Batterham v Makeig

[2010] NSWCA 86

New South Wales

Court of Appeal

CITATION:	Batterham v Makeig [2010] NSWCA 86
HEARING DATE(S):	1 and 2 March 2010
JUDGMENT DATE:	22 April 2010
JUDGMENT OF:	McColl JA at [1]; Young JA at [2]; Sackville AJA at [126]
DECISION:	(1) Appeal allowed. (2) Orders of Ward J set aside. (3) In lieu order that the proceedings be dismissed with costs. (4) Order that the cross-claim be dismissed. (5) Order that the respondent repay to the first appellant within 14 days any monies obtained by him in reliance of the judgment below. (6) Order that the respondent pay the appellants' costs of the trial and of the appeal. (7) With respect to the costs of the appeal the respondent is to have a certificate under the Suitors Fund Act 1951. (8) The parties may apply for any further orders for restitution or generally, but only if a notice of motion is filed within 14 days.
CATCHWORDS:	CONTRACTS- construction and interpretation of contracts- whether on its proper construction, a clause requiring respondent to pay consultants' costs and costs ancillary to consultants' services obliged the respondent to pay council fees that parties knew were being utilised to pay consultants' costs incurred by the council- primary judge focused on the character of fees as "lodgement fees"- in the circumstances, and according to the language of the clause and the layman's agreement as a whole construed according to its commercial purpose, the trial judge erred in finding that the respondent was not obliged to pay fees. CONTRACTS- discharge, breach and defences to action for breach- whether respondent breached and repudiated agreement and whether appellant justified in treating breach as repudiation- whether adherence to an incorrect interpretation of a contract when bona fide dispute as to true construction- arguable construction not the reason for non-payment- where respondent did not pay fees in a timely manner as part of "poker game" to obtain written agreement as to refunding and remuneration from council- viewed objectively, the "poker game" conveyed a blanket refusal of an essential term and constituted a repudiation justifying appellant's termination. DAMAGES- discount rate for vicissitudes and present value- primary judge discounted damages by 12.5% for the possibility that put and call options exercisable until November 2012 might not be exercised- further discount required to cover present value of money and general vicissitudes. TRADE PRACTICES- misleading or deceptive conduct- whether project agreement should be set aside because respondent's representation that he was an "experienced project consultant" constituted misleading or deceptive conduct- question of fact whether respondent was "experienced"- whether "professional" connoted competence- claim fails because no reliance on the representation and thus no loss "by" respondent's conduct under Fair Trading Act 1987, ss 68, 72.
LEGISLATION CITED:	Environmental Planning and Assessment Act 1979, ss 57, 94 Fair Trading Act 1987, ss 68, 72
CATEGORY:	Principal judgment
CASES CITED:	Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385; 52 ALJR 407 (PC) Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423 Heenan v Di Sisto [2008] NSWCA 25; 13 BPR 25,213 Macquarie International Health Clinic Pty Ltd v University of Sydney (1998) 98 LGERA 218 Mallis v Bankers Trust Co 615 F (2d) 68 (2 Cir 1980) Poseidon Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Prestia v Aknar (1996) 40 NSWLR 165 Regina v Her Majesty's Treasury; Ex parte Smedley [1985] QB 657 Robbins Herbal Institute v The Federal Commissioner of Taxation (1923) 32 CLR 457 Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 Satellite Estate Pty Ltd v Jacquet (1968) 71 SR (NSW) 126 Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 Walton v R [1989] HCA 9; 166 CLR 283
PARTIES:	Brian Joseph Batterham (First Appellant) Batterham's Bus Lines Pty Limited (Second Appellant) Peter John Makeig (Respondent)
FILE NUMBER(S):	CA 2009/00298384
COUNSEL:	G R Graham (Appellants) G Sirtes SC (Respondent)
SOLICITORS:	Emery Partners (Appellants) Somerville & Co Pty Limited (Respondent)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 4373/07
LOWER COURT JUDICIAL OFFICER:	Ward J
LOWER COURT DATE OF DECISION:	1 May 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	Makeig v Batterham [2009] NSWSC 344

CA 2009/00298384

McCOLL JA
YOUNG JA
SACKVILLE AJA

Thursday 22 April 2010

BATTERHAM v MAKEIG

Judgment

1 McCOLL JA: I have had the advantage of reading Young JA’s and Sackville AJA’s judgments in draft. I agree with their Honours’ reasons and with Young JA’s proposed orders.

2 YOUNG JA: This is an appeal from a decision of Ward J in the Equity Division of this Court ([2009] NSWSC 344) who found the appellants liable to pay substantial damages to the respondent for breach of contract.

3 The background facts are clear.

4 Mr Batterham is the registered proprietor of real estate comprising 209,000 square metres in the village of Kitchener near Cessnock. He intends to sell that land for development, hopefully at a profit.

5 His son, David, was doing some work for the respondent and came to the view that the respondent, Mr Makeig, was a retired architect who may be able to assist his father in the development.

6 The idea was not that Mr Batterham would develop the land himself, but rather package it in such a way that it would be attractive to a professional developer.

7 The project was considered to be best implemented if it included adjoining land owned by Mr Vowles which fronted a principal road. In due course an option was obtained over the Vowles’ land.

8 Mr Batterham and Mr Makeig met together and worked out a method of bringing about the upgrading of the land.

9 It would seem that the project was conceived when the parties first got together about it in 2003.

10 On 5 March 2005, Mr Makeig produced a document. Mr Batterham says that he was dissuaded by Mr Makeig from getting any legal advice about the document and he fell in with that persuasion and signed it.

11 Clause 2 of the document headed “PURPOSE OF UNDERTAKING” said that:

“To do all things necessary to achieve Development Approval for the project, all details of which will be agreed to by the Parties. On or before the achievement of Development Approval, it is the intention of the Parties to on sell the project, including the benefits of the Option … described in Paragraph 3 to a developer or other suitable entity for execution. The Sales Price will be subject to the agreement of both Parties.”

12 The vital clause of the document is 4 which is headed “PROJECT COST TO ACHIEVE DA” and then goes on to provide (PM meaning Mr Makeig):

“PM to undertake the management of the project. PM agrees to pay all Consultants costs and other costs ancillary to consultant’s services in a timely manner … PM agreed to pay and has paid costs relating to … comprising the option fee, the land clearing costs and the survey fees. All professional work required to achieve the above result will be carried out by PM in a timely manner.”

13 The last page of the document provided that Mr Batterham’s signature bound his executors and administrators and Batterham’s Bus Lines Pty Ltd. Clause 12 of the agreement provided that the profit of the enterprise was to be split 11/18ths to Mr Batterham and 7/18ths to Mr Makeig. The agreement was referred to as the Kitchener Project Agreement and it is convenient to continue to use that term.

14 The judge found [69] that Mr Makeig was aware prior to the entry into the Kitchener Project Agreement that unless the whole of the Kitchener precinct was rezoned, it would not be possible to procure the rezoning of the land, the subject of the agreement. Fleshing this out, the situation was that the village of Kitchener is in the local government area of the Cessnock City Council. The Cessnock City Council had prepared a master plan for development in its area but it excluded Kitchener Village. Kitchener Village appears to be surrounded by bushland and the rural fire authority and other responsible civic organisations objected to development in Kitchener because of the risk of bush fires. This meant that before any land in Kitchener could be rezoned, these objections would have to be overcome by having a local environmental plan for the Kitchener area and incorporated into the master plan of the area.

15 There was substantial material before the learned primary judge as to the parties’ behaviour before the Kitchener Project Agreement was signed, though little of this is of great moment. Her Honour did find, however, that Mr Makeig had expended at least time and effort and some $122,335.60 of his own funds on the project before it came to a halt.

