November 24, 2021

The High Court of Australia in Key Infrastructure Australia and Ors v Bensons Property Group Pty Ltd [2021] HCATrans 185 has refused to grant special leave to appeal a decision from the Victorian Supreme Court of Appeal (VSCA) where the VSCA held the prevention principle had not been enlivened.

KIA entered into an Agreement with Bensons to acquire a site in South Melbourne. Under the Agreement, KIA was to obtain a planning permit for the proposed development in return for a fee to be paid in instalments. The final instalment was dependent on the relevant Council issuing a permit before a sunset date. It became apparent the Council would refuse to issue the permit and KIA filed a VCAT application seeking orders directing the Council to issue the permit. In response, Bensons issued a letter to KIA, stating among other things, it considered the VCAT proceedings would constitute a breach of the Agreement. KIA withdrew the application, however, at a later date it reinstated the VCAT proceedings and VCAT directed the Council to issue the permit. The permit was issued after the sunset date and Bensons subsequently terminated the Agreement.

At first instance, KIA successfully argued that Bensons’ conduct had prevented it from procuring the permit by the sunset date and that Bensons had breached its duty of cooperation, with the trial judge awarding KIA damages.

Bensons successfully appealed the decision. In overturning the decision, the VSCA held that the primary judge had erred in applying the prevention principle without first considering whether Bensons’ conduct constituted a breach and further, the letter did not breach the duty to cooperate or prevent KIA from fulfilling it obligations.

Our update on the VSCA decision can be found here.

In its application to the High Court of Australia for special leave to appeal, KIA contended leave should be granted on the following basis:

  •    there are competing views about the juridical basis of the prevention principle, the preferred view being that the principle is based on fairness and reasonableness, rather than the law of implied terms;
  •    issuing the relevant letter, which resulted in the withdrawal of the VCAT application, enlivened the prevention principle;
  •    the VSCA adopted the wrong approach when they determined the prevention principle could not be enlivened independently of a breach of a contractual term and analysed the facts of the matter through that lens; and
  •    the court should not be discouraged from dealing definitively with the prevention principle by reason of there being doubt whether the conduct in question did amount to prevention.

In response, Benson contended that, on a factual basis, there was no conduct which amounted to an act of prevention and any further consideration of the nature and limits of the prevention principle would not result in a different conclusion.

Justice Keane and Justice Gleeson dismissed the application for leave and made the following observations:

  •    it had not been established that there was a probability KIA would have made the sunset date and earned its fee had the relevant letter not been sent;
  •    the VSCA had found, as a matter of fact, there was no prevention; and
  •    the appeal foreshadowed was not a ‘suitable vehicle’ for consideration by the High Court of the prevention principle and did not enjoy sufficient prospects of success.

The full transcript can be found here.

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