Case: Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527
Outcome: applied
An important aspect to be considered on the question of the showing of reasonable cause is the application made by Goldspar for an extension of time pursuant to cl 18 of the General Conditions of Contract. I need not set out the relevant correspondence again. There are difficulties of construction of cl 18. It seems that the first two paragraphs apply across the board. The third, fourth and fifth paragraphs relate to what is described as an 'entitlement' to an extension. The sixth paragraph, including the handwritten amendment, relates to an overriding general discretion to grant an extension coupled with an obligation to not unreasonably deny a claim where the event causing the delay is beyond the control of Goldspar. The remainder of the paragraph is general. Leaving aside all other difficulties, I cannot see how Goldspar could have established an 'entitlement' to an extension in the face of the terms of paragraph (v) of the third paragraph. However, the general discretion to extend is a horse of a different colour. The second paragraph describes a wide set of circumstances which would justify notification, which must then be considered with a view to exercising the general discretion coupled with the obligation. In considering that issue Khreich was obliged to do more than merely pursue the interests of the Council he was required to give genuine and bona fide consideration to the factors advanced by Goldspar. (Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 per Davies J at 532; Sheppard J at 542 4, see also Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 ; (1991) 174 CLR 64 per Mason CJ and Dawson J at 96 and Gaudron J at 150; and Jenkins v NZI Securities Australia Ltd (1994) 124 ALR 605 discussed below). 193 Clause 25.4 gave to the Council a discretion to terminate. It follows from the findings that have been made that the necessary preconditions to exercise that discretion did not occur. It is also argued that the exercise of that discretion is subject to an implied term as to reasonableness and good faith. This arises in a different context to the similar questions discussed earlier. In Jenkins v NZI Securities Australia Ltd the Full Court considered the following clause: '5.08 On the third anniversary of the first Drawdown Date, the Financier will review the Facility with a view to extending the Repayment Date by a further period of 12 months. If the Financier is prepared to so extend the Repayment Date, it will notify the Company accordingly and request the Company to advise whether it so wishes the Repayment Date to be so extended. Upon receipt of such notice from the Financier, the Company shall advise the Company [sic] within seven (7) days as to whether it wishes the Repayment Date to be extended. If the Company so advises the Financier, the Repayment Date will be extended for a further period of 12 months and otherwise the Repayment Date will remain unaltered.' Beaumont, Gummow and Carr JJ said (at 619): 'We would add that the law would oblige the financier to conduct the review in good faith and, perhaps, also reasonably, in the sense of paying regard to the interests of both parties: Amann Aviation Pty Ltd v Commonwealth (1990) 92 ALR 601; 22 FCR 527 at 532, 542 4, affd [1991] HCA 54 ; (1991) 174 CLR 64 at 96, 150; 104 ALR 1; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 280; cf Hughes Bros Pty Ltd v Trustees of Roman Catholic Church for Archdiocese of Sydney (1993) 31 NSWLR 91.' I should follow that guidance and imply a term accordingly. There is an air of unreality in considering breach of that term because, for it to arise, the show cause notice must be taken to have been valid and Goldspar would not have shown reasonable cause. However, I have no doubt that in purporting to rescind the contract the Council was acting pursuant to the determination which had been formed to remove the work from Goldspar and give it to others and so was in breach of the implied term, no matter how it is precisely framed.