16 In April 2005, the Kitchener Strategic Assessment Report was lodged with the council by an expert planner, Mr Glendinning. Mr Glendinning had previously been retained by Mr Makeig on behalf of the joint venture. On 4 May 2005, the Cessnock City Council resolved to amend its master plan to include the Kitchener precinct and Mr Makeig was informed of this by letter bearing date 9 May 2005.

17 A master plan was then required by the council to be prepared for the whole of the Kitchener project. Mr Makeig re-engaged most of the consultants who had been involved in the preparation of the Kitchener Strategic Assessment Report, including Mr Glendinning.

18 In December 2005, the Kitchener Master Plan, prepared by Mr Glendinning, was lodged with the council and at about the same time Mr Makeig paid the council $31,250.00 (this was included in the $122,335 referred to earlier).

19 In about January 2006, Mr Batterham was told by the council that the Department of Planning required a local environment study (”LES”) to be prepared under the direct control of the council. The council took over the same experts who had been working for Messrs Batterham and Makeig including Mr Glendinning to assist them in doing this.

20 Further fees were sought by the council in late 2006. The council asked for $36,500.00 which was paid by Mr Batterham on 28 November 2006 as well as an amount of $16,000.00 on 8 December 2006. It is the nature of these payments that was critical to the decision in the case.

21 By December 2006, Mr Batterham says he came to the view that he could no longer work with Mr Makeig, although on 2 December he had written a letter to Mr Makeig asking him to “Please keep your side of the agreement” and confirming his own intention to do so. However, the parties were still having lunch together.

22 On 2 January 2007, Mr Makeig sent to Mr Batterham an agenda for a proposed meeting on 9 January 2007 to discuss various matters in relation to the project. Mr Batterham refused to attend the proposed meeting. On 9 January 2007, Mr Batterham’s lawyers notified Mr Makeig that because of his various breaches of the Kitchener Project Agreement Mr Batterham considered it to be at an end. However, the letter said that should the project proceed to fruition then Mr Batterham would repay all out of pocket expenses as well as “reasonable” costs in acting on his behalf to date and asked for an accounting.

23 The breaches which were said to constitute a repudiation of the agreement were:

(i) Failure to pay the $36,500.00 and $16,000.00 to the council;

(ii) (Later withdrawn);

(iii) Failure to pay the full amounts due in respect of the Vowles Option;

(iv) Failure to pay engineers fully for their services; and

(v) Failure to pay “in a timely manner” the bill of ecological consultants.

24 Mr Johnson is a developer whose activities cover many areas. He, or his single venture company JPG 58 Pty Ltd (a $1 company), in about February 2007, entered into put and call options so that JPG 58 would acquire the subject land. Although JPG 58 was a single venture company with limited capital, its obligations were guaranteed by Mr Johnson personally.

25 The only other vital facts that I need note at this stage are that one of the matters which appears to have soured Mr Batterham towards Mr Makeig was that Mr Batterham appears to have thought from what Mr Makeig had said and not said, that Mr Makeig was a retired architect and an experienced property consultant. In fact, he was a person who had opted out of his architecture course as an under-graduate and had been convicted in Queensland of pretending to be an architect and had only very limited experience in property development, mainly involving single lot projects.

26 Mr Batterham became aware of the truth in May 2006 and although it appears that he was shocked when he found out the truth, he did not at that stage put an end to the agreement, electing to proceed.

27 Another fact that is important is that Mr Makeig came to the view in 2006 that he was entitled to $450,000.00 for his time spent on the project up to that time. He was hoping to be able to have the council reimburse him for that expenditure of time. Mr Batterham appeared to think that this was quite improper. Mr Makeig in evidence said that he adopted a poker stance and refused to make payments or be actively involved with the project unless his demands were met. However, he gave evidence that whilst he may have conveyed to Mr Batterham that he would not pay monies, that was a stance as in poker, and had his bluff been called, he would have made the payments. There was, however, no evidence at all that that attitude was conveyed to Mr Batterham.

28 With that background, I turn to the issues which the learned primary judge considered. She set them out at para [21] of her judgment. They are, in summary as follows:

(i) whether the Kitchener Project Agreement is binding;

(ii) alternatively, are the Batterhams estopped from denying its existence as a binding agreement;

(iii) had either Mr Makeig or Mr Batterham breached or repudiated the Kitchener Project Agreement, and if so, the consequences of that breach/repudation;

(iv) whether the Batterhams owed to Mr Makeig fiduciary obligations;

(v) whether the Kitchener Project Agreement was entered into by Mr Batterham in reliance on any false or misleading representations by Mr Makeig;

(vi) what relief should be given.

29 At [22] her Honour found, in summary, as follows on those issues:

(i) Yes, there was a binding and enforceable agreement;

(ii) Had there not been, the Batterhams would have been estopped from denying an obligation to account to Makeig for 7/8ths of the net profit;

(iii) Mr Makeig breached the Kitchener Project Agreement by failing to pay the engineers in a timely manner but this was not a repudiation. However, the letter of 9 January 2007 by Mr Batterham was a wrongful repudiation of the Kitchener Project Agreement giving rise to a claim for damages for loss of bargain;

(iv) Yes, the Batterhams did owe Mr Makeig fiduciary obligations;

(v) Mr Makeig impliedly represented to the Batterhams and thereby engaged in misleading and deceptive conduct that he was a semi-retired architect but this caused no loss nor did the Batterhams rely on it;

(vi) The Batterhams are liable for damages for loss of bargain or alternatively for equitable damages for breach of a fiduciary duty.

30 The primary judge’s reasons occupied 156 pages and thoroughly traversed the matters put by the parties. Unfortunately, it would appear that on some aspects of the case, her Honour was not given the assistance she was entitled to expect. There is usually nothing to be gained by making complaints about a first instance judgment when the alleged deficiency was caused by the failure to render the trial judge appropriate assistance.

31 The amended notice of appeal contains 15 grounds which may be summarised as follows:

1-3. The primary judge erred in her construction of clause 4 of the Kitchener Project Agreement.

4. The primary judge erred in finding that the respondent’s conduct in respect of the $450,000.00 issue did not constitute repudiatory conduct.

5. The primary judge erred in not holding that such conduct constituted a discretionary bar to relief.

6. The primary judge erred in finding that the appellants repudiated the agreement.

7-11. The primary judge erred in finding that the respondent was an experienced project consultant and that any misrepresentation about him being an architect was of no significance.

12-13. The primary judge erred in not dealing with the cross-claim.

14. The primary judge erred in assessing damages given that the respondent had no present entitlement to any monies.

15. The primary judge erred in assessing damages in that she failed to apply an adequate discount rate and failed to deduct certain payments.

32 1-3. Her Honour’s conclusion on this matter is set out in [235] that “Failure or a refusal to pay the two sets of Council’s fees can only be a breach of clause 4 of the Kitchener Project Agreement if the obligation to pay consultants’ (or costs ancillary thereto) included Council’s fees.” She continued:

[238] There is much scope for confusion or misunderstanding between Mr Makeig and Mr Batterham as to the characterisation of the monies payable to the Council because of the course which the project took …
[239] By the time of entry into the Kitchener Project Agreement it was clearly understood that in order to achieve the rezoning of the Batterham land it would be necessary to obtain rezoning of the whole Kitchener precinct. In those circumstances, the obligation to pay “all consultants’ costs and other costs ancillary to the consultants’ costs in a timely manner” must have included consultants’ costs or ancillary costs not only in relation to the rezoning of the Batterham Land … but also of the necessary preliminary steps … . I do not understand Mr Makeig to contend otherwise.

33 However, her Honour at [242] then said:

The question is whether or not the lodgement fees payable to the council in late 2006 were “consultants’ costs” or “costs ancillary to consultants’ services”.

