Ahmau Developments Pty Ltd v Preet

[2025] NSWSC 604

Supreme Court

New South Wales

Medium Neutral Citation:

Ahmau Developments Pty Ltd v Preet [2025] NSWSC 604

Hearing dates:

13, 14, 15, 16, 21 May; 7 June; 24 July 2024; 9 May 2025

Date of orders:

12 June 2025

Decision date:

12 June 2025

Jurisdiction:

Equity - Real Property List

Before:

Parker J

Decision:

See [633], [739]

Catchwords:

BUILDING AND CONSTRUCTION — Contract — Specific performance – Where changes to zoning laws altered contractual parameters – Whether contract was frustrated by changes to zoning laws – No issue as to principle

BUILDING AND CONSTRUCTION — Contract — Termination — Frustration – Where changes to zoning laws altered contractual parameters – Whether contract was frustrated by changes to zoning laws – Whether frustration is impacted by statutory scheme – No issue as to principle

LAND LAW — Conveyancing — Contract for sale — Off the plan Contracts — Rescission – Where rescission of an off the plan contract for sale of land was sought – Where the Conveyancing Act 1919 s 66ZS creates requirements for rescission – Where changes to zoning laws altered commercial conditions – Whether developers acted unreasonably

COSTS — Party/Party — Exceptions to general rule that costs follow the event – Orders when proceedings involve multiple parties – How parties liable – Multiple claims in multiple proceedings – Where statutory scheme modifies the general rule that costs follow the event – Whether statutory scheme captures the entirety of the multiple claims – Held: Conveyancing Act 1919 s 66ZS(8) applies only to claims under s 66ZS, not the proceedings as a whole

Legislation Cited:

Camden Local Environmental Plan 2010

Conveyancing Act 1919, s 66ZS, 66ZS(8)

Frustrated Contracts Act1978

Real Property Act 1900

State Environmental Planning Policy (Sydney Region Growth Areas) 2006

Cases Cited:

Akierman Holdings Pty Limited v Akerman (No 3); In the matter of Akierman Holdings Pty Limited (No 2) [2021] NSWSC 869

Ardee Pty Ltd v Collex Pty Ltd [2001] NSWSC 836

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Bank Line Ltd v Arthur Capel & Co [1919] AC 435

Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137

Burger King Corp v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558

Chinatex (Australia) Pty Limited v Bindaree Beef Pty Limited [2018] NSWCA 126

DGF Property Holdings Pty Limited v Di Federico; DGF Property Holdings Pty Limited v Butros [2018] NSWSC 344

Embiricos v Sydney Reid [1914] 3 KB 45

Hillpalm Pty Ltd v Heaven's Door Pty Ltd 220 CLR 472

Jobema Developments Pty Limited v Zhu & Ors [2016] NSWSC 3

Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483

Metropolitan Gas Co v City of Melbourne (1924) 35 CLR 186

oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd & Anor (2011) 32 VR 255

Opera Properties Pty Ltd v The Uniting Church in Australia Property Trust (NSW) [2021] NSWSC 1436

Paolucci v Makedyn Pty Ltd [2020] NSWSC 1871

Paolucci v Makedyn Pty Ltd [2021] NSWCA 215

Pioneer Park [2006] NSWSC 1176

Plumor Pty Ltd v Handley (1996) 41 NSWLR 30

Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330

Ryde Ex Services Memorial and Community Club Ltd v Kaloriziko Ryde Pty Ltd (No 2) [2018] NSWSC 317

Scanlan's New Neon Ltd v Tooheys Ltd; Caldwell v Neon Electric Signs Ltd (1943) 67 CLR 169

Shun Sheng Pty Ltd v Lei (No 6) [2024] NSWSC 1613

Silver Star Fashions Pty Ltd v Dal Broi [2018] NSWSC 1445

Southern Oil Refining Pty Ltd v Hydrodec Australia Pty Ltd (No 2) [2021] NSWSC 336

Thomas Brown & Sons v Fazal Deen (1962) 108 CLR 391

Van Eeden v Henry (2005) 62 NSWLR 301

Woolworths Group Ltd v Gazcorp Pty Ltd [2022] NSWCA 19

Texts Cited:

Dyson Heydon, Heydon on Contract: The General Part (Thomson Reuters, 2019)

Dyson Heydon, Mark Leeming, and Peter G. Turner, Meagher, Gummow, and Lehane’s Equity: Doctrines and Remedies (LexisNexis, 5th ed, 2015)

Category:

Principal judgment

Parties:

Summons filed 28 August 2022
Ahmau Developments Pty Limited (Plaintiff)
Shabad Preet (First Defendant)
Amandeep Kaur (Second Defendant)
Aishwarya Bakshi (Fourth Defendant)
Ishita Bakshi (Fifth Defendant)

Cross-Claim filed 23 March 2023
Aishwarya Bakshi (First Cross-Claimant)
Ishita Bakshi (Second Cross-Claimant)
Ahmau Developments Pty Limited (Cross-Defendant)

Cross-Claim filed 14 March 2024
Shabad Preet (First Cross-Claimant)
Amandeep Kaur (Second Cross-Claimant)
Ahamu Developments Pty Limited (Cross-Defendant)

Representation:

Summons filed 29 August 2022
Counsel:
M Fernandes (Plaintiff)
T Wong (First and Second Defendants)
H El-Hage SC (Fourth and Fifth Defendants) (13, 14, 15, 16, 21 and 7 June 2024)
A Bakshi (Self-represented) (24 July 2024)

Solicitors:
Centurion Lawyers (Plaintiff)
Byles Anjos Lawyers (First and Second Defendants)
Shad Partners (Fourth and Fifth Defendants) (13, 14, 15, 16, 21 and 7 June 2024)

Cross-Claim filed 23 March 2023
Counsel:
H El-Hage SC (First and Second Cross-Claimants) (13, 14, 15, 16, 21 and 7 June 2024)
M Fernandes (Cross-Defendant)
A Bakshi (Self-represented) (24 July 2024)

Solicitors:
Shad Partners (First and Second Cross-Claimants) (13, 14, 15, 16, 21 and 7 June 2024)
Centurion Lawyers (Cross-Defendant)

Cross-Claim filed 14 March 2024
Counsel:
T Wong (First and Second Cross-Claimants)
M Fernandes (Cross-Defendant)

Solicitors:
Byles Anjos Lawyers (First and Second Cross-Claimants)
Centurion Lawyers (Cross-Defendant)

File Number(s):

2022/256891

Publication restriction:

Nil

JUDGMENT

1. These proceedings concern off the plan contracts for the sale of land in a sub-division development. The plaintiff, Ahmau Developments Pty Ltd “(Ahmau”), is the vendor. The defendants are purchasers.

2. This judgment concerns two contracts. In each case, the purchasers are a married couple.

3. Under the first contract the purchasers are Shabad Preet, the first defendant, and Amandeep Kaur, the second defendant. Ms Kaur is also known as Amandeep Preet. For convenience and without intending any disrespect, I will refer to her by that name. The Preets’ contract is dated March 2017.

4. The purchasers under the second contract are Ashwarya Bakshi, the fourth defendant, and Ishita Bakshi, the fifth defendant. Their contract is dated April 2017.

5. The contracts between Ahmau and the defendants are subject to the statutory regime for off the plan contracts in Part 4, Division 10 (ss 66ZL to 66ZU) of the Conveyancing Act 1919 (“CA”). That regime requires leave from the Court for the vendor to exercise a contractual right of rescission if the purchaser does not consent.

6. The sunset dates under the contracts passed in March and April 2021, before the subdivision plan had been registered, triggering a contractual right of rescission. Several months later there was a rezoning of the land which affected, or potentially affected, the number of dwellings which would be permitted in the subdivision. Ahmau sought the defendants’ consent to rescission of their contracts (as had been successfully negotiated for the other pre-sales), but they refused. The plan remains unregistered.

Claims for determination

7. The proceedings were commenced in August 2022. Ahmau as plaintiff sought the Court’s leave to rescind the defendants’ purchase contracts under CA s 66ZS. They resisted the grant of leave and cross-claimed for specific performance. The Bakshis’ cross-claim was filed in March 2023. The Preets’ cross-claim was filed in March last year.

8. Originally a third contract was the subject of the proceedings. The purchaser under that contract was the third defendant. The proceedings were settled as between Ahmau and that purchaser shortly before the trial.

9. The trial took place over five days between 13 and 21 May last year. The time allocated for the hearing was sufficient to complete the evidence but not the parties’ closing submissions.

10. The proceedings were adjourned until 7 June for this purpose. But prior to that hearing counsel for the Preets sought leave to supplement the expert town planning evidence which had been presented at the trial.

11. The supplementary evidence was to address one of the critical issues which had arisen in the proceedings, concerning the extent to which the 2021 subdivision had made it impossible to register a subdivision plan in the form attached to the purchase contract. Counsel suggested (and there was some justification for this) that the evidence at the trial had proceeded on an incorrect, or at least, an incomplete, basis.

12. Counsel for Ahmau wished to have its expert respond to the new evidence from the Preets’ expert. Counsel also sought to amend Ahmau’s claim so as to contend that the subdivision had had the effect of frustrating the contract. If this was correct, no leave was needed to rescind the purchasers’ contracts because the contracts had already been discharged by operation of law. Furthermore, no question of specific performance could arise.

13. In these circumstances, the parties recognised that the proceedings could not be completed on 7 June. Directions were made for supplementary evidence from the experts and for the amendment of the pleadings so as to raise Ahmau’s frustration claim. The proceedings were relisted for July.

14. Up to this point, the Bakshis had been represented by solicitors and counsel in the proceedings. But their instructions were withdrawn before the resumption of the hearing, which eventually happened on 24 July. On that day, the Preets’ and Ahmau’s planning experts gave supplementary evidence, and the parties’ closing submissions, which now addressed the frustration claim, were presented. Mr Bakshi attended and presented his submission orally. Mrs Bakshi was unrepresented, but no one suggested that there was any separate need for her to present submissions on her own behalf.

Summary and analysis of evidence

Chronology of key events

15. The land owned by Ahmau which is the subject of these proceedings is one of four parcels of land which together make up a larger block at Leppington at the southwestern outskirts of Sydney. That larger block, to which I will refer as “the Leppington Land”, is oblong in shape with its shorter sides running roughly north-south.

16. An aerial photograph showing the Leppington Land is reproduced below. The photograph dates from 2021 (or before), but, according to the evidence, the appearance of the site is more or less the same today:

17. The photograph is oriented with north at the top. On the eastern side, the Land is bordered by Camden Valley Way. This is a dual carriageway main road. To the south (bottom) is Dwyer Road and to the west (left) is Hulls Road. These are both smaller two-lane roads.

18. The four parcels making up the Leppington Land can be seen in the title diagram reproduced below.

19. The four parcels are owned by three companies which are, and have at all material times been, in common ownership. The parcel owned by Ahmau which is the subject of these proceedings, Folio Identifier 10/1172863, is the southernmost parcel (bordering Dwyer Road) and has the street address 14 Dwyer Road. The parcel immediately to the north, Folio Identifier 4/858010, has the street address of 1105 Camden Valley Way. It is owned by Allgood Projects (NSW) Pty Ltd (“Allgood”). The next parcel, Folio Identifier 5/858010, has the street address 14 Hulls Road and is also owned by Allgood. The northernmost parcel, Folio Identifier 11/1172863, has the street address 22 Hulls Road and is owned by McInnes Developments Pty Ltd (“McInnes”). I will refer to the parcels owned by the three companies as the “Ahmau Land”, the “Allgood Land” and the “McInnes Land”.

