Berryman v Hames Sharley (WA) Pty Ltd
[2008] WASC 59
•22 APRIL 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: BERRYMAN -v- HAMES SHARLEY (WA) PTY LTD [2008] WASC 59
CORAM: HASLUCK J
HEARD: 25, 26 JULY 2006 & 5 - 12 SEPTEMBER 2007
DELIVERED : 22 APRIL 2008
FILE NO/S: CIV 2373 of 2004
BETWEEN: PETER MICHAEL BERRYMAN
Plaintiff
AND
HAMES SHARLEY (WA) PTY LTD
Defendant
Catchwords:
Contract and tort - Trade Practices Act 1974 (Cth) - Claim for loss of commercial opportunity - Nature of contractual obligations undertaken by defendant acting as architect and town planning adviser - Whether duty of care extends to the taking of positive steps beyond agreed professional task
Special qualities of plaintiff's site secured by planning consent for 12 months under current town planning scheme - Pending town planning scheme with reduced height limits - Expiry of existing consent while building plans being finalised - Plaintiff's project barred by gazettal of new scheme - Whether representations made by defendant as to viability of project - Extent to which defendant's duty of care affected by terms of contract and plaintiff's ambivalence about project - Defendant found to be in breach of common law and statutory duties in failing to warn or inform plaintiff about risk of gazettal
Whether sufficient causal link between misconduct complained of and loss suffered - Identifying and valuing loss - Likelihood of project being completed - Whether reasoning in Sellars case applies - Whether damages to be assessed at date of breach or date of trial - Assessment of damages for loss of opportunity - Amount of compensation payable to plaintiff reduced pursuant to reasoning in Sellars case - Payment of interest
Legislation:
Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA), s 4
Trade Practices Act 1974 (Cth), s 51, s 52, s 82, s 87
Result:
Judgment for plaintiff
Category: A
Representation:
Counsel:
Plaintiff: Mr M J Feutrill & Mr P Mendelow
Defendant: Mr P G McGowan
Solicitors:
Plaintiff: Haydn Robinson
Defendant: DLA Phillips Fox
Case(s) referred to in judgment(s):
Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell (2007) 34 WAR 109
Astley v Austrust Ltd (1999) 197 CLR 1
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Bellgrove v Eldridge (1954) 90 CLR 613
Bennett v Minister for Community Welfare (1992) 176 CLR 408
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410
Carmody v Priestley & Morris Perth Pty Ltd [2005] WASC 120; (2005) 30 WAR 318
Chappel v Hart (1998) 195 CLR 232
Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Cottrill v Steyning & Littlehampton Building Society [1966] 1 WLR 753
Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Ellul v Oakes (1972) 3 SASR 377
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Hawkins v Clayton (1988) 164 CLR 539
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
Heydon v NRMA Ltd (2000) 51 NSWLR 1
Hocking Stuart (Hawthorn) Pty Ltd v Vernea [2005] VSCA 129
Howe v Teefy (1927) 27 SR (NSW) 301
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640
Johnson v Perez (1988) 166 CLR 351
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281
Malec v JC Hutton Pty Ltd (1990) 169 CLR 638
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Midland Bank Trust Co Ltd v Hett Stubbs & Kemp (a firm) [1979] Ch 384
Mohr & Mohr v Cleaver & Cleaver [1986] WAR 67
Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Rogers v Whitaker (1992) 175 CLR 479
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Seven Cable Television Pty Ltd v Telstra Corp Ltd (2000) 171 ALR 89
Spencer v Commonwealth (1907) 5 CLR 418
Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93
Taylor v Johnson (1983) 151 CLR 422
Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321
Vass v Commonwealth of Australia [2000] FCA 47; (2000) 169 ALR 486
Voli v Inglewood Shire Council (1963) 110 CLR 74
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
TABLE OF CONTENTS
Introduction
Background
The planning controls
The first site potential report
The defendant's 18 September letter
Preparation of drawings
The 18 December planning consent
The planning consent plans
Events after 18 December planning consent
The second site potential report
Evidence concerning the site potential reports
The River Stone estimate of building costs
The Rix estimate
The Pindan estimate
Evidence concerning the Pindan estimate
The next phase
The Hames evidence concerning the 28 May letter
The plaintiff's property listing and bank application
The Psaros letter
Cross‑examination of plaintiff as to Psaros letter
Cross‑examination of Mr Hames as to Psaros letter
Events after the Psaros letter
Certain issues
The September 2002 events
Cross‑examination of the plaintiff
The evidence of Ms Cunningham
Cross‑examination of Ms Cunningham
The Hames evidence as to September 2002 events
Cross‑examination of Mr Hames
The 2003 events
Cross‑examination of the plaintiff and Ms Cunningham