34 On the appeal, Mr G R Graham of counsel appeared for the appellants and Mr G Sirtes SC appeared for the respondent.

35 Mr Graham put that her Honour had put the wrong question. The fees, he submitted, were not lodgement fees at all and to put the matter in this way cadit quaestio. Mr Graham put that when one looks at the evidence one can see that what happened was that when the council took over the project of rezoning the Kitchener project, it retained the consultants that had been retained by Mr Makeig. It was paying those consultants out of monies that were contributed by the joint venturers. It had indicated in correspondence that various fees would be due and payable at various stages of the project known as Phase 1, Phase 2, Phase 3 and Phase 4. The Phase 1 fees had been paid by Mr Makeig. The council indicated how much the Phase 2 and Phase 3 fees would be. They were not due and payable in 2006 because the appropriate phase had not been reached. However, the council officers indicated to Mr Batterham (and Mr Makeig), that it needed the money in advance of the Phase 2 and Phase 3 fees becoming payable in order to discharge its obligations to the consultants. Mr Graham says that her Honour misunderstood the position.

36 With respect, I do not consider that that charge can be successfully laid against her Honour. She did recite sufficient facts to show that she was fully aware of all these matters. However, it is true that it was unfortunate to put the tag “lodgement fees” on the payments and by such appellation disqualifying the fees from falling within clause 4. One must construe clause 4 in a commercial document, albeit a commercial document put together by lay people, and if one has to (because it is a rule of last resort), remember that Mr Makeig is the drafter and that one must construe documents proffered by Mr Makeig contra proferentem, that is, against him.

37 It does not seem to me to matter at all what is the tag that one puts on these fees paid to council, though I would respectfully suggest that “lodgement fees” is the incorrect tag. One must go to what the parties intended by clause 4 of the Kitchener Project Agreement.

38 Tags which the parties put on their contract may in certain circumstances be of value when construing the contract. However, courts cannot put their own tag on a provision and then use that to assist construction. Her Honour did not do that, though with respect, she came close. What needs to be done is to see whether the parties, in view of the words they used in clause 4, intended that these payments were ones which Mr Makeig was to pay.

39 There does not appear to be any dispute in the evidence that the council was entitled to the lodgement fees for Phases 2, 3 and 4 of the Kitchener development project. It was a country council which had its own town planner, but may well not have had other necessary resources in its internal staff – the evidence is unclear on this. It would seem to me that everyone realised that the Department of Planning for a proper LES would require the input of consultants. It was perfectly natural for the council to retain the consultants that had previously worked on the project.

40 The material in the Blue Appeal Book shows that it was the council’s intention to collect a phase 2 and phase 3 (and phase 4) lodgement fee at the proper time and it was also the council’s intention to collect contributions under s 94 of the Environmental Planning and Assessment Act 1979 in respect of any subdivision in due course. However, in the meantime the council needed to be funded in order to get on with the preparation of the LES.

41 Mr Batterham swore in his affidavit of 11 June 2008, that around mid-2006 the council’s planning officer, Bo Moshage, at a meeting with himself and Mr Makeig said:

This is as a result of a directive from the Department of Planning because it wants to retain full control as to the standard and type of studies that are performed in major developments. The new procedure will be for council to call for tenders and to select consultants. You, as the developer will be required to pay an up front fee (in the form of a s 94 contribution) to council towards the payment of consultants. Any funds remaining in the pool on completion of the matter would be refunded to you.

He added:

Although council will now be arranging consultants, we are happy to continue dealing through Ian Glendinning but we will be dealing with him directly, not through you.

42 On 27 November 2006, Mr Batterham deposed in the same affidavit para 108, that Bo Moshage said, in a telephone call:

“Brian, there is now an amount of $36,000 now due to be paid for the consultants engaged for your application. This is payable by you under the new Department of Planning guidelines that we discussed previously. Could you please drop a cheque in to council as soon as possible.”

43 Mr Batterham says he then contacted Mr Makeig to request a cheque, but Mr Makeig said, “I think I’ve paid enough in this matter”. Mr Batterham was not pleased and I will not set out the whole of the discussion he says he had with Mr Makeig, but that he included “These are not council fees and you know that. These are payments to professional consultants via council as per Department of Planning instructions. You must pay these charges. It is our agreement. Any charges not fully utilised by council will reimburse you. As you already know the council has agreed to refund any monies not used”. Mr Batterham says that Mr Makeig appeared satisfied and agreed to pay the $36,000.00. However, on the same night Mr Makeig telephoned him and said: “I will pay the charges to council but only if they give a written contract to reimburse monies already paid in my account for $450,000.00 for the work that I have done.”

44 Mr Batterham repeated and slightly expanded this evidence in his affidavit of 25 February 2009. He said that Mr Makeig said, “I have thought about this further. I will only write the cheque for $36,500 to the council, if the council gives me a letter confirming that all monies I have paid to date, plus the $450,000 claimed in my account to you, will be paid to me.”

45 Mr Batterham says he returned the account that Mr Makeig had sent him for $450,000.00 and paid the fee himself the next day.

46 He then said that on 8 December 2006, Mr Makeig came to his house and at that time Mr Batterham said to Mr Makeig: “Bo has requested a further $16,000 for the on-going consultants’ costs. Are you going to pay this?” Mr Makeig said: “No” and Mr Batterham then wrote a cheque for $16,000.00 payable to the council and said to Mr Makeig: “As you are going back through town on your way home, would you please deliver this cheque for the council and obtain a receipt” upon saying which he gave the cheque to Mr Makeig who said “Okay”. The cheque was cleared but Mr Batterham never received any receipt.

47 Mr Makeig’s affidavit of 4 April 2008, para 103, records a similar meeting with Mr Moshage in January 2006 at which he was told that the Department of Planning insisted that an LES be prepared under the direct control of council but that he would be using Mr Glendinning and others. Mr Moshage indicated there would be a committee in which either Mr Makeig or Mr Batterham would be a member which would monitor the fees. Whilst the developers would not be requested to pay directly any of the consultants’ costs, and the council would give back any monies left over “from the $90,000 lodgements fees after we have paid the consultants directly”, Mr Moshage spoke in terms of lodgement fees.

48 Mr Makeig said that at a meeting at Mr Batterham’s house on 13 December 2006 Mr Batterham said that he was worried by Mr Makeig’s continuous request to council to put in writing a promise that monies would come back to the joint venturers from the s 94 levies.

49 Mr Makeig said in his affidavit of 23 February 2009, that about 27 November 2006 Mr Batterham said to him: “The second instalment of the council’s lodgements fees will be due soon”. Mr Makeig said he replied: “I know, but I think we should hold back on paying those fees until we get something in writing from council that they are going to reimburse us for the monies that we have paid out over the previous two years as they have been promised”. He then says without his knowledge, on the following day, Mr Batterham paid the lodgement fees of $36,500.00 to the council. Likewise he said, Mr Batterham’s payment of further lodgement fees in the sum of $16,000.00 on 8 December 2006 was done without prior discussion. He denies he was handed the cheque to deliver to the council.

50 In cross-examination at Black 392, Mr Makeig was asked:

Q. Until Brian Batterham agreed with you that $450,000, half a million dollars, was claimed, you were just not going to pay any of the levies from the council, the $36,500 and the $16,000 which were levied in part at least to cover the cost of consultants who were working on the Batterham Kitchener development. Isn’t that the case?
A. My answer to that is that Brian paid that money without reference to me. Indeed, I probably would have paid it if my poker hand had failed. My poker hand was I am not interested in paying that unless we get that agreement.