20. In 2017, when the parties entered into the contracts which are the subject of these proceedings, the Leppington Land was governed by the Camden Local Environmental Plan 2010. It was zoned “RU4 Primary Production Small Lots”, which zoning prevented its subdivision for residential purposes. It however formed part of the “Leppington Priority Precinct” which had been identified by the State Government as an area for future residential subdivision.

21. The Precinct was divided into five stages. The Leppington Land was part of stage 5. In May 2014 an Indicative Layout Plan (“ILP”) was published for the Precinct. The southernmost part of the Precinct, showing stage 5, is reproduced below.

22. The dark grey strip on the eastern side of the Precinct is the Camden Valley Way road corridor. The local roads shown in the plan (in light grey) included the existing extension of Dwyer Road across the Precinct on the southern side of the Leppington Land, and Hulls Road on the western side of the Land. The hexagonal green shape on the northeastern corner of the Leppington Land was designated in the ILP as open space.

23. The other local roads shown in the ILP between Hulls Road and Camden Valley Way had not been reserved or constructed and represented a proposed layout. They included a local road along the eastern boundary of the Leppington Land, alongside the Camden Valley Way road corridor. This reflected the fact that Camden Valley Way is a “no access” road, so that lots in the Land abutting the corridor would need to be provided with internal road access rather than directly using Camden Valley Way.

24. In 2015, stage 1 of the Precinct was brought under the State Environmental Planning Policy (Sydney Region Growth Areas) 2006 (“Growth Centres SEPP”), re-zoning it for residential development. In October 2015, an Indicative Layout Plan (“ILP”) was published for the Precinct. The southernmost part of the ILP, showing stage 5, is reproduced below.

This version of the ILP showed, in yellow, an area for drainage on the corner of Dwyer Road and Hulls Road which did not appear in the May 2014 version. It also did not show the internal roads proposed in the May 2014 version of the ILP.

25. Brian Garnet Wheadon is, and has since December 2020 been, the sole director and shareholder of Ahmau, Allgood and McInnes. But he holds his shares in trust for two property developers, or entities associated with them. Apparently, it is they who make all of the key commercial decisions. For the purposes of this judgment, I will call them “the Developers” and will treat them as if they were the owners of the Leppington Land, referring only to the interposed companies if it necessary to do so.

26. The Developers are Mr Ryan Strauss and Mr Andrew Kavanagh. Mr Kavanagh gave evidence before me. He is, and was at all material times, in day-to-day management control of the Leppington Land, with major decisions being made in consultation between him and Mr Strauss.

27. The Leppington Land is not the only property venture in which Mr Strauss and Mr Kavanagh are engaged as business partners. In his evidence, Mr Kavanagh stated that Mr Strauss’ skills lie principally in the acquisition and sale of properties. Mr Kavanagh himself is more concerned with the operational process of subdivision and development.

28. The contracts the subject of these proceedings resulted from a campaign by the Developers to pre-sell lots in a proposed subdivision of the Leppington Land. Some of these pre-sales were effected by way of contract for the sale of land, and others were effected by way of option agreement. For convenience, I will refer to all the sales, whether by formal contract or by option agreement, as “the Presale Contracts”.

29. In the usual way, the proposed lots were defined in a plan of subdivision annexed to the Contracts. I will refer to the plan as “the Presale Plan”, and to the proposed lots in it as “the Presale Lots”.

30. The Presale Plan is reproduced below.

31. The Plan depicted 133 Presale Lots in total. Of these, 42 were located on the Ahmau Land. One of those (Lot 1012) encroached onto the Allgood Land.

32. The campaign began in late 2016 or early 2017. In all, there were 93 pre-sales. The agent for Ahmau (and, I assume, for Allgood and McInnes) was Mr Bruno Sergi, whose firm was known as “Patrick York Real Estate” (PY).

33. The contracting work for the pre-sale campaign was undertaken in-house by Mr Dean Alcorn. His responsibilities were described by Mr Kavanagh as “negotiating contracts with various purchasers (or their legal representatives), for exchanging those contracts and for communicating with various purchasers (or their legal representatives)”. There was no direct evidence as to who gave Mr Alcorn instructions, but seemingly it was mainly Mr Kavanagh.

34. The relevant Presale Lots for the purposes of this judgment are Lots 1040 and 1064. Lot 1040 (shaded above in green) was the subject of the Presale Contract with the Preets. Lot 1064 (shaded above in blue) was the subject of the Contract with the Bakshis.

35. Both Lots were on the Ahmau Land and in each case the vendor under the Presale Contract was Ahmau (alone). Presumably the same approach was taken for the other Presale Lots, although there is no evidence about this, or how the Lots which extended over parcels of land owned by two different companies were dealt with.

36. The Presale Contract between Ahmau and the Preets was dated 21 March 2017. The Contract with the Bakshis was dated 6 April. I will refer to the relevant Contracts as the “Preet Contract” and the “Bakshi Contract” respectively. Caveats were lodged on behalf of the Preets and the Bakshis over the Ahmau Land notifying their interests under the Contracts.

37. In each case the area of the Presale Lot was 313 square metres, and the purchase price was $333,971. The Contracts both included terms (set out in full below) providing for a sunset date of 4 years (48 months) within which the Presale Plan was to be registered. If no registration had been effected by that date, either party was entitled to rescind.

38. It is common ground that the Presale Plan could not be registered without having first been the subject of a development approval by the relevant consent authority (Camden Council). Before such an approval could be granted, the Leppington Land had to be brought under the SEPP for rezoning, and this required action by the State Government – relevantly, the Department of Planning, Industry and the Environment (“DPIE”).

39. There was some debate in the proceedings as to whether work on a development application for the subdivision could, or should, have begun before the rezoning had been effected. I deal with this in more detail below. It is however clear that the Developers did not actually take any action in this regard.

40. For three years little if anything appears to have happened with the subdivision as the Developers waited for the rezoning. In April 2020, soon after the outbreak of the Covid pandemic, the Developers retained Mr David Whitting, a consultant project manager, to advise them on, and assist them with, the development of the Leppington Land. Initially, he was asked to address two issues. One was the rezoning. The other was the drainage and sewerage which would be required by Sydney Water Corporation (“SWC”) on the site. Over the next eighteen months or so, Mr Whitting pursued the Council, DPIE and SWC about these issues.

41. As I describe in more detail below, nearly all of the Presale Contracts were ultimately rescinded by agreement between the Developers and the relevant purchaser (or, in the case of option agreements, the options were allowed to lapse). Up to the end of June 2020, there were a few isolated rescissions. The pace picked up towards the end of 2020 and the beginning of 2021 as the sunset dates for the Contracts approached, and began to pass, without any rezoning or any apparent progress on the subdivision.

42. Both the Preets and the Bakshis were offered a consent rescission, but neither took the offer up. The sunset dates for their Contracts passed in March and April 2021 respectively.

43. In mid-July 2021, the Growth Centres SEPP was finally amended so as to bring stages 2 to 5 of the Leppington Priority Precinct within its terms. The effect was to re-zone the rest of the Precinct, including the Leppington Land, for residential development.

31. At the same time as the SEPP was amended, the State Planning Department issued its Finalisation Report for stages 2 and 5 of the Leppington Precinct. Among other things, the Report described the general effect of the amendments. It also foreshadowed that further guidelines for the development of the land in question would be contained in a revision of the relevant Development Control Plan (“DCP”), which would be issued in due course. The same point was made in the media release which accompanied the issue of the Report.

32. Further amendments were made to the Growth Centres SEPP in late September 2021. The revised DCP (the Camden Growth Centre Precincts Development Control Plan) followed in late October.

33. I set out the relevant provisions of the planning instruments (the Growth Centres SEPP and the DCP) in a later section of this judgment. For present purposes it is enough to say that:

1. the July amendments to the SEPP carried forward provisions (the application of which are now disputed) concerning a minimum lot size of 300m², and, for the first time, imposed an overall cap on the number of permitted dwellings;

2. the September amendments to the SEPP introduced, for the first time, a limit of 16.5 dwellings per hectare for residential development;

3. the DCP provided further guidance on the application of these restrictions.

47. As I describe in more detail below, even before the land was formally re-zoned, Mr Whitting devised a revised version of the subdivision plan which differed in some respects from the Presale Plan. Work continued on the revised plan following the release of the Finalisation Report (which Mr Whitting received soon after the rezoning was effected). In late September (actually several days in advance to the amendment to the SEPP) Mr Whitting became aware that a density limit of 16.5 dwellings per hectare was to be imposed. It seems that he was not aware of the amendments to the SEPP, but he did obtain a copy of the revised DCP which referred to this restriction in early November, within a week or so of the DCP being released.

48. Mr Whitting considered that a 16.5 dwellings per hectare restriction would require further amendments to his proposed subdivision plan, or alternatively the Developers could sell the land. Some negotiations for the sale of the land took place between the Developers and a third party beginning in late 2021, but these negotiations did not ultimately go anywhere. No steps were taken by the Developers to prepare or lodge a development application for the subdivision, whether in the form of the Presale Plan or in any other form.

49. Meanwhile, by the end of July 2021, the Developers had obtained consent recissions for 73 of the 93 Presale Contracts. In August 2021, letters were sent by Mr Alcorn to the Preets and the Bakshis (among other remaining purchasers) requesting their agreement to rescind as well. This was the first occasion on which the Developers had contacted them since their respective sunset dates had passed. No agreement was reached.

50. By late November 2021, only eight of the Presale Contracts remained un-rescinded. The Developers had Mr Whitting prepare a report to bolster their case for rescission. The report argued that non-registration of the Plan by the sunset dates in the contracts had been unavoidable, and completion of a subdivision was still some years away.

51. It was, however, not until April the following year that Mr Whitting’s report was sent to the Preets and the Bakshis. Accompanying the report was a letter formally giving the notice required for rescission proceedings under CA s 66ZS. Correspondence ensued but neither the Preets nor the Bakshis agreed to rescind.

52. Ahmau’s originating summons was filed on 29 August 2022. Since then, it seems, no steps have been taken by the Developers either to pursue a subdivision of the Leppington Land or to sell it. The caveats lodged by the Preets and the Bakshis over the Ahmau Land remain in place.

Lay witnesses

53. Evidence was given by Mr Preet on behalf of the Preets and by Mr Bakshi on behalf of the Bakshis. Each of them was cross-examined. I summarise their evidence below.

54. For Ahmau, evidence was given by Mr Wheadon, Mr Kavanagh and Mr Whitting. Mr Wheadon’s evidence was limited in scope and his cross-examination, although effective, was brief. Mr Kavanagh and Mr Whitting were cross-examined at length. I refer to their evidence, to the extent necessary, in more detail below.

55. Mr Alcorn did not give evidence. According to Mr Kavanagh, Mr Alcorn stopped working for the Developers in early 2022 upon being diagnosed with cancer. He died in 2023.

Planning instruments

56. As already noted, at the time the parties entered into the Contracts, the Leppington Land was zoned RU4 (Primary Production Small Lots) under the Camden Local Environmental Plan 2010. That zoning imposed a minimum lot size of two hectares on any subdivision of the Land. The RU4 zoning remained in place thereafter, including as at the sunset dates under both Contracts, until 16 July 2021, when it was altered by amendments to the relevant part (Appendix 9) of the Growth Centres SEPP. It is unnecessary for the purposes of this judgment to refer to the clauses of the SEPP itself. All references to clauses are to Appendix 9 (the Camden Growth Centres Precinct Plan).