Evidence of Mr Popplewell
Cross‑examination of Mr Popplewell
The Hames' evidence concerning events of 2003
Further cross‑examination of Mr Hames
Evidence of Mr Buttle
Cross‑Examination of Mr Buttle
Events after 2003
Cross‑examination of the plaintiff as to later events
The pleadings
The issues
Legal principles
The nature of the agreement
The alleged May variation
The alleged September variation
Certain evidentiary issues
The renewal or extension issue
The alleged failure to warn or inform issue
Resolution of the failure to warn or inform issue
General observations on the causation issue
Specific observations on the causation issue
Causation issues concerning loss of opportunity
Causation in the present case
Observations on the assessment of damages
The primary claim and the alternative claim
The nature of the plaintiff's claim for damages
The plaintiff's particulars of loss
The plaintiff's alternative claim
The plaintiff's primary claim
The plaintiff's expert evidence
Cross‑examination of Mr Edwards
The plaintiff's expert witness - Paul McEvoy
The plaintiff's expert witness - Samantha Dempsey
Overview of plaintiff's expert evidence
The plaintiff's expert witness - David Stewart Liggins
The defendant's expert evidence - David Moore
Mr Moore's first report (exhibit D10)
Mr Moore's second report (exhibit D11)
Mr Moore's third valuation (exhibit D12)
Observations on Mr Moore's evidence‑in‑chief
The cross‑examination of Mr Moore
Findings as to assessment of loss
Findings as to contingencies and possibilities
Summary of findings
HASLUCK J:
Introduction
The plaintiff, Peter Michael Berryman, was at all material times the proprietor of a property known as 20 Hensman Street, South Perth. The plaintiff contends in these proceedings that on or about 28 September 2000 he engaged the defendant company, Hames Sharley (WA) Pty Ltd, to provide services for the redevelopment of the subject property by the construction of three luxury multiple residential dwellings. The nature of the services to be provided and the exact terms of the contract are in dispute. However, in essence, the plaintiff alleges that as a consequence of certain actions and omissions on the defendant's part the project did not proceed with the result that the plaintiff is entitled to relief.
It was common ground at the trial that with the assistance of the defendant the plaintiff applied for and obtained a grant of planning consent from the City of South Perth dated 18 December 2001 for 'three grouped dwellings' (the planning consent). By condition 25 of the planning consent the validity of the approval was to cease if construction was not substantially commenced within 12 months. Construction did not commence within the prescribed period. Shortly afterwards a new planning scheme was gazetted with height restrictions that ruled out the possibility of obtaining a fresh planning consent and proceeding with the project in the form originally proposed. It was a central issue at the trial as to whether the defendant could be held responsible for an alleged failure to extend or renew the original planning consent.
The plaintiff did not proceed with the proposed or any form of development and continued to reside at the property. His claim for relief was directed essentially at an alleged loss of opportunity to proceed with the project. This required that his claim be defined with precision so that each party would be able to call expert evidence bearing upon the value of the property if the project had proceeded.
The matter was listed for trial initially on 25 July 2006. However, as a consequence of a significant controversy at that time as to the way in which the plaintiff's claim for damages was formulated, the claim was amended and the trial had to be adjourned. This allowed for further steps to be taken in relation to the presentation of expert evidence in response to the amendments. The matter was then relisted for trial. Both parties accepted that the burden of proof lay upon the plaintiff throughout to make out his claim upon the balance of probabilities.
Background
The plaintiff described his personal circumstances as at mid 2000 in his witness statement (exhibit 45). He said that the property was his family home and he had lived there for over 30 years. He was the major shareholder of a company which owned and operated a business of car sales trading under the name and style of Berryman Car Sales. Through his business he had access to considerable financial resources.
In the course of his evidence at the trial the plaintiff said that he was essentially a self‑made man. He had been operating his business, which was a second‑hand or used car business, from caryard premises at 575 Newcastle Street in Northbridge. Cars were sold from those premises and he attended the premises six days a week. In August 2000 he decided to make enquiries about developing the Hensman Street property.