51 Earlier in the cross-examination at Black 384 and following, Mr Makeig was asked about a letter he had received from Mr Batterham on 28 November 2006. The letter is set out in Blue Appeal Book 642 and following. The letter said, inter alia:

It seems preposterous that you would consider that Cessnock Council would end up revenue neutral on the many land sub-division applications now before it. There is never an application before council that does not carry a fee. In sub-division application council has given the applicant an option: wait for us to it – or do it yourself and have some monies reimbursed. We are no different from any other re-zoning applicant. …
I am not willing to be embarrassed by an argument over the right of council to impose non-refundable fees for work applications. Indeed we already know what these fees are being spent on and I doubt that they will cover all outgoings. It is somewhat a bizarre idea that council having committed the fees to furthering our application that they then refund them to us in full?
I am dismayed and bitterly disappointed by your stance in this matter. I feel I can no longer rely on you to do the right thing and ensure the smooth transit of this project through council: consequently I have, this day, paid the outstanding fees myself.

52 Mr Lever SC who appeared for the appellants at the trial asked Mr Makeig at Black 384 whether after he got that letter he had a conversation with Mr Batterham during which he (Makeig) said he would only pay the $36,500.00 if the council gave a written contract to reimburse the monies and paid your account for $450,000.00. Mr Makeig twice denied that. However he admitted that he got the letter the day after he had said to Brian Batterham: “I will pay the charges to council, but only if they give a written contract to reimburse monies already paid.” His attention was directed to the letter that said that Mr Batterham was paying the $36,500.00 and said he had doubts as to whether he would do it. He was then asked about the $16,000.00 payment and a meeting at Mr Batterham’s house about 8 December 2006. Mr Makeig said he did attend at about that time though he couldn’t be sure of the exact date.

53 The cross-examination then proceeded:

Q. And that was the occasion on which Brian Batterham said to you, ‘Peter, Bo has requested a further $16,000 for the ongoing consultants’ costs. Are you going to pay this?’ You remember him saying that to you don’t you?
A. I don’t remember but I can well imagine he would have.
Q. And you said to him straight out ‘No’ didn’t you?
A. I can’t remember but I can imagine I would because I still didn’t have a written contract.
Q. That’s right, and you were still refusing to pay anything to Cessnock City Council until they gave you you say a written contract that somehow in the future they would pay you back the consultancy fees that you had paid for this development?
A. That’s what I was anticipating should have happened and I would have liked to have seen it happen.
Q. And until the council gave you such a document you were not going to pay any of the levies which you knew in part at least were to cover consultants’ costs paid by the council. Isn’t that right?
A. We had an agreement. Batterham and I had an agreement that we would jointly pay the levies – not the levies, the lodgement fees, and I’d paid some and he’d paid some and there were still some to be paid and I expected that somewhere along the line we would sit down and say okay, how are we going to split this up, who’s got the money to pay.
Q. You never said anything like that to Brian Batterham did you?
A. No I didn’t say that, but that was the logical outcome of the situation.

54 The Land Use Planning Manager of the council, at the relevant time a Julie Wells, reported to council for its meeting on 7 July 2004 that both parties were aware that the council’s fees for Phases 1 to 4 did not include the preparation of a Local Environment Study and in respect of that full cost recovery requires an up-front agreement and may require a separate fee to a rezoning application fee (Blue 750).

55 The parties were also made aware by Juliet Grant, an associate of Mr Glendinning, that various lodgement fees would have to be paid, Phase 2 $36,500.00 after council resolution to proceed; Phase 3 $16,000.00 prior to exhibition and Phase 4 $11,000.00 after resolution to proceed to gazettal; but she added: “Apparently any unexpended monies will be refunded upon request!” (Blue 796).

56 However, what appears to have happened is that instead of endeavouring to enter into an agreement under s 57 of the Environmental Planning and Assessment Act 1979 or collecting money by other means, the council worked out what would be the Phase 2 and Phase 3 fees and asked the developers to pay them in advance so that they could be used to pay the consultants. This, of course, leaves open the question as to what would happen for the costs of exhibiting the final rezoning plans and the council’s costs at that stage, but no matter what these difficulties were, what I have said appears to be the path the council took.

57 Thus although it is fair to describe the fees as lodgement fees in one sense, everyone knew, it would seem to me on the evidence of both parties, though the learned trial judge did not make any actual finding of fact, what the monies being paid to the council were being used for and why they were required. Proper weight should be given to a tag so long as the tag chosen by the parties is not a sham (see Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385; 52 ALJR 407 (PC)), but the tag cannot be used as a point where the inquiry as to true construction of what the parties have written ceases.

58 One must go to clause 4 itself. As Sackville AJA put during argument, it is really necessary to direct close attention to what clause 4 says. His Honour put:

Clause 4 is not drafted by lawyers. It is a lay document, and it could mean one of two things. It could mean costs incurred by the joint venturers themselves under the contract, or it could mean consultant costs and other costs by whomsoever incurred which were ultimately met by the joint venture. Why not adopt the latter where that seems to be commercially sensible? What difference would it make whether they engaged some consultants themselves or their consultants were engaged by council because council took it over?

59 To this, Mr Sirtes SC for the respondent put: “The difference of course is who is responsible”.

60 I will set it out again for ease of reference:

4. PROJECT COSTS TO ACHIEVE DA … PM to undertake the management of the project. PM agrees to pay all Consultants costs and other costs ancillary to consultant’s services in a timely manner.

61 The first thing to note is the heading “PROJECT COSTS”. The clause is dealing with the costs of the project. Secondly, there is no reference to costs that are directly incurred by the joint venture or the project manager. Thirdly, “consultants costs” is an odd expression. The expression is not necessarily synonymous with accounts rendered by the consultants, but is more focussed on the price charged by the consultant including the consultant’s expenses and sub-contracts. Fourthly, one has got to find that there are some other costs which are not consultants’ costs but which are ancillary to consultants’ services. It would not appear that the primary judge was given much assistance on the meaning of the word “ancillary”. In her judgment [244] she merely refers to the Oxford English Dictionary where “ancillary” is defined as “subservient or subordinate” or as designating services that provide support for central services.

62 Although they do not appear to have been cited to her Honour, there are cases, including cases in this Court, which define the word far more widely. In Regina v Her Majesty’s Treasury; Ex parte Smedley [1985] QB 657 at 674, Slade LJ said at 673 that “ancillary” was a word of wide and somewhat uncertain import. At 674 he said:

Mr McDonald (counsel), while not attempting an exhaustive definition of the word “ancillary,” has submitted that the phrase “as ancillary” connotes “assistance of a subordinate or subservient kind”. Even accepting this submission for present purposes, any agreement which is ancillary to an earlier agreement in this sense may well involve some variation of that agreement and thus, in one sense, a measure of conflict with it. However, the fact that such variation may be thought in some respects to involve a departure from the terms of the earlier agreement, even on a point of principle, does not in my view inevitably prevent a subsequent agreement from being properly described as “ancillary” to the earlier agreement, according to the ordinary meaning of words. This, I think, must be a question of degree according to the particular facts of each case.

63 The word can mean something which is supplemental and is not subordinate. The prime example of that meaning is the decision of this Court in Macquarie International Health Clinic Pty Ltd v University of Sydney (1998) 98 LGERA 218, 223, where Stein JA, with whom Mason P and Meagher JA agreed said:

An ancillary use does not necessarily need to be a subordinate or subservient one. It may be more than a minor use. It seems to me that an ancillary or incidental use is not capable of being reduced to a mathematical formula. It may also be noted that among the relevant dictionary meanings of ancillary are “auxiliary” and “accessory”.

Thus, a teaching hospital could be ancillary to the educational purposes of the University even though that hospital would augment those educational purposes.

64 The semantic significance of ancillary was apparently not argued before her Honour, nor was it argued before us, but consideration of that significance reinforces the view that I have taken as to the construction of the clause.

