In June 2021, we published an article on the decision at first instance of Darke J in Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd  NSWSC 504. A link to the article appears here. That decision was subsequently overturned on appeal in December 2021 by a 2-1 majority of the NSW Court of Appeal. On 19 August 2022, the High Court of Australia granted special leave to appeal after counsel for the appellants, Mr Bret Walker QC, characterised the approach taken by the majority in the Court of Appeal as giving rise to a new doctrine which he described as “a poor relation of frustration which picks one of the parties to get the benefit of what might be called the suspended animation of the contract“.
We will not repeat the facts of the case which are set out in our earlier article. In short, Laundy Hotels (Quarry) Pty Ltd entered into a contract with two purchasers to sell a pub in Pyrmont, Sydney (land and business) for a total purchase price of $11,250,000. Shortly before completion, the outbreak of the COVID-19 pandemic caused the NSW Government to make a Public Health Order for the temporary shutdown of pubs and registered clubs, except for the limited sale of food and beverages to customers to consume off the premises.
This caused the purchasers to write to the vendor asserting that the contract had been frustrated or, alternatively, the vendor was not ready, willing and able to complete the contract because it was in breach of clause 50.1 which was entitled ‘Dealings pending completion’. That provision imposed various obligations upon the vendor in respect of the period from the date of the contract until completion, including an obligation to carry on the Business (as defined) “in the usual and ordinary course as regards its nature, scope and manner…”
On the same day that the vendor served a Notice to Complete on the purchasers, the purchasers commenced proceedings in the Supreme Court of NSW seeking a declaration that the contract was frustrated by virtue of the Public Health Order, or alternatively, a declaration that the whilst the Public Health Order was in force, the purchaser was not able to complete the contract and not entitled to issue the notice requiring completion.
Justice Darke determined that the contract was not frustrated (for the reasons set out in our earlier article), and further, that the vendor was not in breach of its obligation in clause 50.1. He concluded:
“In my opinion, reasonable business persons in the position of these parties would have understood Additional Clause 50.1 to mean that … the obligation would be to carry on the Business in the usual and ordinary course (as regards its nature, scope and manner) as far as it remained possible to do so in accordance with the law.”
In light of these conclusions, Justice Darke held that the vendor was entitled to terminate the contract and ordered the purchasers to pay damages and interest of around $940,000.
Before the Court of Appeal, there was no challenge to Justice Darke’s conclusion on the question of frustration. Rather, the grounds of appeal focussed on his conclusion on the proper construction and operation of clause 50.1.
The majority in the Court of Appeal determined that there were a number of difficulties with the construction preferred by Darke J, including that it failed to recognise clause 57.2 of the contract (which provided that the title and risk to the assets passed to the purchasers on completion not on contract). Ultimately, the majority concluded that such a construction did not conform with the objective intention of the parties. In the words of Bathurst CJ (who along with Brereton JA comprised the majority):
“The contract on its proper construction requires the hotel licence and other assets to be conveyed as a going concern, which at the time of the Notice to Complete and termination was prevented by the Public Health Order. Although the (vendor) was excused from any liability for damages for non-compliance with cl 50.1 and the (purchasers) would not have been entitled to terminate on this ground, it does not follow that at the time the (vendor) was ready, willing and able to complete the contract, a necessary precondition for serving the Notice to Complete” (at )
The majority were therefore of the view that the vendor was not entitled to enforce completion of the contract by the purchaser, and its purported termination of the contract amounted to a repudiation which entitled the purchasers to treat the contract at an end. The purchasers had no liability to the vendor for damages and were entitled to return of their deposit.
The minority judge (Basten JA) had particular regard to the fact that clause 35 of the contract identified various clauses as conditions precedent to the parties’ obligation to complete the sale and purchase of the Assets, however clause 50.1 was not among them, and clause 36 identified circumstances in which the purchaser will have defaulted in the observance of an essential provision of the contract, and again clause 50 was not referred to. His Honour noted that a hotelier business is highly regulated, that “there is an important difference between maintaining the current business until settlement and meeting expectations as to future returns“, and that the various risks of interruption to a hotelier business are insurable risks. Basten JA concluded that as a matter of construction of the contract, at the date of proposed completion the vendor, operating in accordance with the requirements of the Public Health Order, was not in breach of cl 50.1, and in any event, compliance with clause 50.1 was not an essential condition or a condition precedent to completion of the contract.
On 19 August 2022, the High Court granted the vendor special leave to appeal from the NSW Court of Appeal’s decision. The oral submissions made by Counsel for the vendor, Mr Bret Walker QC included:
“in our submission, this is a case which, if uncorrected, has in accordance with the majority reasoning … the defect of proposing some state of contractual effect where the contract is not discharged by frustration but indefinitely remains on foot, notwithstanding that the executory obligations remaining to be performed are all unaffected by illegality”
We await with keen interest the judgment of the High Court of Australia which likely won’t be delivered until 2023.
As we said in our original article, the case serves as a salient reminder for all commercial parties to review their contracts and assess who bears the risk of a significant unforeseen event such as a pandemic. If you are exposed to such risk, it may be possible for you to negotiate a variation to the contract. Further, for any prospective contracts yet to be entered into, consideration should be given as to whether to include a clause which expressly deals with contingencies flowing from a pandemic, such as the making of a Public Health Order by the government. Because as this case clearly shows, relying on a Court to determine the proper construction of your contract can be a very uncertain, lengthy and costly exercise.
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.