The plaintiff said in his witness statement that one of his neighbours was William George Hames who lived nearby at 29 Ridge Street, South Perth. The plaintiff had known Mr Hames since about 1970 as a neighbour and friend and as a person who had bought several vehicles from the plaintiff's car dealer business. He understood that Mr Hames was an architect and town planner. With that thought in mind, he approached Mr Hames and had an initial meeting with him in about August 2000 in the front room of the subject property in order to talk about a redevelopment project.
According to the plaintiff, 'the substance' of what he said to Mr Hames at that meeting was that he wanted to build a three‑storey luxury home unit building on the property with one floor for each home unit and to the intent that the plaintiff would live in the top unit. He had not decided what he would do with the bottom and middle unit. He would consider renting or selling those units or retaining them all indefinitely with a view to leaving them to his children in his will. He had promised his late wife that the property would be left to their three children. That was why he had in mind three units so that he could leave one to each child.
On the plaintiff's account of what took place at the initial meeting, he asked Mr Hames if what he (the plaintiff) had in mind was the type of work Mr Hames did and, if so, whether he would do this project for the plaintiff. The plaintiff had never done this sort of thing before and did not know what to do and wanted to get it right. Because of the recent demise of his wife and some difficulties with his own health, he did not want to have any problems with the project and wanted Mr Hames to do all the necessary work. It was therefore important that Mr Hames handled the project from start to finish.
According to the plaintiff, the substance of Mr Hames' response was that he did the type of work required and would be pleased to handle the project for the plaintiff from beginning to end. He and his business, Hames Sharley (the defendant in these proceedings), had a lengthy experience doing projects of this type. The firm employed architects and town planners and could do all the work required to complete the project. Moreover, Mr Hames himself was a member of the City of South Perth's Town Planning Committee and its Design Advisory Board, so he knew all the right people and what was going on in the City. He said that Hames Sharley would prepare a site potential report. He advised the plaintiff to stay away from the City because, as a non‑professional person, the plaintiff might upset the City and Mr Hames wanted to deal with the City himself to ensure the project ran smoothly.
I note in passing that Mr Hames, in his witness statement at trial, gave evidence that can be related to the plaintiff's evidence about these matters (exhibit D35). Mr Hames said that he holds the Degrees of Bachelor of Architecture (Hons) from the University of Adelaide and Master of City Planning and Urban Design from Harvard University. He has been working as an architect since 1960. He worked initially for institutions such as the South Australian Housing Trust and the Western Australian Housing Commission. In the early 1970s he and another architect, David Sharley, formed the firm which was destined to become the defendant company, known simply as Hames Sharley. Mr Hames has been a director of that company since 1983. He is a Life Fellow of the Royal Institute of Architects, a member of the Planning Institute of Australia and a Fellow of the Australian Property Institute.
Mr Hames said in evidence that in mid 2000 he had a discussion with the plaintiff at the premises of Berryman Car Sales in West Perth concerning a proposed redevelopment of the subject property. This led to a meeting at the plaintiff's house.
According to Mr Hames, the plaintiff said he was interested in constructing a three storey building with a view to retaining the top floor apartment and selling the lower two apartments. He wanted the apartment to be luxurious; classical in style; have large windows to take advantage of the views; have recess windows; have large balconies; have the bedroom located on the eastern side; have landscaped gardens and be white, cream or grey/blue in colour. He said also that he wanted the same feel to the apartment as his current house. The plaintiff wanted to be able to sit out on a balcony with a view of the river and read the newspaper, as he did in his current house. He wanted to develop the property because he liked the area.
According to Mr Hames, he told the plaintiff that a site potential report was required prior to commencing any work on the project because it was necessary to identify any potential problems which could arise as a result of the town planning regulations. He said that the defendant company was engaged initially to prepare a site potential report and proceeded to do so. Research for the report was undertaken by Darren Youens who was associated with the defendant company.
It emerges, then, that there were differences between the two principal witnesses as to where the initial discussion was held and as to the scope of the plaintiff's requirements. The plaintiff said he wanted Mr Hames to handle the project from start to finish. According to the defendant, he was asked initially to prepare a site potential report.
The planning controls
It was common ground at the trial that as at mid 2000 the applicable City of South Perth town planning scheme was TPS5 which permitted four 'grouped' dwellings to be developed on the site. A proposed TPS6 projected rezoning of the subject property from R35 to R25/40. This would reduce the opportunity to develop the site with four grouped dwellings and would enable only three grouped dwellings to be developed.