65 It was odd that so little attention was paid to the actual words of clause 4 and to its genesis. There was considerable material before the judge which was admitted into evidence as to how the Kitchener Project Agreement developed. The whole flavour of this surrounding circumstance evidence was to the effect that Mr Batterham would contribute the capital, his land, and Mr Makeig would, in the first instance, bear the costs and do the necessary work with the statutory authorities, doing what was required to obtain development approval. This material to my view reinforces the view which I have taken on the construction of clause 4.

66 As was put to counsel during argument, the purpose of the agreement appears to be that Mr Batterham is to contribute capital to the joint venture being his land. It is a layman’s agreement and should be construed according to its commercial purpose, not in any pedantic way. Project costs were at least to cover the expenses involved with consultants. In addition to those expenses, ancillary costs in the services of consultants were to be paid by Mr Makeig.

67 When one looks at the reason why the council required the money, one can see that it was required so that the consultants, whom the parties may have thought they would need to retain to pay preliminary costs of getting the Kitchener precinct included in the Cessnock master plan, could be paid by the council. The tag “lodgement fee”, with respect, only seeks to divert attention from the question of construction. In strict sense, the lodgement fee was not payable until after the Kitchener precinct had been included in the master plan.

68 Her Honour in para [258] when she said that the amounts paid by Mr Batterham in November/December 2006 were Phase 2 and 3 lodgement fees refers to annexures A and B to his affidavit of 1 December 2008. However, annexures A and B do not assist. Annexure A are cheque butts which merely show that money was paid to the Cessnock City Council for council fees re land rezoning and annexure B is the bank statement showing where the cheques were cleared. They do not in any way assist in assuming that Mr Makeig’s description of lodgement fees is a correct tag. It follows that in my view on the proper construction of clause 4, Mr Makeig was liable to pay these fees. It is clear he did not pay them. It is clear he was asked to pay them. Why didn’t he pay them?

69 If one looks at the evidence, the reason given by Mr Makeig for not making the payments was not that he was not liable to pay them; indeed he said that were it not for his poker face he may eventually have paid them. He was playing a game of poker in which he was bluffing in order to achieve an advantage to himself by having the council do one or both of two things: (a) acknowledge in writing that the fees would be refunded if there was a successful rezoning or at least if there was a successful rezoning and s 94 contributions were obtained; and (b) that he was remunerated for his time between 2003 and 2006.

70 There is, as far as I know, no judicial definition of a poker faced attitude, but the meaning is clear. A person playing poker may have thoughts in his or her mind, but the last thing that he or she will do is to convey by words or expression or even facial expression that he or she is doing anything else than what appears from his or her actions.

71 Accordingly, the only thing that Mr Makeig could mean by his evidence which I have already quoted, “I would have paid if my poker hand had failed. My poker hand was I am not interested in paying that unless we get the agreement”, is that whatever his subjective intentions, Mr Makeig conveyed and intended to convey a definite refusal not to pay. One can easily infer that Mr Batterham certainly got that impression.

72 Accordingly, we have a breach of the agreement, an intentional breach of the agreement on the part of Mr Makeig.

73 The next question that must be addressed is, did that breach justify Mr Batterham treating that breach as a breach of an essential term or a repudiation?

74 The primary judge said at [310]:

I am of the view that while the obligation on Mr Makeig’s part to pay consultants’ costs … would have the necessary quality of essentiality, I do not see the obligation to pay those costs ‘in a timely manner’ as having that same quality. In other words, while a failure or blanket refusal to pay consultants’ fees properly due in respect of the project would in my view have amounted to a breach of an essential term of the parties’ agreement giving rise to a right to terminate for breach, I am not satisfied delay in payment of itself would give rise to a right of termination.

75 That finding appears to be a finding that breach of the term to pay consultants’ costs and ancillary costs was breach of an essential term justifying termination by the opposite party. When that proposition was put to Mr Sirtes, he replied, “I don’t believe her Honour’s finding went that high. I think her Honour found that there was a distinction between payment – non-payment in a timely manner and a blanket refusal to make a payment.” Assuming that that is correct, though I am not at all sure it is, in my view we have here a situation where there was a blanket refusal to make a payment.

76 Mr Sirtes would dispute that proposition. He says that Mr Makeig’s evidence was that if his poker bluff position had been called, he probably would have paid.

77 However, there was no communication of the possibility of payment. Indeed, when one plays poker I understand, one goes out of one’s way to make sure that one does not communicate one’s real feelings. A reasonable observer would take what his own evidence shows Mr Makeig’s attitude was as a blanket refusal despite what his subjective intentions might have been.

78 Mr Sirtes says that Mr Makeig was not aware that the payment had been made until after it had been made. This may literally be true. However, Mr Batterham wrote to Mr Makeig the following day saying he was going to make the payment, an allegation which Mr Makeig just shrugged off as being part of a game Mr Batterham was playing, and if Mr Batterham’s evidence was correct, he was actually given the cheque to pay to the council for the $16,000.00. Whether he was or not he knew fairly soon after the payment had been made that it had been made. Her Honour made no finding as to the possible handing over of the cheque for $16,000.00 so that one cannot go any further than what I have just said.

79 Mr Sirtes mentioned “the territory of DT Nominees and Satellite” and says that Mr Makeig was in the position that brought him directly within that territory. The reference to Satellite is Satellite Estate Pty Ltd v Jacquet (1968) 71 SR (NSW) 126 and the other reference is to DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423.

80 In Jacquet which was an appeal from Jacobs J sitting in Equity, Walsh JA said at 140 that the authorities say that the ultimate question as to whether conduct constitutes repudiation of the contract is whether it should be concluded that one party acted in such a way as to evince an intention not to carry out the contract and that the question is one of fact. Asprey JA at 149 said:

Where one party to a contract persists in maintaining that it will only perform an obligation of essential importance in accordance with an untenable construction of that obligation, that should be regarded as amounting to a total repudiation of the contract on the part of that party … . The case may be different where there is a bona fide dispute as to the true construction of “a not very perspicuous document” cf Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699.”

81 Those utterances were approved by the High Court in DTR Nominees at 433 by a four to one majority, the majority including Jacobs J. At 431-2 the majority said that the question was whether the intention of the respondents to repudiate may be inferred from the events particularly the appellant’s continued adherence to an incorrect interpretation of the contract. “It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of the contract, because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.”

82 Those cases also remind people of two other relevant points: (a) that repudiation is not to be lightly inferred: Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60, 71; and (b) “Contentious observations in the course of discussions or arguments” are not too readily to be used to find a refusal to perform the agreement: Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 at 734.

83 In Jacquet at 149, Asprey JA emphasised that if “in the instant case the respondent was claiming wilfully to be entitled to perform the contract in a manner to which it knew it had no shadow of right”, that was repudiation. Mr Sirtes says that in the instant case, not only did Mr Makeig have a shadow of right in that the construction for which he was contending was possible as is illustrated by the fact that her Honour so found, but also he never got to the stage of a definite refusal.

84 At this stage I must digress. If, what the primary judge said at [310] is not a sufficient finding of fact, then the question is whether this Court should make its own findings or whether the matter should be sent back for retrial. Mr Graham asks the Court to deal with the matter; Mr Sirtes suggests that if we are against him, the matter should go back for retrial.

85 Retrials are to be avoided if possible, but if possible means, amongst other things, that a just result can be obtained by this Court analysing the facts.

86 The question of repudiation is a question of fact. However, apart from some criticisms of Mr Makeig’s evidence, the judge did not make any significant findings of fact based on credit. The primary facts are there. What has to be done is to assess those primary facts to see whether an ultimate holding of fact of repudiation should be made. In my view, this Court should deal with the matter itself.