57. The amendments had the effect of re-zoning Stage 5, including the Leppington Land (bordered in red), as shown in the zoning map reproduced below.

58. Most of the Leppington Land (coloured pink) was rezoned as R2 (Low Density Residential). Some on the southwestern corner (coloured yellow) was zoned SP2 (Infrastructure: Local Drainage). Some on the northeastern corner formed part of an area zoned RE1 (Public Recreation).

59. Part 2 of the Appendix dealt with permitted and prohibited developments. The Land Use Table incorporated therein relevantly provided, for land zoned R2:

1 Objectives of zone

• To provide for the housing needs of the community within a low density residential environment.

• To enable other land uses that provide facilities or services to meet the day to day needs of residents.

• To allow people to carry out a reasonable range of activities from their homes where such activities are not likely to adversely affect the living environment of neighbours.

• To support the well-being of the community by enabling educational, recreational, community, religious and other activities where compatible with the amenity of a low density residential environment.

• To provide a diverse range of housing types to meet community housing needs within a low density residential environment.

2 Permitted without consent

Home-based child care; Home occupations

3 Permitted with consent

Bed and breakfast accommodation; Boarding houses; Business identification signs; Centre-based child care facilities; Community facilities; Drainage; Dual occupancies; Dwelling houses; Earthworks; Educational establishments; Environmental facilities; Environmental protection works; Exhibition homes; Exhibition villages; Flood mitigation works; Group homes; Health consulting rooms; Home businesses; Home industries; Information and education facilities; Neighbourhood shops; Places of public worship; Recreation areas; Recreation facilities (indoor); Recreation facilities (outdoor); Roads; Secondary dwellings; Semi-detached dwellings; Seniors housing; Shop top housing; Studio dwellings; Veterinary hospitals; Waterbodies (artificial)

60. Clause 2.6 provided:

2.6 Subdivision—consent requirements

Land to which this Precinct Plan applies may be subdivided, but only with development consent.

61. Part 4 dealt with what were described as “principal development standards”. Three of those standards were the subject of argument by the parties. One of them concerned the minimum lot size. The other two concerned the dwelling density.

62. Minimum lot size: minimum lot sizes were dealt with in clauses 4.1 to 4.1AG. Clauses 4.1 and 4.1AA relevantly provided:

4.1 Minimum subdivision lot size

(1) The objectives of this clause are as follows—

(a) to ensure orderly and efficient use of land,

(b) to ensure a minimum lot size sufficient for development,

(c) to allow for a range of lot sizes that cater for a diversity of land uses and employment activities.

(2) This clause applies to a subdivision of any land shown on the Lot Size Map that requires development consent and that is carried out after the commencement of this Precinct Plan.

(3) The size of any lot resulting from any such subdivision of land to which this clause applies is not to be less than the minimum size shown on the Lot Size Map in relation to that land.

...

4.1AA Subdivision resulting in lots between 225–300m

(1) This clause applies to land in the following zones—

(a) Zone R2 Low Density Residential,

(b) Zone R3 Medium Density Residential.

(2) Development consent may be granted to the subdivision of land to which this clause applies resulting in the creation of a lot that has an area of less than 300m² (but not less than 225m²), if the consent authority is satisfied that the lot will contain a sufficient building envelope to enable the erection of a dwelling house on the lot.

…

63. Apparently (and perhaps surprisingly), the Lot Size Map did not make any provision for the Leppington Land (or any other part of Stage 5). Instead, lot sizes for land zoned R2 were governed by cl 4.1AB which relevantly provided:

4.1AB Minimum lot sizes for residential development in Zone R2 Low Density Residential and Zone R3 Medium Density Residential

(1) The objectives of this clause are as follows—

(a) to establish minimum lot sizes for residential development in Zone R2 Low Density Residential …,

(b) to ensure that residential development in the [Leppington Precinct (among others)] results in the efficient use of land and contributes to the supply of new housing in the South West Growth Centre,

(c) to ensure that residential development has adequate usable areas for buildings and open space,

(d) to ensure that residential development in the Leppington Precinct (among others)] is compatible with the character of the locality and with surrounding residential areas,

(e) to facilitate and encourage the provision of a range of residential lot types, in particular, small lot housing.

…

(3) The minimum lot size for a dwelling house is 300m² if, on the Residential Density Map—

(a) the dwelling density (per hectare) in relation to the land is 15, 20 or 25, or

(b) the dwelling density range (per hectare) in relation to the land is 10–20, 20–25, 25–35 or 35–60.

64. Further sub-clauses provided for minimum lot sizes for dual occupancies, semi-detached dwellings, attached dwellings, multi-dwelling houses, “manor homes” and residential flat buildings.

65. The relevant Residential Density Map (RDM) is reproduced below:

66. The RDM included the following key:

67. That part of the Leppington Land which had been zoned R2 was labelled in the RDM as “O2” and coloured pale brown. Thus, the RDM prescribed a dwelling density range of 12.5 to 16.5 dwellings per hectare for the developable part of the Land.

68. Clause 4.1AD created an exception to the restraints in 4.1AB(3):

4.1AD Exceptions to minimum lot sizes for dwelling houses

(1) This clause applies to the following—

(a) a lot in Zone R2 Low Density Residential that has an area less than 300 m² (but not less than 250m²) if, on the Residential Density Map—

(i) the dwelling density (per hectare) in relation to the land is 15, or

(ii) the dwelling density range (per hectare) in relation to the land is 10–20,

…

(2) Despite clause 4.1AB(3), development consent may be granted to the erection of a dwelling house on a lot to which this clause applies if—

(a) the lot results from a subdivision to which development consent has been granted in accordance with clause 4.1AA and, in determining the development application for the erection of the dwelling house, the consent authority considers any information that it considered for the purposes of that clause in determining the development application for that subdivision, …

69. When promulgated on 26 October 2021, the revised DCP addressed, among other things, the subdivision approval process for Leppington. The DCP specified various “controls”, which included (cl 3):

3. Subdivision applications that create lots smaller than 300m² and larger than or equal to 225m² must be accompanied by a Building Envelope Plan (BEP). An example of a BEP is included at Figure 3-8.

The BEP should be at a legible scale (suggested 1:500) and include the following elements:

• Lot numbers, north point, scale, drawing title and site labels such as street names

• Maximum permissible building envelope (setbacks, storeys, articulation zones)

• Preferred principal private open space

• Garage size (single or double) and location

• Zero lot line boundaries

…

4. Applications for subdivision using approval pathways A2, B1 and B2 require a Public Domain Plan (PDP) to be submitted as part of the application. The purpose of the PDP is to demonstrate how the public domain will be developed as a result of future development on the proposed lots. An example of a PDP is included at Figure 3-9.

The PDP should be a legible scale (suggested 1:500) and include the following elements:

• Lot numbers, north point, scale, drawing title and site labels such as street names.

• Indicative building footprints on the residential lots.

• Location of driveways and driveway crossovers.

• Verge design (footpath, landscape).

• Surrounding streets and lanes (kerb line, material surface where special treatments proposed).

• In laneways, indicative provision for bin collection

• Street tree locations. (Sizes and species list can be provided on a separate plan).

• Demonstrated provision and arrangements for on-street car parking particularly in relation to street tree planting, driveways and intersections.*

• Extent of kerb line where parking is not permitted.*

….

70. The sample BEP and PDP are reproduced below:

71. Dwelling cap: clause 4.1AB imposed a maximum number of dwellings for the purpose of residential developments in the Leppington Precinct. The clause relevantly provided:

4.1BA Maximum number of dwellings on land—Leppington Precinct

...

(2) Development consent must not be granted to development that would result in the number of dwellings on land being more than the maximum number of dwellings shown for the land on the Maximum Dwellings Map.

72. The relevant Maximum Dwellings Map (which need not be reproduced for the purposes of this judgment) specified a limit of 500 dwellings for Stage 5 of the Leppington Precinct (of which the Leppington Land formed part).

73. Dwelling density: Clause 4.1B dealt with residential density. There was a version of this clause in the Growth Centres SEPP as it stood, following amendment, on 16 July. That version only imposed a minimum density requirement, by reference to the bottom of the range shown in the RDM; there was no maximum density requirement. But that changed when a new version of the clause was substituted by further amendments to the SEPP on 30 September 2021. In its substituted form, that clause relevantly provided:

4.1B Residential density

(1) The objectives of this clause are—

(a) to establish density requirements for residential development, and

(b) to ensure residential development makes efficient use of land and infrastructure and contributes to the availability of new housing, and

(c) to ensure the scale of residential development is compatible with the character of the precinct and adjoining land.

(2) The consent authority must not grant development consent to residential development on land for which a dwelling density range is shown on the Residential Density Map if the development will result in the density of dwellings on the land being—

(a) less than the minimum density specified by the dwelling density range, or

(b) more than the maximum density specified by the dwelling density range.

(3) The consent authority must not grant development consent for the subdivision of land for which a dwelling density range is shown on the Residential Density Map if the subdivision would result in the dwelling density on a resultant lot being greater than the maximum dwelling density specified for the land by the dwelling density range.

(4) Subclause (3) does not prevent a subdivision that provides for individual dwellings to be on separate lots if the consent authority is satisfied the subdivision does not also involve the creation of additional dwelling entitlements.

(5) This clause has effect despite anything to the contrary in another provision of this Precinct Plan.

(6) In this clause— density means the ratio of the number of dwellings to the area of the land to be occupied by the residential development, including internal streets and half the width of the roads adjoining the development that provide vehicular access to the development, but excluding land that is not zoned for residential purposes.

74. Part 6 contained “additional local provisions”. Clause 6.1 relevantly provided:

Part 6 Additional local provisions

6.1 Public utility infrastructure

(1) The consent authority must not grant development consent to development on land to which this Precinct Plan applies unless it is satisfied that any public utility infrastructure that is essential for the proposed development is available or that adequate arrangements have been made to make that infrastructure available when required.

(2) In this clause, public utility infrastructure includes infrastructure for any of the following—

(a) the supply of water,

(b) the supply of electricity,

(c) the disposal and management of sewage.

…

75. The October 2021 DCP also dealt with density controls. Schedule 5, clause 4 relevantly provided:

4 Indicative Density Controls

Objectives

a. To ensure the Residential Density of development aligns with infrastructure capacity and amenity of Stages 2 and 5 of the Leppington Precinct.

b. To assist in achieving an equitable share of density across Stages 2 and 5 of the Leppington Precinct.

Controls

1. The clause applies to the area identified in the Indicative Residential Density Map (refer to Figure 2-13).

2. Residential Density should not be greater than the Residential Density shown on the Indicative Residential Density Map (refer to Figure 2-13).

3. A restriction may be placed on new lots to limit further development upon those lots to a single dwelling house. This restriction is to ensure compliance with the maximum number of dwellings allowed in stages 2 and 5 of the precinct.

76. The Indicative Residential Density Map was relevantly the same as the RDM in the Growth Centres SEPP ([65]-[66] above). It likewise prescribed a dwelling density range for the developable part of the Leppington Land of 12.5 to 16.5 dwellings per hectare.

Preets’ circumstances and dealings with Developers

77. Background and documentary evidence: Mr Preet was born in India and migrated to Australia in 2007. Since 2013 he has worked as a bus driver. Mrs Preet has since 2020 operated a business from home selling products on Amazon. Before that she appears to have been occupied full-time at home looking after the Preets’ young children.

