This is the latest in a series of articles which has followed the run of appeals of the decision of Darke J in Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd  NSWSC 504. Our first article, analysing the decision at first instance, can be found here, and more recent analysis of the NSW Court of Appeal’s decision and special leave application to the High Court of Australia can be found here.
On 8 March 2023, the High Court unanimously overturned a decision of the Court of Appeal, reinstating an initial award of damages in the sum of $900,000 plus costs in relation to a contract for the sale of a Pyrmont based hotel business. In doing so, the High Court has provided greater clarity on how contractual obligations are to be performed in the context of unprecedented times, in this instance the New South Wales government’s response to the COVID-19 pandemic.
For those unfamiliar with the facts in this case, Laundy Hotels (Quarry) Pty Ltd (Laundy Hotels) entered a contract with two purchasers, Dyco Hotels Pty Ltd and Quarryman Hotel Operations Pty Ltd (Purchasers) for the sale of the Quarryman’s Hotel in Pyrmont, Sydney on 31 January 2020. The sale was for both the freehold land upon which the hotel was located, as well as the assets of a hotel business. Clause 50.1 of the contract provided that, from the contract date until Completion:
‘the Vendor must carry on the Business in the usual and ordinary course as regards its nature, scope and manner and repair and maintain the Assets in the same manner as repaired and maintained as at the date of this Contract’ (at ).
Public health orders were imposed by the Minister for Health in response to the emerging COVID-19 pandemic on 23 March 2020. These public health orders, among other things, inhibited pubs, as licenced premises, from being ‘open to members of the public… except for the purposes of… selling food or beverages for persons to consume off the premises‘. In response, the Quarryman’s Hotel sold only takeaway alcohol and food for a number of months. From 1 June 2020, the business slowly re-opened subject to customer number restrictions as permitted by subsequent public health orders.
The date of Completion of the contract for sale was 55 days after the contract date for the property and the hotel licence, and 56 days for the business and all other assets. By agreement, the parties agreed for Completion to take place on 30 and 31 March 2020 respectively.
Prior to Completion, the Purchasers notified Laundy Hotels they would not complete the contract, stating that Laundy Hotels was not ready, willing, or able to complete the contract as it was in breach of clause 50.1. Laundy Hotels disagreed and, after the Completion date had passed, served a notice to complete upon the Purchasers under the terms of the contract.
Following expiry of the period under the notice to complete, Laundy Hotels served a notice of termination on the Purchasers. The Purchasers had already commenced proceedings seeking declaratory relief to the effect that the contract had been frustrated or that Laundy Hotels was not entitled to issue the notice to complete on the basis that Laundy Hotels was not ready, willing, and able to complete the contract, submitting that Laundy Hotels was not continuing to trade as a going concern whilst the public health order was on foot . On receipt of the notice of termination, the Purchasers submitted that if the Court did not find the contract frustrated, then the notice of termination constituted a repudiation of the contract by Laundy Hotels, and the Purchasers accepted such repudiation.
Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ of the High Court unanimously allowed the appeal, finding that:
‘the Vendor [Laundy Hotels] was “ready, willing and able to complete” and was not in default of its contractual obligations at the time it served the notice to complete. The Vendor was obliged to carry on the Business in the manner it was being conducted at the time of contract to the extent that doing so was lawful. There was no obligation (and could not have been an obligation) imposed on the Vendor to carry on the Business unlawfully.’ (at )
The Court considered the proper construction of the contract, reiterating that:
‘It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract.’ (at )
The Court considered that Laundy Hotels’ obligation to “carry on the Business in the usual and ordinary course” contained an implied requirement to comply with relevant legal obligations imposed at the time of contract (at ). The contract need not expressly state a requirement that the conduct of the business be lawful, as this inherent requirement is considered against the terms of the contract.
The Court found that Clause 50.1 did not contemplate operation both within and against the law, and held that that there could not have been an obligation imposed on Laundy Hotels to carry on the business unlawfully.
The hotel’s “business” further included a licence pursuant to the Liquor Act 2007 (NSW) which was subject to statutory conditions. The Court noted that the:
‘dynamic nature of the regulatory environment of the Business under the Liquor Act is inconsistent with the proposition that the Vendor might be in breach of or unable to comply with cl 50.1, or that the Purchaser would be permitted to delay Completion, because of any change in the law which, as in this case, did not have the effect of frustrating the contract.’ (at )
In considering the High Court’s decision in this instance, it seems the Laundy Hotels’ success was greatly assisted in that it had clearly endeavoured to carry on the business as best as it could in view of the public health orders relevant at the time. To have been required to carry on the business in a ‘pre-pandemic’ manner without adapting to the constraints of the public health orders (and indeed, in contravention to the relevant orders) could be tantamount to be requiring Laundy Hotels to act outside of the law at the time.
As with most disputes of this nature, the outcome may have been quite different in a different fact scenario. Parties disputing transactions arising during the restrictions imposed due to the pandemic might well find a different path. In this scenario, if Laundy Hotels had ceased trading altogether rather than transitioning to a ‘take-away only’ model, it may have been found not to have been ‘carrying on the business’ in the manner required under the contract.
As emphasised throughout this series, this case remains a salient reminder that all commercial parties should review their contracts and assess who bears the risk of significant unforeseen events. Clauses which have the effect that a vendor gives no warranties as to value/financial performance will inhibit a purchaser seeking to rely on the doctrine of frustration to terminate the contract from doing so. Prospective contracts should consider the inclusion of a clause which expressly deals with contingencies flowing from a significant unforeseen event.
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.