Mr Hames said in evidence that in 2000 he was aware that TPS5, as it affected South Perth, was under review and had been under review since 1998.
According to Mr Hames, he told the plaintiff that in his belief there was room to negotiate with the City of South Perth on the basis of allowing for 'multiple' dwellings to be built on the site in return for the retention of certain trees and increased open space left on the site. He explained that multiple dwellings are dwellings which are stacked vertically; grouped dwellings are side by side.
I note in passing that as at mid 2000 the height restriction on the subject property was 10.5 metres. Much of the surrounding area had a height limit of 7.5 metres. It seems that there was no discussion about height restrictions in the course of the initial exchanges. Mr Hames was aware that TPS5 was under review, but it was a matter of controversy at the trial as to when he personally first became aware that the new TPS6 would reduce the height limit on the subject property to 7.5 metres. It was a matter of controversy also as to whether the plaintiff was sufficiently informed and/or warned about the effect of the change.
It was common ground between the parties that prior to 1 September 2000, as a consequence of the initial discussions, the defendant company proceeded with the preparation of a site potential report and delivered the same to the plaintiff under cover of a letter dated 1 September 2000. It will now be useful to look at the terms of the 1 September letter (exhibit 1) and the first site potential report (exhibit 2).
The first site potential report
The defendant's 1 September letter opens in this way:
Please find copy of our initial assessment of your site in regard to its development potential. Your indicated preference for 3 multiple dwellings will need to be negotiated with Council. The codes allow four grouped dwellings (which are side by side dwellings) whereas your requirement is multiple dwellings (ie. stacked vertically) is not defined under the R35 code.
Hames Sharley would be most pleased to act as your architect and town planner for this project.
We understand that it is your intention to build three luxury multiple dwellings to be held by yourself and you occupying the penthouse. Specific details will be developed once a formal commission is enacted.
Our planning services would include all applications and representations to Council in regard to this development application.
Our architectural services would include full service for the design, contract documentation, tendering and contract administration services for the project.
The defendant's 1 September letter went on to refer to the defendant company's base fee of 6% of the final or estimated costs of the works and indicated that certain specified proportions of the base fee would be recovered progressively at different stages. These stages were described as schematic design, design development, contract documentation and contract administration. It was said further that the firm rendered monthly accounts for services rendered.
In regard to secondary consultants, such as, civil, structural, mechanical and electrical engineers, quantity surveyors etc, the defendant recommended 'that these appointments be by yourself'. However, the defendant was willing to advise on the methods of engagement.
Mr Hames closed the letter by saying that his firm could provide the plaintiff with a building of quality which would enhance an excellent site.
The first site potential report included an introduction describing the lot size (1,212 square metres) and noted that the local authority was the City of South Perth. The local Town Planning Scheme zoning was said to be residential R35, the number of permissible dwellings was said to be four grouped dwellings, the plot ratio was said to be 'not applicable', the height limit was given as 10.5 metres.
The introduction contained an observation at par 1.1.10 to this effect:
The City of South Perth is currently in the process of reviewing their existing Town Planning Scheme. The site is proposed to be zoned R.25/40.
The first site potential report included this passage under the heading 'Comment':
The issues that are associated with this proposal are involved with height and impact upon the surrounding development.
A minor concern exists over a classification in the Residential Planning Codes of multiple or grouped dwellings. Multiple dwellings are not defined in the R.35 density code. A multiple dwelling is where any part of a dwelling is vertically above part of any other. It is anticipated that this can be negotiated with Council.
The attached development concept complies with the height requirements of the Town Planning Scheme and shows the possible development opportunities that exist on the site (See Attachment I).
The opportunity currently exists to develop the site for 4 grouped dwellings however the Draft Town Planning Scheme proposes that the site be zoned Residential R.25/40 which means that to achieve the higher codes you must comply with a number of criteria. These criteria are shown in Attachment II. An assessment of the criteria reveals that the site can only comply with 5 of the criteria which makes the maximum density available, under the draft Town Planning Scheme, R.25. R.25 enables only 3 dwellings to be developed. An opportunity for an additional dwelling will be lost if the draft Town Planning Scheme is enacted.
Visual privacy of the adjoining neighbours will be the biggest issue that needs to be addressed and this can be accommodated by taking advantage of the view to the south west.