78. According to Mr Preet, he first became aware of the Leppington Land subdivision when he saw it advertised in January 2017. At the time the Preets were living in a rented apartment at Granville in western Sydney with their son, who was born in 2015 or 2016.

79. The Preets were introduced to the subdivision through a business which traded under the name “Stroud Homes” (“Stroud”). Stroud was marketing house and land packages containing Presale Lots. Initially the Preets paid a $1,000 deposit for Lot 1043, but they were later told that this Lot had become unavailable and the Lot they eventually purchased (Lot 1040) was substituted.

80. The advertised price of the house and land package was $565,000. Stroud required the Preets to sign a standard form agreement to proceed. The agreement was styled “Housing Industry Association Preliminary Agreement”. It required the “client” to pay a sum of up to $3,900 to Stroud. Of this sum, one part was described as a “land holding deposit”, which was $1,000. The other part of the sum was described as a “preliminary agreement fee”. It was made up of six specified amounts for the carrying out of tests and surveys, preparation of drawings and the like which could be individually selected by the client. If all the amounts were selected, the fee was $2,900.

77. The Agreement was accompanied by a standard form building contract for the type of home selected by the client. But the Agreement stated that it was not a contract for Stroud to carry on any actual construction work. A fixed price construction contract would be entered into later. If so, the preliminary agreement fee would be built into the cost under that contract. But the client was not obliged to proceed with Stroud. The client could use the test results and proceed with another builder. The fee would be refunded if the client decided, before the tests began, not to proceed.

78. The agreement also contained a series of special conditions which could be ticked by the client if required. These were:

[Red type in original shown in bold]

Subject to finance

Subject to Land Registration

Subject to the Sale of Home

No Tests or Surveys Will Be Commenced Until Advised by Clients

Changes to Home Design and Inclusions Can Still Be Made, up to Contract Signing

100% Guaranteed Fee Refund Will Apply, If Client Doesn't Proceed, For Any Reason

83. The version of the Preets’ Preliminary Agreement which is in evidence is unsigned. The individual components of the $3,900 fee are not ticked, but the Preets paid the maximum fee amount of $2,900, so they must have chosen all the components. The last three special conditions (including the “guaranteed fee refund”) are ticked. There was no evidence about whether the “subject to finance” or “subject to land registration” special conditions were ticked in the executed version.

84. The Preets paid the $2,900 preliminary agreement fee in in mid-February. They were asked by Stroud’s office manager to provide the name of a solicitor to act for them so that the matter could be referred to “the developer” for preparation and execution of a formal contract for the purchase of the Lot. The Preets seem not to have had an existing solicitor, and they agreed to use Stroud’s.

85. As previously mentioned, the Preets’ Presale Contract was executed on 21 March 2017. The deposit under the Contract was 10% of the purchase price ($33,397), which was paid by the Preets (presumably including the $1,000 “land holding deposit” the Preets had earlier paid to Stroud). The Contract records Mr Alcorn as Ahmau’s representative and the Preets’ solicitor as Juris Australia Lawyers, a firm at Harris Park (presumably the solicitor identified by Stroud). There was no further evidence about the process of negotiating and executing the Contract.

86. On an ad valorem basis, the duty on the Contract was $10,500. But the Preets successfully applied for a ‘first home buyer’ concession, which reduced the duty to $5,500.

87. In their correspondence with Stroud, the Preets were told that the Presale Plan would be registered by June 2018. But there is no evidence of any of the further dealings, if any, between the Preets and Stroud. There was no suggestion that the Preets had ever entered into a building contract with Stroud, or would not be entitled to do so (at least at the original price) if they were to obtain specific performance of the Contract.

88. On the face of it, the Preets would have been entitled to a refund of the $2,900 preliminary agreement fee if they had asked for it and they had not in the meantime requested the tests covered by the fee to be carried out. Whether they in fact obtained a refund, or could now do so if their Presale Contract were rescinded or were found to have been frustrated, was not addressed.

89. After entering into the Contract, the Preets continued to live in their rented apartment at Granville. Their second child, a daughter, was born in 2017 or 2018.

90. In late 2019, the Preets moved to Spring Farm southwest of Sydney, having bought land in a subdivision there and built a house on it. They continue to live there. The suburb of Spring Farm is about 3km southwest of Leppington and also falls within the Camden local government area.

91. It seems that, following entry into their Presale Contract, the Preets made no enquiry of the Developers or their representatives about the progress of the subdivision of the Leppington Land until January 2021, about two months before the sunset date in the Contract. On 11 January, a solicitor acting for the Preets, Mr Khurram Shahzad, wrote to Mr Alcorn:

We are seeking an update on the progress of the registration.

We note that the contract was exchanged on 21 March 2017 and registration was due in 48 months of the contract which is due in March 2021.

We will appreciate if you can inform our office with the anticipated date of registration in order to organise loan.

92. Mr Alcorn replied by email at about 10pm the same day. He wrote:

Land has yet to be rezoned let alone any development consent or the like.

Even when the land is rezoned I wouldn't expect registration for 2 years after that at a minimum.

We keep asking when rezoning is likely and get stone walled every time.

Happy to agree to a mutual rescission if that is desired.

93. There was no response from Mr Shahzad to the proposal for rescission. The sunset date passed two months later. Four months after that, the Leppington Land was finally rezoned.

94. On 18 August Mr Alcorn wrote a formal letter to Mr Shahzad seeking rescission of the Preet Contract. The letter set out the provisions of SC cl 11.1 and continued (paragraph 3):

The Vendor has been unable to register the proposed Plan of Subdivision because:

a. the relevant authorities have rezoned the area that the proposed lot is proposed to exist only very recently, and within the past few week(s); and

b. there has been no opportunity to progress the development (such as by lodging a development application).

95. The letter then contained an offer, open until 25 August, to enter into a deed under which the parties were to agree to rescission with a “full refund” of the deposit; to mutual releases, and to bear their own costs. If the offer was not accepted, Ahmau would “proceed to rescission” pursuant to CA s 66ZS.

96. Again, there was no response from Mr Shahzad. On 16 September Mr Alcorn sent a further letter. He stated that if the Preets did not agree to rescission within 14 days Ahmau would have to instruct lawyers to make an application to this Court for leave to rescind the Contract under CA s 66ZS. In that application Ahmau would seek an order for costs against the Preets under s 66ZS(8).

97. Mr Alcorn explained the threat to seek costs as follows (paragraph 4):

Your clients are unreasonably withholding consent on the basis that:

a. the land was only rezoned in July 2021;

b. since rezoning it would have been impossible to:

i. lodge a development application, which would take at least 4 months to prepare and lodge;

ii. obtain a development consent which would take about 6 months for council to consider; and

iii. carry out the subdivision works which would take at least 9 months,

all by the sunset date under the contract.

98. Again, there was no response from Mr Shahzad. But a month later, on 19 October, one came from the Preets’ new solicitor, Mr Peter Anjos. His letter relevantly stated:

Your offer of rescission is rejected.

We note that our client is willing to extend the sunset date to enable the vendor to:

a. Lodge a development application;

b. Obtain development consent; and

c. Carry out the subdivision works.

We have made our client aware of the legislation and when costs may be awarded against him. In the circumstances we fail to see how our client’s consent to extend the sunset date is unreasonable.

If the Court agrees that our client has acted reasonably and even if your client is successful, the vendor will be liable for costs.

In addition to the above we put your client on notice that should an application be made to the Court our client will be seeking an order for compensation should the contract be rescinded.

Please be advised that we have instructions to accept service of any originating process with respect to this matter.

99. Mr Alcorn did not reply to Mr Anjos’ letter. This was despite follow-up letters from Mr Anjos in December and January. Mr Anjos lodged a caveat over the Ahmau Land to protect the Preets’ interest under the Contract. This appears to have been lodged after the December letter, and it was specifically referred to in the January follow-up letter.

100. Still there was no reply from Mr Alcorn. Mr Anjos sent three follow up letters in March and further follow up letter in April. Mr Alcorn never did reply. Instead the matter was taken over by an external firm of solicitors, Centurion Lawyers.

101. On 20 April, Mr Maroun Draybi of Centurion wrote to Mr Anjos with a fresh request for rescission. Mr Draybi began by setting out the changes to the planning instruments which had occurred in 2021. He made two points.

102. The first point was that delays in the planning process, over which Ahmau had had no control, had delayed the lodgement of a development application. The rezoning had not occurred until after the sunset date had expired. And even after the rezoning, the Council would not have been prepared to accept a development application until after the revised DCP was issued on 26 October.

103. Mr Draybi’s second point was that the changes to dwelling density limits and minimum allotment sizes made in the SEPP had rendered the Presale Plan “obsolete”. Mr Draybi set out the relevant provisions at some length to explain why this was so. These changes had been unforeseen.

104. Mr Draybi asserted that, following the issue of the revised DCP on 26 October 2021, and ignoring the density restrictions, a minimum period of 18 months, which he described as “optimistic but unrealistic”, would have been needed to register a plan of subdivision. That would have implied completion in late April 2023 at the earliest. But the new density restrictions would have further delayed registration at least by “some months”.

105. In support of these assertions Mr Draybi enclosed a report written by Mr Whitting for Mr Kavanagh in November 2021 (see [223]-[225] below). The report was described as a “planning and approvals precis”. It outlined the steps so far towards obtaining a subdivision of the Leppington Land; described the course of the planning process; and listed the further tasks required to complete subdivision, with an estimated timetable.

106. The report stated that the activities completed to date included:

• Ongoing liaison with Camden Council in relation to progress of the rezoning process

• Completion of land surveying and contouring

• Liaison with Sydney Water to confirm the availability of gravity sewerage infrastructure to service the Property

• Environmental assessment of select areas of the site for contamination

• Preliminary planning and subdivisional layouts

107. In his description of the planning process to date Mr Whitting reported:

Rezoning [in July 2021] was followed in early November [2021] by an updating of the Camden Council Growth Centre Precincts Development Control Plan. This was accompanied by unforeseen density and maximum dwelling controls imposed as a result of limitations on sewerage capacities.

It was therefore only in November 2021 that any development application could have been submitted via the NSW Planning Portal and even then, it would be unlikely to have been accepted absent a formal pre-lodgement meeting with Camden Council.

Whilst we had previously managed to gain confirmation from Sydney Water that it could service the Property, any subdivisional planning works undertaken to date were rendered obsolete by the imposed density controls.

Effectively therefore, it was only in mid-November 2021 that we were in a position to proceed with planning for submission of a development application for the Property.

108. The timetable for the remaining tasks estimated that registration of the subdivision plan would occur in February 2024. This was 27 months after the date of the report, although the estimates provided for the tasks in question totalled 30 months.

109. In his letter Mr Draybi referred to Mr Whitting’s report as “expert advice”. He summarised the main points in the report, describing the outline of tasks already taken as “the various activities which have been carried out … to progress the development up until November 2021”. He also stated that the 30 month timeline exceeded the 18 month timeline he had earlier provided, but that was because that timeline was, as he himself had stated, unrealistic. The 30 month timetable was the one a reasonable developer would adopt.

110. Under the heading “sunset date” the letter repeated that it had been impossible for Ahmau to obtain registration of the Plan by the sunset date and further that changes to the planning instruments had “effectively rendered the [Presale Plan] obsolete”. It added:

As at the date of this letter, only the Purchaser and 7 other purchasers (purchasing a proposed lot in the Proposed Subdivision Plan) are yet to provide their consent to rescission.

