Background
Macquarie International Health Clinic Pty Ltd and a predecessor of Sydney Local Health District entered a suite of interrelated agreements for Macquarie to construct and operate a private hospital and adjoining car park on the Royal Prince Alfred Hospital campus. The car park was substantially completed, although with fewer spaces than contemplated and without a required ramp, but the hospital was never built.
After decades of litigation, the agreements were validly terminated and the District retook possession in 2020. Macquarie brought this proceeding relying on post-termination clauses requiring the District to use all reasonable endeavours to relet the hospital and car-park premises and to share specified proceeds, seeking performance of those obligations or about $30 million in damages. The District cross-claimed for approximately $15 million for contractual breaches, including loss-of-bargain and pre-termination claims.
The Court’s Holding
Brereton J dismissed Macquarie’s amended claim. The compensation clauses were engaged despite the incomplete construction, but the transaction documents had to be construed together: a replacement lease on the same or substantially the same terms would carry the interconnected obligations concerning construction of both the hospital and car park. Because efforts to secure such a reletting would have been futile, the District had satisfied its obligation to use all reasonable endeavours.
The District’s cross-claim succeeded only in part. It failed to establish loss-of-bargain damages because its analysis isolated selected lost benefits without properly accounting for benefits obtained after termination, including control of additional car-parking spaces valued at nearly $32 million, or for mitigation. The Court nevertheless awarded $329,536 for breach of clause 3.4 of the Construction Deed, plus interest: $486,785 through 31 December 2024 and further interest on the principal at Supreme Court rates to judgment. The balance of the cross-claim was dismissed.
Key Takeaways
- Documents executed as components of one transaction may be construed together, particularly where their obligations are expressly interconnected.
- An obligation to use all reasonable endeavours does not require futile attempts to achieve an outcome that is not realistically available.
- Loss-of-bargain damages require assessment of the net contractual position, including benefits received after termination and losses reasonably capable of mitigation.
Why It Matters
The decision illustrates how post-termination compensation and reletting provisions operate when a long-term development project ends before construction is complete. A party cannot detach a commercially attractive part of an integrated arrangement from the construction obligations that formed part of the same bargain.
It also underscores that a claimant seeking expectation damages must value the bargain as a whole. Identifying lost contractual income is insufficient where termination also releases burdens or delivers substantial assets and revenue opportunities.