I note in passing, as a matter bearing upon the central issues, that the first site potential report appears to accept that the development potential of the site could be adversely affected if the new TPS6 was put into effect. However, it is important to keep in mind that the adverse effect being spoken of was the loss of an opportunity for an additional dwelling rather than the loss of an opportunity to proceed in the manner being proposed, namely, the construction of three luxury multiple dwellings (that is dwellings stacked vertically).
There is a reference to height as an issue associated with the proposed development but there is no reference to a more specific issue that might arise if the relevant planning controls were amended to restrict the height of the building to 7.5 metres. The report simply notes that 'the attached development concept complies with the height requirements of the Town Planning Scheme'.
The first site potential report included indicative sketches for 'multiple dwellings' and various annexures bearing upon the nature of the planning controls. These included in Appendix II the Proposed Town Planning Scheme Standards in respect of Dual Density Coding: R25/40. It included also Appendix III which consisted of a document dated February 2000, bearing the heading 'Planning Policy No. P34 Residential Density - Interim Introduction of Proposed Town Planning Scheme No. 6 Provisions'.
The P34 policy document observed that the policy was applicable to all land within the City of South Perth where residential development is permitted. The policy objective was said to be to promote orderly and proper planning by introducing certain residential density controls 'contained within the latest version of the proposed Town Planning Scheme No. 6 endorsed by Council, which are essential to protect the integrity of the proposed Scheme'.
Clause 3(a) provides that in assessing applications for planning consent the Council (or its officers acting under delegated authority) shall have regard to the relevant density codings imposed by the No. 5 Town Planning Scheme as well as those to be imposed by No. 6 Town Planning Scheme.
Mr Hames said in evidence that he discussed this 'letter of engagement' with the plaintiff. He explained that, as indicated in the letter, the Hames Sharley services would be provided in stages. The plaintiff would have to engage secondary consultants such as engineers and quantity surveyors.
The defendant's 18 September letter
The plaintiff said in his witness statement that he read the defendant's 1 September letter and report. He noted that the letter made reference to a formal appointment. A day or so later he spoke to Mr Hames, asking him what the next stage was and what the approximate cost of the development would be.
According to the plaintiff, Mr Hames said that he was going away but would ask his associate Dean van Niekerk, to send out a more detailed proposal with a costing. By letter dated 18 September 2000 from Hames Sharley (being a letter signed by Dean van Niekerk) a proposal was put to the plaintiff in which it was said that the estimated cost of the project was $1.25 million to $1.5 million. Hames Sharley would charge $8,250 for their services in order to obtain planning approval for the project (exhibit 3).
Having regard to later events, it will be useful to look at the defendant's 18 September letter closely.
It commences by saying that a detailed brief 'is yet to be formulated' but it is understood that the plaintiff was giving consideration to building 'three luxury multiple residential dwellings' on the subject property. Specific accommodation and user requirements/preferences were to be established after a site visit with the plaintiff with topographical and physical constraints being identified at that time.
The 'scope of work' was described as being to prepare schematic design suitable for lodgement with the City of South Perth for development approval purposes. Town planning input to assist in this stage would be provided. The design was also to be used to establish an 'indicative estimate of likely construction costs'. The documentation associated with those services was then described and certain 'exclusions' were referred to which included 'other consultants (if required)'.
It seems that the defendant's 18 September letter was accompanied by a lengthy memorandum headed '20 Hensman Street, South Perth. Description of General Scope of Works for Stages of Work to Delivery of Product'. The defendant's Scope of Works document referred to the various specific forms of design that would have to be completed such as structural, mechanical, hydraulic and electrical design and referred at length to the provision of contract documentation services.
The plaintiff was unsure when exactly he received the Scope of Works document but to the best of his recollection it came with the letter of 18 September 2000. I am prepared to find as a fact that it did so. For ease of reference, when I refer to exhibit 3 or the defendant's 18 September letter it can be assumed that I am referring also to the defendant's Scope of Works document.
The plaintiff sent a letter dated 28 September 2000 to Hames Sharley saying that he had no problems with the proposed fee structure of $8,250 (exhibit 4). However, before he committed to the project he wished to find out what his rights were to 'the design, plans, approvals etc'. Mr Hames informed him by telephone that whatever work had been paid for by him would belong to him. The plaintiff said in his witness statement that he then accepted the proposal from Hames Sharley contained in 'its letters to me as we had discussed'. Mr Hames said words to the effect that he would have the drawings prepared for the project and discuss them with the plaintiff when they were ready.