111. The letter went on, “[b]y reason of the matters set out” in it, to give formal notice under CA s 66ZS(4) of Ahmau’s intention to rescind the contract within 28 days after service. It stated that if consent was not given within that period, Ahmau would commence proceedings under CA s 66ZS. The Preets were invited to give consent to avoid unnecessary litigation. The letter asserted that the Court would be “comfortably satisfied” that rescission would be just and equitable, and that, in Ahmau’s opinion, the withholding of consent would be unreasonable.

112. Mr Anjos replied on the same day. He wrote:

At this time we do not propose to respond to the matters raised in your correspondence and ask you advise our office as a matter of urgency, whether or not your client intends to proceed with the subdivision. If your client intends to proceed with a subdivision then please submit the amended plan and our client may wish to consider whether to accept a comparable block of land under the new subdivision.

We believe that the above is a suitable alternative resolution to the current matter.

113. A week later Mr Draybi responded. He stated that Ahmau did not “view the proposal in your letter … as a suitable alternative resolution”. He repeated the invitation to rescind, and foreshadowed, if consent were to be withheld, an application for costs.

114. On 11 May Mr Anjos replied (emphasis added):

We note your correspondence and advise that our client is not prepared to rescind the contract on terms advanced by your client.

We have advised our client on the ramifications of S66ZS of the Conveyancing Act 1919 and are comfortable with the instructions received to date. It is firmly in your client's interest to put forward a proposal that would provide our client with compensation having regard to the significant change in the market. We note the circumstances of your letter dated 20 April 2022 and we are yet to be convinced that grounds exist for your client to rescind the contract without compensation being ordered.

115. There was no further communication (apart from without prejudice correspondence referred to below) between the parties before the proceedings were commenced three months later.

116. Mr Preet’s testimony: Mr Preet’s main affidavit was made in March 2023. In it, he deposed that he and his wife “started looking for property to purchase in Sydney” from “around 2016 onwards” because they wished to expand their family and the existing rented apartment at Granville was too small.

117. In his affidavit, Mr Preet explained the decision to purchase lot 1040 in the following terms:

I decided to purchase Lot 1040 because I thought it was a desirable area to grow my family and raise my children as it was in the same area as our then rental home in Granville, close to a shopping mall, close to my work, close to our extended family, close to schools and it was also close to a new airport that was under construction at the time. After researching property for over a year, I knew that Leppington was also one of the only areas that I could afford in Sydney.

118. In explaining his reasons for refusing to consent to rescission of the contract, Mr Preet deposed in his main affidavit that since entering into the Contract he had been looking forward to moving to Leppington with his family. He acknowledged that in the meantime he had bought the Spring Farm property, but stated that his plan was to live there only “until Lot 1040 settled”.

119. Mr Preet explained that the Spring Farm property is located between two other houses which are occupied by people with disabilities. The behaviour of the disabled residents frightens his children and at times creates disturbances which prevent him and his family from enjoying their home. He stated that he was not aware that this would be the case until after they had moved in. He described this as “a major factor” in the decision not to rescind the contract, and stated that the Spring Farm property was not suitable as a long term home for his family.

120. Mr Preet also stated that another “major factor” in his refusal to rescind was that Lot 1040 had greatly increased in value. He referred to the valuation he had obtained of $720,000 and asserted that if the contract was not completed he would “incur a significant loss” and Ahmau would receive a corresponding “windfall”.

121. Mr Preet stated:

On my family's income, I would not be able to purchase a similar parcel of land in Leppington at the price for which I purchased Lot 1040 in March 2017 nor could I afford to purchase a similar parcel of land in Leppington at all now given the steep rise in house values, increasing interest rates and increasing cost of living.

122. Mr Preet added that he was no longer eligible for the first home buyer’s concession and any duty on a new purchase would be levied at the full rate. On the $720,000 valuation the amount of duty would be $27,500. Mr Preet stated that “the rising interest rates and increasing house prices together with the requirement to pay the full amount of stamp duty will make it impossible for me to enter the market in Leppington”.

123. Mr Preet went on to state:

In the current housing market, I believe that in order to move my family to a home that suits our needs, I would have to relocate interstate or move to the regional and rural areas of New South Wales to find affordable housing which would be highly disruptive to the life I have built in Sydney for my family and especially for my children.

124. Mr Preet stated that he had seen what he described as “the amended plan of subdivision”, by which he appears to be referring to one of the layout plans prepared by Mr Whitting in 2021. He continued:

I have seen the amended plan of subdivision and I can see that a parcel of land similar in size to Lot 1040 is still depicted within the plan in a similar position within the subdivision. It is still contemplated that that parcel of land will form part of the subdivision. It is my belief that the Plaintiff will eventually commence subdivision of the land at 14 Dwyer Road, Leppington now that it has obtained approval for the subdivision. I am willing to wait as long as necessary to receive a parcel of land equivalent or similar to that in the Contract. It is very important for my future and my children's future that the investment that my wife and I made in Lot 1040 can continue. That land will continue to rise in value and I want my children to have this asset to on an ongoing basis.

125. Mr Preet also deposed that he “did not hear anything” from Ahmau between March 2017 and 11 January 2021. He referred to the correspondence between the parties up to May 2022 which I have summarised above. He said that it made him “extremely disappointed and stressed”. This stress had been compounded by the Developers’ “long period of unresponsiveness”.

126. In his supplementary affidavit, Mr Preet denied the allegation in Ahmau’s defence that the Preets’ “primary position” was that “they should be awarded some form of damages”. Mr Preet stated that he did not want the contract to be rescinded and he wanted the land at Lot 1040 “or a similar block”. He stated that he was “willing to consider” paying the difference for any larger block the plaintiff might have available once a subdivision was approved.

125. Ahmau’s defence to the Preets’ specific performance claim put in issue whether they were ready willing and able to complete the Contract. Mr Preet gave supplementary oral evidence in chief on this subject. He said that his annual earnings were about $60,000 and Mrs Preet’s current annual income from her business was similar. On his and his wife’s earnings, they could borrow up to $550,000.

126. Mr Preet also said that, in addition to the Spring Farm property, he and his wife owned an investment property in Queensland. They had about $400,000 in equity in the Spring Farm property, plus another $200,000 in the Queensland property.

127. It emerged in Mr Preet’s cross-examination that at the time the Preets entered into the Contract to buy Lot 1040, they owned an investment property at Shortland, Newcastle, which they were renting out. Their prior ownership of this property had not been disclosed in Mr Preet’s affidavits. It had been purchased in 2014 for about $380,000, also under an off the plan contract. At some point after March 2017 it was sold, presumably to fund the purchase of the Queensland property.

128. Further details about the purchase of the Spring Farm property also emerged. The land was in fact purchased pursuant to an off the plan contract similar to that which was applied to the Leppington purchase (it likewise contained a sunset clause). The land contract was signed in “2017 or 2018”. The price for the land was about $345,000. Following registration of the plan and completion of the purchase, the Preets entered into a building contract which took “4 or 5 months” to complete before they moved into the property in late 2019. Mr Preet said that the building work cost about $300,000.

129. Mr Preet was asked about the delay of almost four years between entry into the Presale Contract for Lot 1040 in March 2017 and the enquiry to Mr Alcorn about progress in January 2021. It was put to him that this showed that he did not care about the completion of the Contract. He denied this, and complained about a lack of action from his solicitor.

130. Mr Preet was also cross-examined on the references in Mr Anjos’ letter of May 2022 to compensation ([114] above). Mr Preet agreed that nowhere in the letter did Mr Anjos say that the Preets wanted the Lot itself; all Mr Anjos mentioned was compensation. At one point, counsel for Ahmau put to Mr Preet that it was fair to say that at the time the letter was sent he wanted compensation rather than the land, and he agreed. But when pressed about when and why he had changed his mind, he quickly sought to resile from that position, insisting that he had always wanted the Lot.

131. I found Mr Preet’s complaint about not hearing from the Developers puzzling. While it is true that the Developers made no approach to the Preets before January 2021, Mr Preet did not make any approach to them either. There were also significant delays in responding to the rescission proposals put forward by Mr Alcorn in January and August 2021.

132. Mr Preet tried to blame his solicitor for this, but there was no evidence that Mr Shahzad was retained before January 2021. Nor, after January 2021, was there any independent evidence of any delay by Mr Shahzad in acting on instructions given by Mr Preet. Certainly, although Mr Alcorn might not personally have been to blame, there was no excuse for the failure to respond to correspondence addressed to him by Mr Anjos. But this only covered the period from October 2021 to April 2022.

133. I also found Mr Preet’s testimony about his intentions a bit unconvincing. Clearly, he did not anticipate the problems with the neighbours at the Spring Farm property. The decisions to buy the Spring Farm property, to build a house on it and then move there would have involved significant long-term planning and financial commitments. They are not easy to reconcile with a continuing fixed intention of moving to the Leppington property as soon as he completed its purchase. And of course, on completion of the sale of the Leppington property it would not be possible to move in; it would be necessary to build a house first.

134. Once the Preets had moved to Spring Farm, registration of the Presale Plan and completion of the purchase of Lot 1040 would have given them three choices. Those would have been: re-selling the Lot; retaining it as an investment, either as vacant land or with a rental home built on it; or building a home on it for themselves. Given the uncertainty about when (or if) Lot 1040 would become available, the only rational approach would have been to wait and see. Counsel for the Preets submitted that they were not sophisticated people, but Mr Preet was already, at the time, no stranger to property transactions, including off the plan purchases. I can see no reason why he would have followed anything other than the rational approach.

135. Admittedly, the problems with the neighbours which emerged at Spring Farm might have increased the attraction of eventually building at Leppington and moving there. But, judging by his lack of enquiries about the Contract before January 2021, Mr Preet seems to have been in no hurry. In January 2021, when he was first asked about rescission, completion of the purchase of Lot 1040 remained at least two years away, and the construction of a new house would have added substantially to the timetable. That remained the case when Mr Preet gave evidence at the trial.

136. If the Contract were still on foot, the only rational approach would remain that of waiting and seeing. On the evidence which has emerged about the Preets’ financial firepower, I do not accept that they would be unable to buy a new house in south-western Sydney if they wished. Presumably they have decided to put up with the problems at Spring Farm for the moment.

137. In these circumstances, I find it telling that Mr Preet referred in his affidavit to Lot 1040 being an investment and wanting it for his children. I do not accept that the Preets have, nor, probably, that they ever did have, a settled intention to use Lot 1040 to build a new family home for themselves.

Bakshis’ circumstances and dealings with Developers

140. Background and documentary evidence: Mr Bakshi, like Mr Preet, was born in India. He is a software engineer who holds an Indian Post-Graduate qualification in computer science. In 2011, he “relocated” to Sydney to pursue post-graduate study in information systems at the University of New South Wales. There he met his now wife, who was completing a PHD in Medicine at the Garvan Institute of Medical Research (under the auspices of the University of New South Wales). They married in 2012.

141. Like the Preets, the Bakshis’ introduction to the Leppington Land came through Stroud. They too signed a Preliminary Agreement and paid Stroud a deposit of $1,000 and a preliminary agreement fee of $2,900. In their case, all of the special conditions were ticked except the one making the Agreement conditional on the sale of an existing home (which, of course, they did not then have).

142. The Bakshis paid the $3,900 to Stroud on 8 February and were similarly asked to identify their solicitor for the purposes of preparing their Presale Contract. They retained a firm named VS George Lawyers (“VSG”), to act for them on the purchase. Initially the matter was handled by Mr Jyotsna Singh of that firm.

