Dyco Hotels Pty Ltd & Ors v Laundy Hotels (Quarry) Pty Ltd [2021] NSWCA 332

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Dyco Hotels Pty Ltd & Ors v Laundy Hotels (Quarry) Pty Ltd [2021] NSWCA 332 Hearing dates: 15 November 2021 Decision date: 21 December 2021 Before: Bathurst CJ at [1]; Basten JA at [86]; Brereton JA at [141] Decision: (1) Appeal allowed. (2) Set aside the orders made by the primary judge and in lieu make the following orders: (a) Declare that the defendant by issuing a notice of termination of the contract between it and the plaintiffs dated 31 January 2020 for the sale and purchase of the property 214-216 Harris Street, Pyrmont and the assets associated with the hotel business carried on at those premises, repudiated the contract which repudiation was accepted by the plaintiffs. (b) Declare that the plaintiffs are entitled to a return of the deposit paid by them in respect of the contract. (c) Order the cross-claim be dismissed. (d) Order that the defendant pay the plaintiffs' costs of the proceedings. (3) Order the respondent pay the appellants' costs of the appeal and have a Certificate under the Suitors' Fund Act 1951 (NSW) if eligible. Catchwords: CONTRACTS – construction – interpretation – contract for the sale of a hotel and associated business – where cl 50.1 required the business to be conducted in its "usual and ordinary course" – the meaning of "usual and ordinary course" – whether the phrase refers to the usual and ordinary course of hotel businesses generally or to the particular business – whether the business was required to be carried on in an identical manner to the way it was carried on pre-contract – objective intention of the parties – purpose of the transaction CONTRACTS – construction – interpretation – contract for the sale of a hotel and associated business – COVID-19 pandemic – restrictions on trading – where risk passed on completion not on contract – whether such risk would include the significant restriction on trading resulting from the Public Health Orders – Public Health Act 2010 (NSW), ss 7, 10 – Public Health (COVID-19 Places of Social Gathering) Order 2020 (NSW) CONTRACTS – construction – interpretation – contract for the sale of a hotel and associated business – COVID 19 pandemic – restrictions on trading – severability – where cl 63.7 dealt with severance – whether cl 63.7 operated to sever cl 50.1 in the contract of a temporary supervening illegality – whether the Public Health Order rendered cl 50.1 unenforceable – whether cl 50.1 formed part of an indivisible whole by which the hotel and business was to be transferred as going concern – Public Health Act 2010 (NSW), ss 7, 10 – Public Health (COVID-19 Places of Social Gathering) Order 2020 (NSW) CONTRACTS – implied terms – terms implied in law – contract for the sale of a hotel and associated business – whether there was an implied term to the effect that the obligation in cl 50.1 of the contract was limited to the extent permitted by law – Public Health Act 2010 (NSW), ss 7, 10 – Public Health (COVID-19 Places of Social Gathering) Order 2020 (NSW) CONTRACTS – termination – repudiation of contract – wrongful termination – contract for the sale of a hotel and associated business – COVID-19 pandemic – restrictions on trading – whether the respondent was entitled to issue a notice to complete and a notice of termination – whether the conduct of the respondent amounted to repudiation of the contract – whether the conduct of the respondent was such as to convey to a reasonable person in the position of the appellants renunciation either of the contract as a whole or a fundamental obligation under it CONTRACTS – termination – frustration – supervening illegality – contract for the sale of a hotel and associated business – COVID-19 – restrictions on trading – whether compliance with cl 50.1 was illegal because of the operation of the Public Health Order – where the effect of the temporary supervening illegality of cl 50.1 rendered the sale of the business not as a going