Abandonment of Contract
Commercial agreements and dealings can frequently be delayed by other events.
By parties failing to act upon or attempt to perform their separate contractual obligations, or by not expressly stating an intention to perform or be bound, a contract can be found to have been abandoned and unenforceable.
A key issue to consider in such circumstances is whether the parties showed any intention to meet or fulfill contractual obligations. Oftentimes, this issue of abandonment of contract is concurrent with issues of frustration and a wider deterioration of relations between groups.
In Woolworths Group Ltd v Gazcorp Pty Ltd [2022] NSWCA, such a situation arose.
Facts
Agreement for Lease (AFL)
On 20 February 2008, Woolworths Group Limited (Woolworths) and Gazcorp Pty Ltd (Gazcorp) entered into an AFL in relation to a proposed commercial and retail development in Green Square, Sydney.
The AFL contemplated that Gazcorp would undertake building works on the site, and that the Date for Practical Completion would be 30 April 2010.
2008 Development Consent
The development was to include premises for a supermarket on the lower ground level, and it was agreed that Woolworths would enter into a lease of those premises. Development Consent had already been obtained in relation to the development (the 2008 Development Consent).
New Development Application (DA)
In late 2007 and 2008, Woolworths and Gazcorp then discussed the prospect of including a Big W store in the Green Square development. A fresh Development Application (DA) was lodged on 2 July 2008 which reflected the inclusion of the Big W store in the development (the 2008 DA). These discussions resulted in delays to the construction program, and on 23 July 2008, Gazcorp sent a letter to Woolworths requesting that Woolworths agree to an extension of the Date for Practical Completion.
Efforts to extend dates for Completion
On 11 September 2008, Woolworths sent a letter in reply, agreeing to extend the Date for Practical Completion to 1 October 2010, subject to Gazcorp’s agreement to several further variations to the AFL. Relevantly, one of these variations was to alter the definition of the “Landlord’s Works” to be completed by Gazcorp, such that they referred to the revised building plans. In reply, Gazcorp requested that the approval date (the date by which all approvals were to be obtained in relation to the development) be further extended from November 2008 to early 2009. On 12 September 2008, Woolworths sent a letter which was in identical terms as its letter sent the previous day, except that the approval date had been amended as requested by Gazcorp (the 12 September 2008 letter). The proper construction and legal effect of this letter was disputed by the parties.
New DA Refused
In the interim, the 2008 DA was deemed to have been refused on 11 August 2008. Gazcorp instituted an appeal in the Land and Environment Court of New South Wales, which was dismissed on 20 March 2009.
The 2008 Development Consent, however, remained in place.
Discussions continued intermittently between representatives of Gazcorp and Woolworths, during which various iterations of the building plans were exchanged.
2012 Development Consent
On 6 July 2012, with the support of Woolworths, Gazcorp lodged a further Development Application in relation to the Green Square site, which contemplated a development significantly different from that originally envisaged in the AFL. Notably, the location and configuration of the proposed supermarket was differently situated within the development. This application was approved on 30 November 2012 (the 2012 Development Consent). The parties continued to discuss proposals for the Green Square development, however no reference was made to the AFL in any correspondence between April 2012 and 3 February 2016.
2012 Development Consent Expires
The 2008 Development Consent expired on 17 February 2014, without any building works having commenced.
Negotiations for new AFL
Some 8 years later, in early 2016, Woolworths and Gazcorp discussed entering into a new agreement for lease in relation to the Green Square site.
In the course of these discussions, it became clear that the parties disagreed about whether the AFL remained on foot. Gazcorp asserted that the AFL had been abandoned and that there was no existing agreement between the parties, while Woolworths asserted that the AFL remained in force. Further negotiations proved unsuccessful in reviving the project, and the parties were unable to reach agreement about the terms of a new agreement for lease.
Proceedings
Gazcorp commenced proceedings on 15 October 2018, seeking various declarations including a declaration that the AFL had been terminated or was otherwise no longer in force. Woolworths lodged a cross-claim seeking a declaration to the opposite effect.
Primary Decision
On 30 March 2021, Darke J (the primary judge) made a declaration that the AFL, whether as varied in September 2008 (as Gazcorp contended) or not, was no longer on foot. His Honour held that the AFL had been varied by the 12 September 2008 letter, and was then discharged by frustration following the refusal of the 2008 Development Application.
In the alternative, his Honour considered that the AFL was terminated by mutual abandonment of contract no later than about the beginning of 2014.
Further in the alternative, his Honour considered that the AFL was terminated by frustration on 17 February 2014 when the 2008 Development Consent lapsed.
Appeal
Woolworths appealed from the decision of the primary judge on 3 main grounds:
- whether the AFL was varied by the 12 September 2008 letter (the variation issue);
- in the alternative, whether the AFL was abandoned (the abandonment issue); and,
- in the alternative, whether the performance of the AFL was frustrated (the frustration issue).
The Court dismissed the Appeal with Costs:
· As to the variation issue
- The primary judge was correct in finding that the AFL had been varied on 12 September 2008, such that the definition of “Landlord’s Works” was altered. As a result, the works to be completed by Gazcorp under the AFL were those contained within the revised building plans.
- The AFL as varied was not void for uncertainty. It was plain that the plans referred to in the varied AFL were those which had been sent to Woolworths by a representative of Gazcorp, and which included a Big W store. That these plans may have been provisional or preliminary was immaterial, as the AFL expressly provided for their negotiated alteration:
- In light of the holding that the AFL was validly varied, it was common ground that Gazcorp’s ability to perform that varied agreement was frustrated by the Land and Environment Court’s rejection of its appeal from the deemed refusal of the 2008 Development Application. As such, the AFL was terminated by frustration from 20 March 2009: .
· As to the abandonment of contract issue
- On the alternative assumption, contrary to (1)-(3) above, that the AFL was not varied in the manner described above, the primary judge was correct in finding that the AFL was abandoned by no later than about the beginning of 2014.
- The totality of the parties’ conduct was inconsistent with an intention to perform the AFL.
In particular:
a) The AFL was not referred to by the parties in any correspondence between April 2012 and 3 February 2016.
b) The 2012 Development Consent was not consistent with an intention to perform the AFL, as the proposed works differed significantly from the development envisaged by the AFL.
c) The 2008 Development Consent expired in February 2014 without comment or action from either party. From this point in time, the AFL was incapable of performance.
d) Woolworths’ conduct, viewed in the context of the parties’ dealings over time, was inconsistent with an intention on its part to insist on the performance of the AFL.
· As to the frustration issue
- Given the conclusions as to the variation and abandonment of contract issues, it was not necessary and would be artificial to determine the frustration issue.
Summary
If a party to a contract wishes to keep the contract alive and to later enforce its terms, it should take steps to actively show a clear intention to perform its terms or at least make clear by expressly stating, that it does not abandon the agreement. Failure to do so may lead to a conclusion of abandonment of contract.
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