143. Mr Bakshi wished to reduce the deposit payable to 5% and asked Mr Singh to pass the request on to Mr Alcorn. Mr Alcorn was prepared to agree to an instalment arrangement under which half of the deposit (5%) would be paid on exchange and the other half upon approval being granted for the development. This was acceptable to the Bakshis.

144. The following emails ensued between Mr Singh and Mr Alcorn:

Mr Singh to Mr Alcorn, 24 March 5:36pm

When do you anticipate to receive Development Application Approval? And will our clients receive some notice prior to approval so they can arrange their finance to pay the deposit?

Mr Alcorn to Mr Singh, 26 March 10:24am

The land is still zoned rural pending a rezoning to residential. I would expect a rezoning sometime in the next 12-15 months. I can then lodge a development application. Allow say 6 months for that to be assessed and approved then my best guess for development consent is 18-21 months. But that is only a guess.

I will give ample notice of approval for purchasers to arrange the balance of deposit. A regular update will be distributed so [they] are all kept in the loop along the way.

145. As already noted, contracts were exchanged between Ahmau and the Bakshis on 6 April 2017. The Bakshis thereupon paid the balance of the first instalment of the deposit (after taking account of the $1,000 deposit paid to Stroud). The total paid was thus 5% ($16,699). [1]

     1. The figure of $16,699 was in the draft judgment issued to the parties and was challenged by Mr Bakshi (see [636]-[637] below). Mr Bakshi submitted that the figure should have included the initial deposit of $1,000 paid to Stroud ([141] above), giving a total of $17,699. It is true that there is documentary proof of payment of $1,000 to Stroud and a receipt issued on behalf of Ahmau for $16,699. But that does not mean the two amounts should be aggregated. I assume that under the terms of the Preliminary Agreement Stroud was obliged to account for the $1,000 to Ahmau when the Contract was signed, and did so; the Purchasers would have paid the balance to make the deposit up to the agreed figure, and the receipt would issued from Ahmau for that amount. In any event, Ahmau was only accountable for the amount shown in its receipt; if Stroud retained the $1,000 paid to it, that was not Ahmau’s responsibility.

146. Like the Preets, the Bakshis claimed the benefit of the first home buyers’ duty concession on the Contract. They received a complete exemption. Why they received a greater benefit than the Preets was not explained in the evidence or addressed in the parties’ submissions.

147. As with the Preets, there is no evidence of the further dealings, if any, between the Bakshis and Stroud after they entered into the Presale Contract. Mr Bakshi said in cross-examination that they had never entered into a building contract with Stroud and he remained unsure about whether they would. What happened, or may yet happen, with the preliminary agreement fee is unknown.

148. From 2018 onwards, Mr Bakshi did make regular requests for information from Ahmau on the progress of the development. These requests were made to Ahmau’s agent Mr Sergi.

149. The first request for information came in March 2018, 11 months after the Presale Contract was signed. Mr Sergi told Mr Bakshi that development approval was expected at the end of 2018 and registration of the plan of subdivision (and hence completion) at the end of 2019.

150. Mr Bakshi’s next enquiry came in November 2018. He was told that there had been some slippage. Development approval was expected in mid-2019 and registration of the plan of subdivision at the end of 2020.

151. Mr Bakshi made further enquiries in March and May of 2019. His enquiries focused on the development approval. In March, he was told that it was still on track for mid-2019 and in May that it might be delayed for 6 months for the Council election in the “worst case” but that so far everything was on track.

152. In September 2019, the Bakshis bought a residential property at Hammondville. There is no evidence about where they had been living before this, but it was presumably in rental accommodation. The property consisted of an existing house containing three bedrooms. The purchase price was $785,000.

153. Three days after the purchase, Mr Bakshi made a further request of Mr Sergi about the progress of the Leppington subdivision. He was told that the development application was expected at the “start of 2020” and registration of the plan of subdivision by “mid-2021”. He made a further enquiry in December 2019 and was told that everything remained on track.

154. As most who are reading this judgment will recall, the Covid pandemic came to worldwide attention in February 2020 and restrictions on gathering and movements began in March. In July, Mr Bakshi made a further request for information and was told that as a result of the effect of the pandemic the site would not be ready (evidently for building, i.e. registration of the strata plan) until “2022”. This was clearly well beyond the sunset date on the contract, which was April 2021.

155. In early February 2021, Mr Bakshi made a further request for updated information from Mr Sergi. The following emails were exchanged between them:

Mr Bakshi to Mr Sergi, 1 February 2021 8:27am

Given we had paid a deposit for the land back in 2017, could we please get a detailed timeline of if and when this land will be ready? We need to plan our finances accordingly and the moving target even pre-covid has been hard to navigate. Have the approvals been obtained?

Mr Sergi to Mr Bakshi, 1 February 2021 8:33am

Which lot did you purchase. Also an email was sent to your solicitor saying the timing has been pushed out to the end of 2023 & if you no longer want to wait you can cancel your contract and get your deposit fully refundable?

Mr Bakshi to Mr Sergi, 1 February 2021 8:39am

It was lot 1064. I have not heard from the solicitor yet but I’II give him a call. We still aren't sure what we will be doing with the contract but would you be able to tell us the reasons for the delay (other than covid)? Are the approvals still pending?

Mr Sergi to Mr Bakshi, 1 February 2021 8:54am

Unfortunately due to COV19 there was more than this site that got affected, all of stage 5 sites in Leppington got put on hold. Please contact your solicitor regardless as the sunset clause date needs to be extended regardless if you wish to keep this lot.

156. There followed an exchange of emails between Mr David Litfin, a solicitor at VSG, and Mr Sergi:

Mr Liftin to Mr Sergi, 3 February 2021 1:53pm

Our client informs us that the project has been delayed and that the vendors are allowing purchasers to pull out.

We do not appear to have received anything from you since February 2018.

Can you please confirm the current situation?

Mr Sergi to Mr Singh, 3 February 2021 9:01pm

As registration has been pushed out further than expected the vendor is saying each buyer can pull out & get a full refund. Please advise if you would like us to email you a deed of recission?

157. There was no reply from Mr Litfin for almost six weeks. On 15 March he emailed Mr Sergi stating that the Bakshis did not wish to pull out.

158. Almost five months passed. Then on 18 August Mr Alcorn wrote a letter to VSG asking the Bakshis to agree to rescind the contract. The letter appears to have been in almost the same, if not exactly the same, form as the letter sent to the Preets at about the same time ([94] above).

159. On the same day Mr Litfin responded:

Can you please provide more detail regarding paragraph 3 of your letter [quoted at [94] above], so that we can advise our client fully. You appear to be saying that the area has been rezoned and that now makes the Development Application possible, as the reason for now wanting to rescind the contract.

160. There was no immediate reply from Mr Alcorn and six days later Mr Litfin emailed him again. Mr Litfin noted that Mr Alcorn’s letter had given the Bakshis seven days to consent to rescission and had not responded to the request for information. The email went on to state that the offer of rescission in the letter was rejected.

161. On 16 September Mr Alcorn wrote again to VSG. The letter was in substantially the same form as the letter sent on the same date to the Preets ([96]-[97] above) and again, asked for consent to rescission within 14 days.

162. This prompted a response from Mr Litfin on 1 October. Mr Litfin wrote:

We are instructed that the value of the land has increased substantially over the last four years and that our client, apart from being significantly disadvantaged if the contract was rescinded, risks being priced out of the market completely.

The first time your client raised the issue of Zoning, was not until after the zoning had already changed. At no point during the preceding four years was it raised as a potential issue and it is no longer an issue. Furthermore, we are informed that the timeline outlined in paragraph 4.b of your letter dated 16 September is substantially different from the timeframe conveyed by the vendor's agent at multiple times.

Your client has had four years to prepare the Development Application. It appears that the vendor did not intend to prepare the Development Application until after the property was rezoned and that even after it was rezoned, they chose instead to try and rescind the contract rather than lodge the Development Application. This objectively appears to have been a commercial decision by your client to capture the financial gain that would flow to our client.

Our client rejects the vendor’s request to rescind the contracts.

163. There was no reply from Mr Alcorn. At the beginning of February the following year Mr Bakshi emailed Mr Sergi asking whether there was “any update on the status” of the Leppington subdivision. Mr Sergi replied that there was none “at this stage”.

164. A further two months passed before, on 20 April, Mr Draybi of Centurion wrote to VSG with a fresh request for rescission. Again, the letter from Mr Draybi was in substantially the same form as his letter Preets sent at the same time ([101] above).

165. Evidently the letter was passed on to Mr Bakshi but he decided to conduct the further negotiations himself. On 4 May, he emailed Centurion asking them to direct future correspondence to him and undertaking to respond to their letter of 20 April on his return from overseas at the end of the month.

166. On 18 April, whilst still overseas, Mr Bakshi sent a letter to Mr Draybi. The letter referred to the provision in the proposed deed of consent which stated that the purchasers had obtained legal advice about their rights. Mr Bakshi stated that the earliest he would be able to obtain such advice would be after his return, but set out a list of questions, by reference to the letter of 20 April and the report from Mr Whitting enclosed with it. Mr Bakshi stated that he was seeking the information was asked so as to be able to make his decision on his return.

167. The list of questions was extensive. It included:

[Mr Whitting’s November 2021 report] states that -

…

Activities completed to date have included:

• Ongoing liaison with Camden Council in relation to progress of the rezoning process

• Completion of land surveying and contouring

• Liaison with Sydney Water to confirm the availability of gravity sewerage infrastructure to service the Property

• Environmental assessment of select areas of the site for contamination

• Preliminary planning and subdivisional layouts

1. Could you please provide details as to the outcome of the Environmental assessment of select areas of the site for contamination?

2. Could you please provide a copy of the preliminary planning and subdivisional layouts?

[The memorandum] further states that

"This was accompanied by unforeseen density and maximum dwelling controls imposed as a result of limitations on sewerage capacities."

3. Please provide details as to the sewerage capacities that were used for the initial subdevelopment, and why these were deemed reliable at the time the development was sold?

4. Please provide details as to the revised, current sewage capacities, and what reasonable steps were taken to achieve provision of the original sewerage capacities?

Additionally, the following timeline is provided for subdivisional work-

Activities required to complete subdivisional works:

A list of the activities prerequisite to completion of subdivisional works are as follows:

Activity            Duration    Complete

Environmental studies      6 months    Apr 2022

Subdivision design & planning   3 months   June 2022

5. Can you please provide us with a copy of the Environmental Studies?

676. Counsel for Ahmau began by contending that, as a matter of substance, Ahmau had been entirely successful in the proceedings. Ahmau had succeeded in its frustration claim. Had it not succeeded on that claim, Ahmau would have obtained an order for statutory rescission in its favour. The cross-claims had failed.

677. Counsel submitted that there was no reason to analyse the outcome on a claim-by-claim basis in accordance with my approach in Akierman. Counsel characterised the case as concerning a single question: whether Ahmau should be discharged from the contract. To the extent that Ahmau had failed on any issues, these were subordinate issues which were not “clearly dominant of severable”.

678. Counsel submitted that, as a result, Ahmau was prima facie entitled to the whole of the costs of the proceeding on the basis that costs followed the event: UCPR Rule 42.1. The onus thus shifted to the Purchasers to demonstrate a good reason why the Court should order otherwise. He submitted that the Court would not ultimately be satisfied that it should do so.