concern – whether the respondent was entitled to demand completion in circumstances where it was not able to deliver possession of the hotel as a going concern – whether cl 50.1 of the contract made it a condition that the business be sold as a going concern – whether cl 50.1 was an essential term in that a purchaser would not have entered into the contract without the business being sold as a going concern – Public Health Act 2010 (NSW), ss 7, 10 – Public Health (COVID-19 Places of Social Gathering) Order 2020 (NSW) Legislation Cited: Conveyancing Act 1919 (NSW) Liquor Act 2007 (NSW) Public Health Act 2010 (NSW) Public Health (COVID-19 Places of Social Gathering) Order 2020 (NSW) Cases Cited: Arab Bank Ltd v Barclays Bank (Dominion, Colonial & Overseas) Ltd [1954] AC 495 Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 at 337; [1951] HCA 24 Bakhos v Fenner [2007] NSWSC 641 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; [1977] UKPCHCA 1 Canary Wharf (BP 4) T1 Ltd & Ors v European Medicines Agency [2019] EWHC 335 (Ch) Carney v Herbert [1985] AC 301 Cass v Rudele (1692) 2 Vern 280; 23 ER 781 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24 Collingridge v Sontor Pty Ltd (1997) 141 FLR 440; 15 ACLC 1681 Cricklewood Property & Investment Trust Ltd v Leighton's Investment Trust Ltd [1945] AC 221 Davis Contractors Ltd v Fareham [1956] 1 AC 696 Davjoyda Estates Pty Ltd v National Insurance Co of New Zealand Ltd (1965) 69 SR (NSW) 381; [1965] NSWR 1257 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432; [1978] HCA 12 Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd [2021] NSWSC 504 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Fagan v Canterbury Waste Lands Board (1882) 1 NZLR (SC) 242 Fletcher v Manton (1940) 64 CLR 37 at 48; [1940] HCA 32 Gerraty v McGavin (1914) 18 CLR 152; [1914] HCA 23 Gordon & Gotch Australia Pty Ltd v Horwitz Publications Pty Ltd [2008] NSWCA 257 HG & R Securities Pty Ltd v Sayer [2009] NSWSC 427 John Lewis Properties plc v Viscount Chelsea [1993] 2 EGLR 77 Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd [1942] AC 154 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 647; [1989] HCA 23 Libyan Arab Foreign Bank v Bankers Trust Co [1989] 1 QB 728 Lindsay-Owen v Associated Dairies Pty Ltd [2000] NSWSC 1095 Lysaght v Edwards (1876) 2 Ch D 499 McDonald v McDonald (1947) 21 MPR (Canada) 346 McFarlane v Daniell (1938) 38 SR (NSW) 337 McIntyre v Marshall [2004] NSWSC 412 McNally v Waitzer [1981] 1 NSWLR 294 Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671; [1976] HCA 30 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; [1974] HCA 18 Nwai Pty Ltd v Johnston [2005] NSWSC 1368 Poole v Adams (1864) 33 LJ Ch 639 Proctor v Chahl [2008] NSWSC 1252 Re Sweeny's Estate (1890) 25 LR Ir 252 Robertson v Skelton (1849) 12 Beav 260; 50 ER 1061 Scanlan's New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169; [1943] HCA 43 Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 Smith v Hayles (1877) 3 VLR (L) 237 Stenner v Sterling Homes Northside Pty Ltd (1973) 3 DCR (NSW) 72 Taylor v White (1964) 110 CLR 129; [1964] HCA 11 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 Urban House Pty Ltd v Purnell Bros Pty Ltd [2007] NSWSC 1248 Victoria v Tatts Group Ltd [2016] HCA 5; 90 ALJR 392 Zaccardi v Caunt (2008) 15 BPR 28,403; [2008] NSWCA 202 Texts Cited: Chitty on Contracts (34th ed, 2021, Sweet & Maxwell) JD Heydon, Heydon on Contract (2019, Thomson Reuters) Lewison and Hughes, The Interpretation of Contracts in Australia (Law Book Co 2012) Trietel on The Law of Contract (15th ed, 2020, Sweet & Maxwell) Category: Principal judgment Parties: Dyco Hotels Pty Limited (ACN 100 275 974) atf the Parras Family Trust (First Appellant) Quarryman Hotel Operations Pty Limited (ACN 634 263 933) (Second Appellant) Daphne Maria Parras (Third Appellant) Colin Michael Parras (Fourth Appellant) Laundy Hotels (Quarry) Pty Limited (Respondent) Representation: Counsel: N Hutley SC with C Freeman (Appellants) C Birch SC with B DeBuse (Respondent)