Power in Shutdown vs Fairness in Lawful Continuity

Home › Case Studies › Case Law Library › Commercial & Business Cases › Contract Interpretation › Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd [2023] HCA 6

Published: 11 November 2025 | Reviewed: 5 December 2025
(3-minute read)

A buyer tried to escape a multimillion-dollar pub purchase
because the law forced the hotel to shut, and
the High Court said the seller was still entitled to the deal.

The Case in One Glance

When Australia shut down pubs in March 2020, the Quarrymans Hotel in Pyrmont was suddenly allowed to operate only as a takeaway venue. Yet settlement under an earlier sale contract was due days later.

Dyco Hotels, the purchaser, refused to complete. It argued the vendor could not possibly be “carrying on the business in the usual and ordinary course” as required by the contract. It also suggested the contract was frustrated by the pandemic.

The High Court rejected both arguments. It held that “usual and ordinary course” means “as the law allows”. So if a public health order narrows the way a business can operate, the obligation narrows with it, but it continues.

What the High Court Decided

The judgment was unanimous. The Court held that:

• A business that must obey public health orders is still operating in its usual course if it follows those laws.

• A seller cannot be required to run a business unlawfully just to preserve the pre-contract status quo.

• The vendor was “ready, willing and able to complete”, and the purchaser’s refusal was a breach.

• The contract was not frustrated; the change was significant but not radical enough to destroy the deal’s foundation.

The Court grounded its reasoning in a structural reality: a hotel business exists only through licences, approvals and compliance. Any contractual promise to carry on that business must be interpreted through that legal frame. A reasonable commercial participant would never expect a vendor to choose illegality over compliance.

This restores a simple rule: contracts live inside the law, not outside it.

Why This Case Still Matters

The decision will shape Australian commercial drafting long after COVID-19 has faded.

It confirms that:

• Government health orders flex the performance of a contract, but do not break it.

• “Business as usual” clauses automatically adjust to lawful limits.

• Purchasers cannot use temporary regulatory restrictions as a reason to walk away.

• Only a truly radical change, one that rewrites the contract’s foundation, can trigger frustration.

This is now the leading authority for any transaction where licences, compliance regimes or public health orders affect performance.

Common examples include:

• pubs and venues

• childcare centres

• construction sites

• aged-care facilities

• professional practices with operating licences

For solicitors, the message is clear: continuity obligations must anticipate regulatory shifts, and risk allocation must be explicit.

The Clean Law Structural Parallel

Dyco Hotels v Laundy Hotels exposes a deeper structural risk: contracts often fail when they assume the world will stay still.

Clean Law’s client-protection safeguards are designed to prevent that failure.

Our structural process ensures that:

• contractual duties are mapped against every regulatory layer the business depends on

• business continuity clauses include lawful flexibility rather than silent risk

• external events cannot be used opportunistically to collapse a deal

• dual-lawyer oversight tests how each obligation behaves under pressure

This judgment strengthens what Clean Law already builds into every agreement:

Fairness depends on structure, and structure must anticipate change.

Lawfulness is the Anchor, Not the Exception

Dyco Hotels v Laundy Hotels shows how sudden disruption can tempt parties to reinterpret their bargains. The High Court responded with clarity:

fairness requires stability, and stability requires that all performance be read through the law’s lens.

When uncertainty rises, clarity becomes protection.
The decision reassures businesses that compliance is never a breach, and that lawful adaptation is the hallmark of contractual integrity.

Clean Law carries that principle into every drafting decision, so clients stay protected no matter how the external world shifts.

Read more about Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited | High Court of Australia

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By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.

Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.