in substance.

43 The question then is whether the defendant was in breach of an implied term that the lessor would not derogate from the grant. It is accepted that unless excluded such a term arises by implication of law.

44 As to the implied term of co-operation, Mason J (as his Honour then was) said in Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607:

"It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contacting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."

45 In CF & SP Pty Ltd v FAI General Insurance Co Limited, Bryson J found that the lessor's refusal to consent to the application which would permit an extension of trading hours was a breach of an implied term of co-operation and of an implied term that the lessor not derogate from its grant. His Honour said:

"The lessee's counsel relied on the law relating to the implied obligation of each party to a contract to do all that is reasonably necessary to secure performance of the contract, as stated by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 576 at 607-608. The lessee relied on the second and less easy implication where the act in question is not essential to the performance of the other party's obligation and is not fundamental to the contract, but is necessary to entitle the other contracting party (in this case the lessee) to a benefit under the contract. It is necessary to ask whether the terms of the lease leave the lessor at liberty to decide for itself whether consent should be granted or withheld, even if the consequence of the decision is to disentitle the other party to a benefit.

In my opinion there is no indication whatever in the terms of lease or the nature of the rights which it creates that the lessor is to have an opportunity to decide, for its own benefit and in its own interest, whether or not the lessee is to be able to get the approval of any public authority necessary for the lessee to do anything which is within the uses permitted by the lease. Having granted the lease and permitted the uses, the lessor cannot be able to consult and serve its own interests on the extent to which the lessee could make the permitted uses of the premises. As an extreme case this may be tested by asking whether a lessor could demand to be paid a fee for giving its consent, but the same result follows at less extreme and superficially more attractive tests such as whether the lessor can ask itself whether its commercial interests in maintaining good relations with other tenants are well served by having a nightclub open at all hours, or by having a lot of people in it. The lease shows no intention to reserve to the lessor liberty to decide such things, so its duty to co-operate is not qualified.

...

It may be that statements of law in terms of non-derogation from grants express the same underlying legal principle as is the source of an implied obligation referred to by Mason J, but in a narrower context and in an older form of expression. In my view both are applicable to the lessee's claim and their application produces an answer favourable to the lessee in both cases. All that is asked of the lessor is that it give its consent in writing, and all that it is asked to consent to are applications for approvals of the lessee's doing things which the lessee may do according to the terms of the lease, and in those circumstances the lessor may not withhold its consents. The position would be different if the subject matter were one with which the lease dealt in terms or one over which the lease gave the lessor an opportunity to grant or withhold consent. It would also be different if the application involved making some alteration to the premises which the terms of the lease do not permit the lessee to make. This case is very simple in what is required of the lessor, and in so far as some consequence adverse to the lessor's interest can be perceived, the lessor has already committed itself by granting the lease. The lessor does not have an opportunity to decide whether it is reasonable that it should have a nightclub on its premises or whether it should trade for extended hours; the lessor has already committed itself by granting the lease and the lessor is obliged to accept the judgment of the public authority."

46 In my view the present case is stronger than that dealt with by Bryson J because of the obligations imposed on the lessee by clauses 6.01 and 6.13. In the present case the lessor's consent to the development application was essential to the performance of the lessee's obligations. But I also consider, for the reasons given by Bryson J, that the defendant's refusal to consent to the development application was both a derogation from the grant and a breach of an implied obligation, that I think is manifested from the terms of the lease itself, to allow the lessee to have the benefit of trading to such hours.

47 For these reasons I refuse to make the declaration sought in paragraph 2A of the amended cross-claim.

48 No obligation on the part of the plaintiff arises under clause 2.2(b) of the deed and accordingly, the orders sought in 2B of the amended cross-claim should also be refused.

49 The plaintiff relied on additional grounds for opposing the relief sought by the amendments to the cross-claim. Counsel for the plaintiff argued that because the cross-claim filed within 10 days of the date of the deed did not seek a determination of whether the plaintiff was obliged to consent to the particular Extended Trading Hours Application, but only made such an application by the amendment filed in Court today, that no obligation could arise under clause 2.2(b), even if the defendant had been otherwise successful. Hence it was submitted that no declaration would be made because the question would be hypothetical. Consent to the extended trading hours application submitted on 3 April 2013 had been given.

50 It is unnecessary to decide that question. Nor is it necessary to deal with the case of estoppel raised by the plaintiff.

51 There remains an application in paragraph 3 of the cross-claim as originally filed by which the defendant sought a declaration that it is obliged not unreasonably to withhold consent in signing any application made by the plaintiff to the Council of the City of Sydney and the nature of the application is set out in paragraph 1 of the cross-claim.

52 I have found that in the circumstances of the present case the defendant was obliged not unreasonably to withhold its consent. I do not see any utility in making a declaration to that effect and no such declaration is sought by the plaintiff.

53 For the reasons I have given, the declaration sought in paragraph 4 of the cross-claim that the defendant has not unreasonably withheld its consent should be refused. I have concluded to the contrary. For these reasons I order that the amended cross-claim be dismissed.

54 I will hear the parties on costs.

[Counsel address on costs.]

55 In my view the defendant's conduct of the litigation does not have the delinquency that would attract an indemnity costs order. Notwithstanding the judgment of Bryson J in CF & FP Pty Ltd v FAI General Insurance Co Ltd, I do not think that the defendant was in the position where it knew or should have known that its case had no realistic prospects of success. I think there were arguable grounds for distinction.

56 That argument was not successful, and costs will follow the event, but they are to be assessed on the ordinary basis.

57 I order that the defendant pay the plaintiff's costs of the proceedings including the cross-claim.

58 The exhibits will be returned in due course.

Decision last updated: 19 September 2013