87 In view of her Honour’s finding it must be accepted that there was an arguable alternative construction of clause 4. However, the evidence clearly shows that it was not on this ground that Mr Makeig declined to make the payments. He made a definite refusal to pay because he was playing a sort of poker game which included bluffing and endeavouring to strengthen his position to obtain from the council a written agreement to make refunds and/or to press his claim for payment for time he had spent on the project. To do this, he had to maintain a firm attitude that he would not perform the contract until he got what he wanted. To my mind, coupled with her Honour’s finding that clause 4 was an essential term, and what her Honour said, it seems to me the only conclusion that can be reached is that Mr Makeig repudiated the contract.

88 Accordingly, Mr Batterham’s termination of the contract was proper and Mr Makeig’s case must wholly fail.

89 It follows that the rest of the appeal can be dealt with fairly shortly.

90 Ground 4 alleges that the primary judge erred in finding that the respondent’s conduct in respect of the $450,000.00 issue did not constitute repudiatory conduct. That issue was on Mr Batterham’s version of what happened that Mr Makeig made up a fraudulent invoice for time spent on the project before the Kitchener Project Agreement of $450,000.00 and was intending to obtain money from the council by insisting that he would not perform the contract or do anything until he was paid. Apart from the way in which this gets caught up in the first three grounds, it does not seem to me that her Honour made any error in dealing with it and the appeal on that ground fails.

91 Ground 5 says that her Honour was in error in not holding that the respondent’s conduct in respect of the $450,000.00 constituted a discretionary bar to relief.

92 In some American States “unclean hands” has come to be a defence to a pure action in law (see eg Mallis v Bankers Trust Co 615 F (2d) 68 (2 Cir 1980) applying New York law) and the review by Dr T Leigh Anenson in Treating Equity Like Law: A Post-Merger Justification of Unclean Hands (2008) 45 American Business Law Journal 469 and following. However, such a proposition cannot be entertained in Australia on the state of the authorities. The present action was purely an action at law: there are no discretionary defences to an action at law. Ground 5 must fail.

93 Ground 6 complained that despite the finding that the appellants acted bona fide, the primary judge erred in holding that their actions amounted to a repudiation of the Kitchener Project Agreement. As I have found that the respondent repudiated that agreement in late 2006, Mr Batterham’s solicitor’s letter of 9 January 2007 properly notified Mr Makeig that his conduct had been accepted as having repudiated the Kitchener Project Agreement.

94 Grounds 7-11 deal with what has become now a side issue in the case and that is, whether the judge erred in her treatment of the representation that the respondent was “an experienced project consultant”. The background facts are that whilst Mr Batterham believed that Mr Makeig was an architect, in actual fact he had never completed his architecture course. He had been involved in property development, but the major development in which he had been involved concerned single lots, not a large scale development such as the present. Mr Makeig appears to have exaggerated his experience and indeed many of the projects about which he boasts were in fact unsuccessful.

95 The primary judge held that the representation that Mr Makeig was an experienced project consultant was true. Her Honour apparently took the view that a person does not cease to be an experienced operator merely because a majority of his or her projects are unsuccessful, or that he or she may appear to be incompetent.

96 These matters are further considered when I deal with grounds 12 and 13.

97 The question of quantum meruit arose incidentally in two places during the argument, only one of which needs mention.

98 There was a back up claim by Mr Makeig for a quantum meruit for the work he had done on the project of $122,335.60. It is a little difficult to describe this as a quantum meruit claim in the strict sense. The claim was that work done by Mr Makeig was worth this sum and that he was entitled under the contract to the reasonable value of the work. This claim fails as the contract was terminated and the right to any payment did not accrue prior to termination: the reimbursement was only due on the completion of the project.

99 I now turn to grounds 12 and 13 in the amended notice of appeal which have to do with the appellants’ amended cross-claim.

100 The appellants’ amended cross-claim principally claimed that the Kitchener Project Agreement should be set aside under the Fair Trading Act 1987 because of Mr Makeig’s misrepresentations or, alternatively that the appellants recover damages.

101 Her Honour did not actually dismiss the cross-claim as one would have thought she would have done in view of her findings. This was an oversight, but it should have been cured by someone going back to her Honour by getting her to make the final order.

102 There is little point in discussing whether her Honour’s construction of the term “experienced project consultant” was correct or not. That is because it is quite clear that there was no reliance on the representation quite apart from considering whether it caused any loss.

103 In May 2006, Mr Batterham became aware of matters which led him to consider that Mr Makeig was not an experienced property consultant. It upset him, but he made the decision that he had to carry on and did so. Accordingly, there being no reliance on the misrepresentation, if it be a misrepresentation, it is of no consequence.

104 Her Honour also seemed to consider that a representation that a person was experienced or was a professional did not carry the implication that the person was competent. This view did not affect her ultimate decision. With respect, I would disagree. The kernel of the conception of a professional in modern Australia is a person who has special knowledge and has attained an intellectual or certain manual skill; see eg Robbins Herbal Institute v The Federal Commissioner of Taxation (1923) 32 CLR 457, 461; Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215, 219; Prestia v Aknar (1996) 40 NSWLR 165, 184. Although the distinction between a professional and a tradesperson has been largely abandoned in modern speech, the word “professional” does to my mind denote both knowledge and competence in the application of that knowledge.

105 However, in any particular case, whether a person is truly described as “experienced” or a “professional” is a question of fact and degree to be adjudicated on the whole of the evidence.

106 Involved in the debate on these grounds was the question as to whether the primary judge wrongly rejected evidence of Mr Batterham’s reaction when he was informed about his misunderstanding as to Mr Makeig’s professional experience and qualifications.

107 Mr Graham put that s 66A of the Evidence Act 1995 makes it clear that the hearsay rule does not apply to a contemporaneous representation about a person’s health, feelings, sensations, intention, knowledge or state of mind.

108 It is not too clear to me why her Honour rejected this piece of evidence. It would not seem to me to be hearsay, but rather observations, and the evidence was presented as to the fact of what Mr Batterham did and said at the time when the alleged misrepresentations were discovered. In that sense it was not hearsay at all. However, as appears from Walton v R [1989] HCA 9; 166 CLR 283 at 288-9, there is some doubt as to this proposition and it was for this reason that s 66A was passed to resolve the doubt. It would seem to me that the material is admissible if relevant. However, as there was no reliance on the misrepresentation, the evidentiary question is of no moment.

109 For the above reason, the amended cross-claim must fail. This is, however, only of academic interest as the claim has failed for the appeal with respect to the cross-claim was only pressed as a set-off to the respondent’s claims.

110 This brings me to the final matter, and that is, the question of the assessment of damages (grounds 14 and 15).

111 Starting at [507] of her judgment, the primary judge considered questions of damage. At [507] her Honour said that what Mr Makeig had been deprived of was the opportunity to obtain a benefit under the Kitchener Project Agreement and that the value of that lost opportunity can be quantified by reference to the benefits Mr Batterham has obtained and is potentially able to obtain. At [512] the primary judge said that Mr Makeig has lost the opportunity in due course to share in the profits if either the put or call option is exercised (or the opportunities to agree with Mr Batterham for the project to be on-sold to someone else for a perhaps greater benefit). At [520] the judge quantified the damages for loss of opportunity at $2,378,638.90 being 7/18ths of $6.1165 million which she discounted by a factor of 12.5% for the possibility that the options under the JPG deed might not ultimately be exercised. The question of GST was left over to be dealt with subsequently.