679. Counsel next contended that the costs order in favour of Ahmau should be on an indemnity basis. Counsel relied in particular on the Calderbank offer of 3 November 2022 and the formal offer of 15 April 2024, submitting that the offers were more favourable to the Purchasers than the eventual result of the proceedings. Counsel argued that rejection of the offers had been unreasonable.

680. Counsel submitted that the correspondence showed that the Purchasers proceeded on the basis that they would be entitled to compensation, effectively on a contractual basis, for the increased value of the land. This was rejected. It was this unrealistic and erroneous assumption which had been the real cause of the litigation proceeding to hearing.

681. Counsel for the Preets submitted, as counsel for Ahmau had submitted, that the proceedings should be seen as having involved a single claim. Counsel therefore agreed that the claim-by-claim analysis in Akierman was not appropriate.

682. But counsel characterised the outcome of the claim differently. Although Ahmau’s claim for frustration succeeded to the extent that the Court was satisfied that frustration had occurred, Ahmau was not successful in its further contention that this should result only in the return of the deposits (or the return of the deposits together with interest). And the claim had been a belated one; the claim for statutory leave to rescind which had been the whole focus of the proceedings up until July last year, failed.

683. Nor was it correct, in counsel’s submission, to say that the cross-claims had wholly failed. Counsel pointed out that the Preets’ cross-claim was begun only late in the piece (April last year) and was always only ever, as a matter of substance, an alternative to a claim for contractual damages. Counsel submitted that the application for specific performance failed only on discretionary grounds.

684. Counsel also put a further, more fundamental submission. This was that the costs of the proceedings were governed by CA s 66ZS(8), which displaced the ordinary provisions under the Rules. Ahmau would therefore be obliged to pay the Preets’ costs of the proceedings unless it could satisfy the Court that they had unreasonably withheld consent to the rescission of their Contract. Counsel submitted that the Court would not be so satisfied.

685. Counsel advanced another argument about the interpretation of s 66ZS(8). Counsel submitted that it applied to the costs of all of the claims litigated in the proceedings, including the costs of the cross-claims and of the frustration claim. It followed that, even if (contrary to counsel’s earlier argument) a claim-by-claim approach to the award of costs would otherwise have been appropriate, it was not open in the present case.

686. Counsel next contended that the order for costs in favour of the Preets should be made on an indemnity basis. This was because, in counsel’s submission, Ahmau’s conduct in the course of the proceedings had been unreasonable. Counsel relied on the costs decision in Silver Star. Darke J held that s 66ZL(8) (the forerunner of s 66ZS(8)) was no bar to an indemnity costs order being made against the unsuccessful developer.

687. His Honour said (at [19]):

… There is nothing in the language of the section to indicate that the legislature intended a departure from the ordinary principles relating to costs beyond the stated position as to the identity of the party generally liable for costs. That is to say, the provision does not affect the principles concerning the basis of assessment of costs awarded. It seems to me that the plaintiff is attempting to read into the section a limitation which is not apparent from its language. ...

690. Counsel identified two main types of allegedly unreasonable conduct on Ahmau’s part. The first was associated with the way in which the frustration issue came to be presented to the Court. Counsel pointed out that I had myself raised the question at two earlier stages of the proceedings, and had been told by counsel for Ahmau that no claim was to be made that the contract had been frustrated.

691. Counsel submitted that, as a result, much of the evidence which had been led concerning the application for leave for statutory rescission was, including the individual circumstances of the Purchasers and the reasons for which rescission had been sought, were irrelevant. Counsel submitted that if the frustration claim had been made at an earlier point, different forensic decisions might have been made about which issues to contest.

692. Counsel also relied, in my understanding by way of analogy, on the frequently cited Court of Appeal for England and Wales in Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 at 154:

…As a general rule, where a plaintiff makes a late amendment as here, which substantially alters the case the defendant has to meet and without which the action will fail, the defendant is entitled to the costs of the action down to the date of the amendment…

693. The second basis for the indemnity costs order sought by counsel was the allegedly unreasonable conduct of the proceedings by Ahmau. This included the failure by Ahmau to provide a full and proper statement of the reasons for which rescission was sought. Counsel also relied on my findings that some of the evidence given by Mr Kavanagh was at best misleading, and the evidence given by Mr Wheadon was incorrect, and embarrassingly so.

694. Counsel also relied on allegedly unreasonable refusal of an offer made on 17 July. That offer was for payment of $100,000 including the deposit but with no order as to costs. The offer was calculated on the basis of return of deposit; interest at Court rates; and $53,000 for “restitution or equitable damages”.

695. The Bakshis’ cross-claim was brought in March 2023, a relatively early stage of the proceedings and well before the Preets’ cross-claim. I did not understand Mr Bakshi to make the same submission about the belated nature of the cross-claim as was made by counsel for the Preets. But he otherwise supported the submissions made by counsel. He further identified two additional features of Ahmau’s conduct, which, in his submissions, had been unreasonable. The first was, so he alleged, that as an experienced developer Ahmau should have been aware that the contract had been frustrated. This lent additional weight, in his submission, to the complaint about the delay in propounding the frustration claim. Mr Bakshi also relied on the failure to accept the offer made on the Bakshis’ behalf in April 2023, which he characterised as an offer to pay $60,000 more than the Contract price. Thirdly, Mr Bakshi complained about the way in which the pre-trial steps had been conducted. He submitted that there had been numerous breaches and delays on behalf of Ahmau’s part in complying with the timetable, which had lengthened the proceedings and made them more expensive.

696. In reply, counsel for Ahmau disputed the Purchasers’ reliance on s 66ZS(8). Counsel submitted that the Ahmau had succeeded on frustration. This was said to be the ratio for the Court’s decision. The special provision in s 66ZS(8) related to proceedings for a statutory leave to rescind and was not engaged.

697. Alternatively, counsel submitted that the rule in s 66ZS(8) was not absolute. It was only a “presumption” just like the “presumption” that costs generally follow the event. Counsel also relied, by analogy on the costs power where a compulsory easement is granted under CA s 88K(5). It is established that in dealing with the costs of such an application, the plaintiff will usually have to bear the costs, but the Court has power to depart from that and either deny costs to the defendant or even order the defendant to pay costs if the defendant’s conduct and the circumstances are such as to warrant it doing so: Civil Procedure Act 2005 s 98.

698. Counsel further submitted that to treat s 66ZS(8) as a binding rule would give rise to a “moral hazard”. Purchasers facing such an application, once their initial opposition had not been unreasonable, would not be subject to any costs sanctions, and would have no incentive to conduct the litigation sensibly and economically. Counsel referred to passages in the correspondence between the parties prior to the litigation to submit that this in fact had been the attitude of the Purchasers all along.

699. Counsel also criticised aspects of the defendants’ conduct of the proceedings as examples of an unreasonable attitude. Counsel submitted that, at base, the Purchasers’ case had always been weak. The Presale Plan had been made absolute by the planning law changes, and this point had been made on Ahmau’s behalf in the April 2022 request for consent to rescission. Instead of accepting this they insisted on contesting the application on a broad basis, resulting effectively in a royal commission type investigation of the circumstances in which the Developers’ decision not to proceed was made. And in the end, the Court found, contrary to the impression which the Purchasers’ sought to convey, that they were relatively experienced in property investment and were well established in the Sydney property market.

700. Counsel also criticised some aspects of the conduct of Mr Kavanagh, picking up some of the points made about it at [243] and [244] above. Counsel submitted that this was indicative of an approach which was unconcerned about the minimisation of costs.

701. By way of fallback, counsel addressed the reasonableness of Ahmau’s conduct. In this regard, counsel acknowledged my findings that, in certain respects, Ahmau behaved unreasonably. This included a failure to provide full information about its intentions should rescission be granted: [587] above.

702. Counsel submitted that the findings which I made in this regard were obiter, being based on an assumption, contrary to my finding, that the Contract had not been frustrated. Counsel submitted that, seen in that light, the findings were less absolute then they seemed and might even have been contestable in terms of their accuracy.

703. Counsel submitted, however, that this finding did not have any great significance in the scheme of things; it would not have altered the Purchasers’ determination to pursue the claim, blinded as they were (in counsel’s submission) by the belief that it would result in a bonanza for them in the form of compensation. Counsel also submitted that this conduct had little or no relevance for the purpose of identifying unreasonable conduct. Counsel relied on the following statement by Einstein J in Pioneer Park [2006] NSWSC 1176 at [12] (emphasis original):

The principled approach to dealing with costs requires the Court to focus upon and only upon, the conduct of the actual proceedings which have taken place. Conduct anterior to the commencement of the proceedings may be remediable if that conduct exposes a cause of action, in which event success on that cause of action is in general, the mode and the only mode, by which the innocent party receives redress from the Court.

704. Counsel also focussed on the offers made in June and July 2022. But counsel submitted that unreasonable behaviour did not end there. Counsel pointed to the other offers made in the course of the proceedings, particularly the offers of November 2022 and April 2024. Counsel submitted that when s 66ZS(8) refers to consent being unreasonably refused, it was wide enough to encompass those offers. Consent was what had been asked for.

705. Finally, counsel submitted that if any costs order was to be made against Ahmau, Ahmau should only have to pay one set of costs. Counsel submitted that the Preets and the Bakshis ran virtually identical cases counsel submitted that where double representation is involved, the Court should only exercise its discretion to award costs in a way which accepts double representation where the requirements of justice require that to be done, and such cases will only arise rarely: Van Eeden v Henry (2005) 62 NSWLR 301 at [33]. Counsel submitted there was no justification for double representation in the present case.

Conclusions

706. Operation of CA s 66ZS(8): The first question for determination is whether s 66ZS(8) displaces the provisions of the Rules which would ordinarily apply to these proceedings, in particular the rule that costs generally follow the event.

707. In my view it does. My reasons are as follows.

1. The rule that costs follow the event is only a general one created by subordinate legislation. It must give way to inconsistent statutory provisions.

2. Subsection (8) in terms creates a rule concerning “liability” for the Purchasers’ costs “in relation to” proceedings for statutory leave. The use of this phrase creates imprecision, but it clearly must include the Purchasers’ costs of the proceedings themselves.

3. The comparison with CA s 88K(5), relied upon by counsel for Ahmau, is instructive in this regard. That provision is worded so as to create a general entitlement in favour of the defendant, but allows the Court to make a different order in some circumstances. There is no equivalent power to dispense with the “liability” created by s 66ZS(8).

4. The departure from the usual rule was seen as a significant factor in levelling the playing field between developers and purchasers, which was part of the rationale for the relevant statutory provisions. It was expressly referred to in the Minister’s second reading speech ([458] above)

5. The points made by counsel for Ahmau concerning “moral hazard” would potentially be relevant to the interpretation of s 66ZS(8) if the language or purpose of the enactment were unclear. But on this issue, I do not think it is. Such considerations therefore do not justify the Court in refusing to give effect to the rule laid down by Parliament, although, as will be seen, they may be relevant to the scope of that rule.

6. It follows, I think, that s 66ZS(8) displaces inconsistent provisions of the Rules (this was also the assumption made by Darke J in Silver Star). Unless the Purchasers were unreasonable in refusing consent to rescission of the Contracts, Ahmau is obliged to pay the costs of the s 66ZS proceedings and there is no discretion to be exercised.

708. It does not however follow that the costs of the cross-claims and of Ahmau’s frustration claim must be dealt with in the same way. Those claims for relief were legally and factually different from the s 66ZS application. They could have been brought in separate proceedings. The fact that they were included in the s 66ZS proceedings is a procedural accident which should not determine the parties’ costs entitlements so far as they are concerned.