112 It is necessary to mention some details which have not heretofore been stated.

113 On 15 November 2007, a deed was executed between Mr Batterham and his company of the one part, and Keith Johnson and JPG 58 Pty Ltd of the other part, the deed being a deed of put and call options. By that document, put and call options were put in place which could be exercised up to November 2012. The purchase price was $7,716,500.00. Mr Batterham has actually received $900,000.00 for option fees and deposit pursuant to the agreement. However, although the primary judge thought that was significant, its significance has been disavowed by senior counsel for the respondent.

114 The status of JPG 58 Pty Ltd is that it is a company with a share capital of $1 whose entire assets appear to have been mortgaged or charged to a bank and which is a single purpose company to acquire the subject land plus adjoining land. However, its obligations are guaranteed personally by Mr Johnson who is a property developer with considerable assets and as far as the evidence goes, well and truly solvent. The trial judge proceeded on the basis that it was virtually certain that JPG would exercise its option, or alternatively, that Mr Batterham would compel JPG 58 Pty Ltd to acquire the land and that even if it failed to do so, damages would be payable which would be paid by Mr Johnson. However, as I have noted, she discounted the damages by 12.5%. This consisted of 10% for the possibility that JPG or Mr Johnson would default and an additional 2.5% for other factors.

115 There is no mention in her Honour’s judgment of a discount to take account of the fact that money is being received now instead of in 2012 or 2013. It would appear that her Honour was not given any assistance on this aspect of the case. However, it would be standard practice to discount by 0.823 for money not to be received for four years on the 5% tables. This would mean that with her Honour’s figure discounted by 12.5% and then further discounted by 0.823, one would arrive at $1,712,917.31.

116 Mr Sirtes objects to the automatic use of the 5% tables. However in the absence of other material a judge is entitled to use such tables in assessing damages.

117 In Poseidon Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355, four members of the High Court said:

“We consider … that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1) [of the Trade Practices Act ], should be ascertained by reference to the court’s assessment of the prospects of success of that opportunity had it been pursued.”

However, as long as it is established on the balance of probabilities that the claimant has suffered some loss, proof on the balance of probabilities has no part to play in the evaluation of possibilities. Evaluation is a matter of informed estimation.

118 This Court considered the question recently in Heenan v Di Sisto [2008] NSWCA 25; 13 BPR 25,213, a case in which Giles JA gave the judgment of the Court in which Mason P and Mathews AJA agreed.

119 As the cases show, one must take into account the probabilities of the relevant event occurring. In the instant case, the relevant event was the realisation of the Batterham land primarily by operation of the put and call option or consequences flowing from it.

120 There was, of course, the possibility that the Kitchener precinct was never rezoned so that the whole scheme fell down. Although the evidence before her Honour indicated that the “experts” reckoned that it was only a question of when the land would be rezoned, not whether if it would be rezoned, in actual fact the Minister still has not approved the rezoning of the Kitchener precinct. However, this is really a red herring, mainly because the option does not appear to be dependent on rezoning.

121 The learned judge assessed the discount at 12.5%. She seemed to take the view that the money would flow through to Mr Batterham from the option almost certainly. However, the judge took the likelihood of JPG exercising or not exercising the option as essentially a red herring. For this reason she did not discount very much at all.

122 With great respect, the land was not zoned in a form where it could be subdivided, the general financial crisis was a real factor in the property market, there was a factor which had been brought up in evidence that there may be an oversupply of land in the Cessnock area, whilst Mr Johnson and his companies were thriving on the evidence before the judge as at 2009, four years is a long time in the property market and the Johnson group were obviously financing much of their land dealings through borrowed money. In all the circumstances, it would seem to me that 12.5% was far too little a discount to apply when valuing the chance of Mr Batterham receiving $12 million odd in 2010 or 2013. A more realistic discount would be 50%.

123 The matter is academic as the appeal must be allowed and Mr Makeig is not entitled to anything. However, if I were wrong on this, then the damages found by the trial judge of $2,378,638.90 should be discounted by 50% which gives $1,189,319.45 which is then reduced for the present value of money by 0.823 to arrive at a figure of $978,809.86. Thus, in my view, the appeal must be allowed, the orders of Ward J set aside, and in lieu an order that the plaintiff’s proceedings be dismissed with costs. The cross-claim should be dismissed, the respondent should pay the appellants’ costs of the appeal, but if eligible have a certificate under the Suitors’ Fund Act 1951.

124 It appears that the respondent has already received monies as a result of the judgment below. There needs to be restitution of those monies. The consequences of the early issuing of a bankruptcy notice by the respondent may also need consideration. Any notice of motion in respect of such matters must be filed within 14 days.

125 The formal orders I would make are:

(1) Appeal allowed.

(2) Orders of Ward J set aside.

(3) In lieu order that the proceedings be dismissed with costs.

(4) Order that the cross-claim be dismissed.

(5) Order that the respondent repay to the first appellant within 14 days any monies obtained by him in reliance of the judgment below.

(6) Order that the respondent pay the appellants’ costs of the trial and of the appeal.

(7) With respect to the costs of the appeal the respondent is to have a certificate under the Suitors Fund Act 1951.

(8) The parties may apply for any further orders for restitution or generally, but only if a notice of motion is filed within 14 days.

: I have had the advantage of reading Young JA’s judgment in draft. I agree with his Honour’s proposed orders.

Construction of cl 4 of the Kitchener Project Agreement

127 I agree with Young JA that cl 4 of the Kitchener Project Agreement, on its proper construction, obliged Mr Makeig to pay the fees imposed by the Council in November and December 2006. As Young JA has explained, the Council at that time required payment of two amounts, totalling $52,500.

128 The starting point is the language of the Kitchener Project Agreement itself. Clause 2 states that the purpose of the undertaking is:

“to do all things necessary to achieve Development Approval for the project”.

Clause 3 identifies the “ Project Site ” as two parcels of adjacent land, one owned by the first appellant (“Batterham Land”) and the other by Mr and Mrs Vowles, who are not parties to the proceedings (“Vowles Land”). Accordingly, the purpose of the undertaking was clearly to do all things necessary to secure development approval for the Project Site.

129 Clause 2 also records the parties’ intention to “on-sell the project … to a developer or other suitable entity”. The remainder of the Kitchener Project Agreement, apart from cl 4 itself, is essentially concerned with the division of the profits assumed to be derived from the sale of the Project Site. In that respect, Mr Batterham was to receive two thirds of the net profits from the sale of the Batterham Land, after allowing $1.5 million to Mr Batterham as the value at the date of the Kitchener Project Agreement. The net profits from the Vowles Land were to be shared equally.

130 Clause 4 is headed “PROJECT COSTS TO ACHIEVE D.A.”. Despite the heading, cl 4 does not expressly oblige Mr Makeig to pay all expenses necessarily incurred in obtaining development approval for the Project Site. But it does require Mr Makeig to pay all consultants’ costs and other costs ancillary to consultants’ services. Clause 4 is not expressed to be limited to consultants’ costs contractually or otherwise directly incurred by the joint venture or by one or other parties to the joint venture. If the clause had been drafted in that way, it might well be difficult to read it as applying to consultants’ costs incurred by the Council, even if the costs were effectively passed on to the joint venture in the form of fees designed to recoup the Council’s costs on a full recovery basis.

131 The language used in cl 4 of the Kitchener Project Agreement is quite capable of being read as covering consultants’ costs that are not contractually incurred by or on behalf of the joint venture, but are incurred in the following circumstances:

the joint venture requests the planning authority to rezone the Project Site;

the planning authority incurs the costs as part of the rezoning process;

the planning authority charges fees to the joint venture pursuant to an announced policy of full costs recovery from proponents of rezoning; and

the fees charged to the joint venture are in fact allocated by the planning authority to payment of the consultants’ costs incurred by it.

132 So far as the last point is concerned, it is important to appreciate that by a letter dated 27 March 2007, Mr Moshage of the Council explained the way in which the fees paid in respect of the proposed rezoning of the Kitchener Investigation Area had been applied:

“As you are aware, the rezoning of the Kitchener Investigation area is a Category C rezoning request. Such rezonings refer to significant and complex applications identified in the City Wide Settlement Strategy (Stage 1) requiring the concurrent preparation of Development Control Plans and Section 94 Contributions Plans.
The proposed fees are based on full cost recovery by Council and are intended to be payable by the proponent prior to commencement of each phase of the rezoning process. To date, you have contributed three (3) of the four (4) fee phases amounting to $83,750.00. An $11,000.00 fee representing phase 4 of the rezoning process is still payable after Council resolution to proceed to gazettal has been made.
Council has expended $77,094.90 in the assessment of the Kitchener rezoning to date which has included the engagement of a number of specialist consultants to assist Council in the preparation and assessment of the Kitchener Rezoning and is made up of the following …”

133 The letter went on to set out the fees paid to consultants. It advised that the unexpended moneys ($6,655.10) and the Phase 4 fees ($11,000.00) would be used for various purposes including finalisation of a DCP and a s 94 Contribution Plan and the decision to gazette the LEP, the DCP and the Contribution Plans.

134 The construction I favour is supported by the heading to cl 4, namely “PROJECT COSTS TO ACHIEVE D.A.”. The objective of the undertaking was to do everything necessary to obtain development approval for the Project Site. The expression “Project Costs” is plainly apt to include fees levied by the Council on the joint venture. It is true that the text of cl 4, despite the heading, does not necessarily extend all fees levied by the Council. But it does cover all consultants’ costs and other costs ancillary to consultants’ services. The heading to cl 4 suggests that a broad construction should be given to this language, so that it covers consultants’ costs paid or to be paid by the council, where the costs are recovered in full by the Council through fees imposed in the joint venture. Whatever description is given to the fees, they were imposed precisely for the purpose of recouping the amounts spent by the Council on consultants’ services.

135 In my opinion, even if cl 4 did not include the expression “other costs ancillary to consultant’s services”, the phrase “all Consultants costs” should be read as extending to the fees levied by the Council in the circumstances of this case. However, the obligation on Mr Makeig to meet “other costs ancillary to consultant’s services” adds force to the conclusion the he was obliged by cl 4 of the Kitchener Project Agreement to pay the fees imposed by the Council in November and December 2006.

136 Both parties placed reliance on various surrounding circumstances to support their respective interpretations of cl 4. In my view, the circumstances, to the extent that they can be taken into account, strongly support the view that cl 4 obliged Mr Makeig to pay the fees required by the Council in November and December 2006. In particular:

As Young JA has pointed out, the primary Judge found that Mr Makeig was aware of the letter of 16 September 2004 to the Council from the Department of Infrastructure, Planning and Natural Resources (“DIPNR”). The letter made it clear that unless the whole of the Kitchener Precinct was rezoned, it would not be possible to obtain the rezoning of the Project Site.

Mr Makeig received a copy of the resolution adopted on 17 November 2004 by the Council’s Strategic and Community Services Committee. The resolution accepted that further land rezoning around Kitchener required a comprehensive assessment to be carried out and required that any such assessment “be based on full cost recovery to Council”.

It follows that there was objective evidence showing that Mr Makeig was fully aware at the time he prepared the Kitchener Project Agreement that the Council would engage consultants to undertake the assessment required for the rezoning of the Project Site and that the assessment would be conducted on the basis of full cost recovery from the proponent of the rezoning. It can readily be inferred that Mr Batterham was also aware of the decisions made by DIPNR and the Council prior to entering into the Kitchener Project Agreement.

A Breach Constituting Repudiation?

137 I did not understand Mr Sirtes, who appeared for Mr Makeig, to dispute the primary Judge’s finding (Makeig v Batterham [2009] NSWSC 344, at [310]) that a blanket refusal by Mr Makeig to pay consultants costs as required by cl 4 of the Kitchener Project Agreement, would constitute a breach by him of an essential term justifying Mr Batterham in terminating the Agreement.

138 I agree with Young JA that the facts as found by the primary Judge warrant this Court finding that Mr Makeig’s conduct, viewed objectively, constituted a blanket refusal to pay the fees required by the Council in November and December 2006. His conduct therefore amounted to a breach of an essential term of the Kitchener Project Agreement and justified Mr Batterham terminating the Agreement. Alternatively, Mr Makeig’s conduct, whatever uncommunicated strategy he may have had in mind, constituted a repudiation of the Kitchener Project Agreement equally justifying Mr Batterham’s termination.

Other Issues

139 As Young JA has explained, it is not necessary to deal with the other issues that were argued on the appeal. However, I agree generally with what Young JA has said on these matters.

140 So far as Mr Batterham’s cross-claim is concerned, I see no basis for interfering with the primary Judge’s finding (at [472]) that Mr Batterham did not rely on Mr Makeig’s pre-contractual representation that he was an architect. Although her Honour found that the representation was false, she pointed at [465]-[471]) to a number of matters strongly indicating that Mr Batterham’s decision to enter into the Agreement was not materially influenced by that representation.

141 The matters identified by the primary Judge militate against any finding that Mr Batterham relied on Mr Makeig’s pre-contractual representation that he was an experienced project consultant, assuming (contrary to her Honour’s findings) that the representation to that effect was untrue and was misleading or deceptive. In the absence of such a finding, it could not be said that Mr Batterham suffered loss or damage “by” Mr Makeig’s conduct for the purposes of ss 68, 72 of the Fair Trading Act 1987. I do not think it necessary to express a view as to whether a representation that a person is a “professional” necessarily carries with it the implication that the person has a particular competence.

142 By reason of the primary Judge’s finding (at [347]) that Mr Batterham repudiated the Kitchener Project Agreement, it was necessary for her Honour to assess the damages to which Mr Makeig was entitled for breach of contract. She did so by valuing Mr Makeig’s lost opportunity to make a profit from the sale of the Project Site as contemplated by the Kitchener Project Agreement (at [507]-[520]). Her Honour thought that the most appropriate course was to consider the events which had actually occurred. So far as the Batterham Land was concerned, this involved determining the likelihood that the put and call option deed entered into between Mr Batterham and Mr Johnson (and their respective companies) would result in a sale of the land at the option price.

143 I agree with Young JA that her Honour was in error, despite the absence of any assistance from the parties on the point, in making no allowance in her calculations for the fact that the Batterham Land (on her Honour’s findings) would not be sold until late 2012. In these circumstances, it was necessary to discount the assumed sale price to calculate its present value at the date of judgment. Otherwise, Mr Makeig would be over-compensated for his lost opportunity.

144 The primary judge recognised that in assessing the value of Mr Makeig’s lost opportunity she had to assess the chance that the put and call option deed would not result in a sale of the Battterham Land at the exercise price or, if a sale occurred by reason of the exercise of Mr Batterham’s put option, the chance that the sale price could not be recovered from Mr Johnson or his company.

145 As Young JA has pointed out, there were many imponderables that had to be taken into account in assessing the chances that not only would the option be exercised, but that Mr Batterham or his company would be paid the full purchase price. Among other things, that depended on Mr Johnson’s ability to satisfy the guarantee he gave in support of the “$1 company” which would be the purchaser if the option were exercised. The finding (at [515]) that Mr Johnson “may be unlikely willingly to contemplate the consequences of an unsatisfied call on his guarantee” did not address the question of his ability to meet any such call.

146 I agree with Young JA that, once the relevant uncertainties are taken into account, a discount of 50% of the assumed sale price for the Batterham Land would have been appropriate. The resultant sum would need to be discounted further to calculate the present value of that sum, in the manner explained by Young JA.

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