709. I think that the statutory language reflects this view. Sub-section 66ZS(8) refers to costs in relation to “proceedings for an order under this section”. The costs of Ahmau’s frustration claim do not answer that description. And no question of consent to rescission arose, so the liability rule created by s 66ZS(8) could not meaningfully be applied. The same is so for the costs of the cross-claims.

710. Clearly the s 66ZS application was the main matter litigated in the proceedings. But I do not accept that s 66ZS(8) governs the additional costs solely referable to the frustration claim and the cross-claims. The Court should deal with those additional costs under the ordinary rule that costs follow the event.

711. The most difficult question, I think, is whether s 66ZS(8) requires the Court to confine its attention, for the purpose of assessing the reasonableness of the Purchasers’ conduct, to their response to the formal requests for consent which were made on 22 April 2022, or at least their conduct prior to the institution of proceedings, on the one hand, or whether it is open to look at their response to all of the settlement offers that were made after 20 April 2022, on the other.

712. Counsel for the Preets submitted that the former approach was required under the terms of the subsection. Counsel submitted that the use of past tense (“unreasonably withheld consent”) referred back to events which pre-dated the institution of proceedings. Specifically, they should be seen as referring to the vendor’s obligation under subsection (4) to give notice of before proceeding to rescission.

713. I do not think this is unavoidably so. The past tense requires that consent has been withheld before the costs in question have been incurred, but not necessarily that consent has been withheld before the proceedings have been commenced. It may be possible to read subsection (8) as operating in an ambulatory way, so that the special entitlement to costs which it creates does not apply to costs of the proceedings which are incurred after the continued withholding of consent has become unreasonable.

714. In this regard, the “moral hazard” issues raised by counsel for Ahmau might have some significance. A construction of subsection (8) which had the result that a purchaser whose initial refusal of consent had not been unreasonable would be entitled to the whole of the costs of the proceedings, despite having unreasonably refused an offer to terminate them, would be an unattractive one. Rather than evening up the “balance of power” between the purchaser and the vendor, it would cause subsection (8) to operate punitively. It would also tend to reduce incentives for settlement of s 66ZS proceedings once instituted, which is hardly likely to have been what Parliament intended.

715. In these circumstances, I propose to proceed on the assumption that s 66ZS(8) does not apply to costs incurred after an unreasonable refusal of consent, even if that consent was sought after the commencement of the proceedings in which statutory leave to rescind is sought. As will appear, this assumption in favour of Ahmau does not affect the ultimate result.

716. Unreasonable refusal of consent to rescission: As already noted, counsel for Ahmau relied on the refusal of the various offers outlined above as unreasonable conduct displacing the costs liability prima facie created by subsection (8).

717. The first point to make is that the question posed by subsection (8) is not quite the same as the question of unreasonableness which arises when considering a Calderbank offer in ordinary litigation. What needs to be established here is that there was an unreasonable refusal of consent to rescission. This creates a possible difficulty with the offer to the Preets of 2 July last year which provided for a “deemed” rescission rather than an actual one, but in the end, it is not necessary to go into this.

718. The argument for Ahmau also faces some difficulties when comparing the terms of the offer with the ultimate outcome in the case.

1. The formal requests for rescission of 20 April 2022 only provided for the return of the Purchasers’ deposits. On any view this was less favourable than the restitution sums which they will recover.

2. The offers of 3 June and 29 July 2022 did provide for further payments on top of the return of the deposits, but the amounts offered were less than the restitution sums obtained (at least so far as the Preets were concerned).

1. The offers of 3 November 2022 did exceed the restitution sums by a significant amount, but by that time the proceedings had been commenced. The offers required the Purchasers to bear their own costs and there was no evidence as to how much they had incurred by way of recoverable costs.

2. The offers of 15 April last year also required the Purchasers to bear their own costs. The evidence does not establish that the $150,000 offered exceeded the restitution sums and the Purchasers’ recoverable costs to that point. Indeed, it seems that the contrary is the case.

3. That is even more clearly the case for the offer to the Preets of 2 July last year (if relevant at all).

719. I think however that there is a more fundamental difficulty for Ahmau’s argument. For reasons given above, attention must be focused on the “proceedings for an order under” s 66ZS. No such order was obtained. Ahmau’s application for statutory leave to rescind was dismissed.

720. The Purchasers may have refused consent for reasons which were unsound. But objectively the refusal of consent was justified. It is difficult to see how it could have been unreasonable to refuse something to which Ahmau ultimately has been found not to be entitled.

721. This is not a merely a formal matter, as counsel for Ahmau suggested. The s 66ZS application necessarily involved a multifactorial analysis of the circumstances set out in s 66ZS(7). The Court was bound to consider matters such as the effect of the rescission on the Purchasers and on Ahmau. Those circumstances have turned out to be irrelevant. The costs of investigating them, which were occasioned by Ahmau’s application, have been wasted.

722. It is elementary that to merely make a Calderbank offer which is not accepted and is then bettered by the offering party at judgment is not enough to entitle the offering party to costs. It is necessary to show that the offeree’s refusal was unreasonable at the time and in the circumstances in which it took place.

723. The multifactorial analysis required by s 66ZS necessarily involves an exercise of judgment by the Court as to the relative significance of the different factors, as ultimately established by the evidence. That in itself makes it difficult to say that the Purchasers’ responses to the offers were so unrealistic as to be unreasonable.

724. Furthermore, a critical point in the interpretation of the Presale Contracts was that Ahmau’s best endeavours obligation applied to registration of the Presale Plan, and only that Plan. But this point only came into focus at the hearing in May last year. Back in 2022 both parties appear to have been proceeding on the assumption that there was room for bargaining under the Contract about the size and shape of the lot to be delivered. This makes it even more difficult to say that the Purchasers’ position was unreasonable.

725. The same point can be illustrated in yet another way. The critical issue for the purpose of comparing the offers with the actual result in the case has proved to be the amount payable by Ahmau in addition to the deposit. But the debate between the parties on this question has only emerged since the frustration claim was made and only reached its final stage at the supplementary hearing which preceded this judgment. The valuation evidence on which the rival indexation contentions were based had not even been filed in 2022. The Purchasers could not remotely have been expected, when considering Ahmau’s offers, to evaluate the additional amounts they were being offered in accordance with the perspective ultimately adopted by the Court.

726. For these reasons, I do not accept that the refusal of any of the offers manifested unreasonableness on the part of the Purchasers. It follows, subject to the remaining submissions to be addressed, that both the Bakshis and the Preets are entitled to the general costs of the proceedings.

727. Costs of cross-claims: As already stated, I consider that the cross-claims gives rise to separate “events” for the purpose of the rule that costs follow the event. The costs solely referable to those cross-claims may not be extensive, but they are identifiable, for instance, those referable to the preparation of the pleadings.

728. Nor do I accept the argument from counsel for the Preets that all the cross-claimants were “really” seeking was damages. Indeed, this argument would be unavailing in any event, because the frustration claims actually operated as a defence to the cross-claims. Once I found that the contract had been frustrated, then both specific performance and the award of damages became impossible.

729. Costs of frustration claim: The first question is whether, as counsel for the Preets contended, Ahmau should be seen as having been unsuccessful (or at least not wholly successful) on the frustration claim.

730. It is true, as counsel for Ahmau himself pointed out, that the effect of the 2021 planning changes was raised from the outset as part of the multifactorial analysis required by s 66ZS. But once the frustration claim was formally made, matters came into sharper focus. If the contract had been frustrated, there was no power to grant statutory rescission. The evidence and submissions in support of the frustration claim (which included the expert evidence given on 24 July) was put forward in support of what was by then a true alternative to the statutory recission claim.

731. It is also true that Ahmau only mounted the frustration claim belatedly, and after earlier having rebuffed the idea. But that cannot affect the “event” of the claim once it had been made. In fact, the delay works in the Preets’ favour; if the claim had been made earlier it might have been possible to argue that more costs of the proceedings should be seen as costs referable to it.

732. Overall, I think that Ahmau was successful in the frustration claim. The principal issue, which was the subject of the expert evidence and lengthy submissions, was whether there was an entitlement to rescind. That was vigorously contested. It is true that the restitution amounts will be more than Ahmau was prepared to concede in argument, but the difference is relatively small in the scheme of things. The amounts are also significantly less than was ultimately claimed by the Purchasers. I think the question of quantum is best seen as an issue arising in the frustration claim which was not “clearly dominant or separable”.

733. Not all the costs incurred after the frustration claim was introduced are, however, costs solely referable to that claim. Part of the further hearing time was spent on finishing the submissions from counsel for the Bakshis on 66ZS issues. That may require some allowance to be made on assessment; in that regard I refer the parties to my comments in Southern Oil Refining Pty Ltd v Hydrodec Australia Pty Ltd (No 2) [2021] NSWSC 336 at [35]-[39]. There has also been the argument about costs itself, which has covered the litigation generally and therefore in my view falls under the general costs of the proceedings.

734. Double representation: Van Eeden was a case where the same party (in fact both plaintiff and defendant) was represented by two sets of lawyers in different capacities. That is not the case here. The Preets and the Bakshis were sued separately under separate contracts. There were also factual differences between them. In my view no question of double representation, in the relevant sense, arises.

735. Indemnity costs: I do not find the submission of the claim for an indemnity costs order in favour of the Purchasers persuasive. It is true that criticism could be made of some of the evidence of the witnesses for Ahmau. But criticisms could also be levelled at some of the evidence presented by the Purchasers. Some of the points made by counsel about the cross-examination of Mr Kavanagh also have some force.

736. This is not to criticise the parties for the way they conducted their case. Events such as these are part of the ordinary course of litigation. In my view, they are not, even when not accompanied by equivalent faults on the other side, a proper basis for awarding indemnity costs.

737. Nor do I consider that the Beoco principle has any part to play in the assessment of indemnity costs in the present case. It is true, as I've explained, that the addition of the claim for frustration changed the nature of the issues to some extent, but it is also true that evidence on the subject had been led up to that point. I do not find the analogy helpful in determining whether the costs order which I have found ought to be made should be made on an indemnity basis.

738. I also agree with counsel for Ahmau that the offers made by the Purchasers did not reflect the merits of the case as I ultimately found them. Refusal of those offers cannot on any view be seen as having been unreasonable.

Orders

739. The orders of the Court are:

1. Declare that the contract for the sale of land between the plaintiff and the first and second defendants dated 21 March 2017 was frustrated by 30 September 2021 at the latest.

2. Order that Ahmau pay the first and second defendants $74,000 by way of restitution.

3. Declare that the contract for the sale of land between the plaintiff and the third and fourth defendants dated 6 April 2017 was frustrated by 30 September 2021 at the latest.

4. Order that Ahmau pay the fourth and fifth defendants the amount of $37,000 by way of restitution.

5. Otherwise dismiss Ahmau’s claims for relief.

6. Dismiss the cross-claim of the first and second defendants and the cross-claim of the fourth and fifth defendants.

7. Order that each of the first and second defendants and the fourth and fifth defendants pay the plaintiff’s costs solely referable to:

8. (a)   their cross-claim; and

9. (b)   the plaintiff’s claims for relief as against them concerning frustration.

10. Order that the plaintiff otherwise pay the costs of each of the first and second defendants and the fourth and fifth defendants of the proceedings as between it and them.

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Endnotes

Decision last updated: 12 June 2025