According to Mr Hames, his firm had been engaged to produce schematic designs suitable for lodging with the city of South Perth for planning consent.
Preparation of drawings
It seems that from September 2000 to about mid 2001 the plaintiff liaised with Mr Hames about the project. During this period Hames Sharley prepared drawings which were shown to the plaintiff. According to Mr Hames, the plaintiff commented upon the plans from time to time and changes were made. At one stage the plaintiff went to Melbourne to study apartment buildings he admired, and in due course provided Hames Sharley with photos of the same. By letter dated 26 March 2001 Hames Sharley informed the plaintiff that the preliminary construction cost estimate was approximately $1.89 million but this was indicative only (exhibit 5).
The defendant's 26 March letter enclosed drawings which purported to bring together the ideas for redevelopment of the site upon the basis that the areas of the apartments were 269 square metres with balconies being additional to that area. These were said to be large apartments and were in the luxury category in regard to size. The 'preliminary construction cost estimate' was said to be approximately $1.9 million. This estimate was 'indicative only' and would depend on final finishes and equipment selection as well of final areas of the apartments.
The defendant's letter asked the plaintiff to review the plans. It said that on the plaintiff's receipt of his comments and approval the documents would be used to commence discussions with the City of South Perth which, in the event of a positive response, could lead to completion of the 'schematic design stage' of the units and lodgement of the documents for a development approval.
Between August and December 2001 the plaintiff received correspondence from Hames Sharley and had discussions with Mr Hames about the progress of the application for planning approval. The plaintiff also paid fees referable to the design process. In due course, Mr Hames gave him an application for planning consent. This described the proposed development as 'three grouped dwellings' with an approximate cost (excluding land) of $2.2 million. The estimated time of completion was said to be 'asap upon approval'. The application for planning consent was signed by the plaintiff and dated 29 October 2001 (exhibit 7).
The application form was then submitted to the City of South Perth by Hames Sharley under cover of a letter dated 31 October 2001 (exhibit 8). The covering letter enclosed documentation relating to the Council's earlier approval of the project 'in principle'.
By a faxed letter to the City of Perth dated 9 November 2001 updated copies of certain of the drawings, namely, SKO4 and SKO5, were forwarded to the City of South Perth together with a copy of the survey of the property (exhibit 9). These drawings reflected changes referable to a report that had been obtained concerning the preservation of trees on the property.
It was common ground between the parties that the application was approved by the City of Perth. The grant of planning consent described the determination date as 18 December 2001 in respect of 'three grouped dwellings' (exhibit 10).
I note in passing that although the plaintiff's 31 October application and the planning consent employed the language of TPS5, and spoke of three 'grouped' dwellings, the consent in fact allowed for three multiple dwellings, that is, three apartments stacked vertically. In the manner foreshadowed by Mr Hames in the first site report this outcome had been negotiated with Council by making provision for the retention of certain trees upon the property. This appears from a letter from Hames Sharley to the City of South Perth dated 3 August 2001. According to that letter the Residential Planning Codes (Part 3 - Grouped Dwellings) stated that 'under exceptional circumstances it is possible to permit a development involving dwellings partly or wholly above another to be classified as grouped dwellings' (exhibit 6).
The same letter noted that the 'existing Town Planning Scheme identifies this and the surrounding lots as having the potential to develop to a maximum height of 10.5 metres, which is the height proposed in the development application'. It was this letter that had led to the Council's earlier approval of the proposed development 'in principle'. The letter was signed not by Mr Hames but by Darren Youens on behalf of Hames Sharley.
The 18 December planning consent
The 18 December planning consent was granted subject to 26 conditions a number of which have an important bearing upon the matters in issue. In particular, the conditions included the following:
17.The finished floor level for the main portion of the ground floor unit shall be a maximum of RL 27.60. The remainder of the dwelling, which has various levels throughout, shall also be reduced by 390mm accordingly.
18.All existing trees intended to be retained as indicated on the site plan and addressed in the arboricultural report shall be identified for retention on the Working Drawings and on the required landscaping plan and shall be protected prior to and during construction, and shall not be removed without the prior approval of the Council. At a suitable distance away from the base of the trees, protection zones shall be established by means of installation of sturdy temporary barrier fences to prevent entry by construction staff, heavy mechanical machinery and the storing of building materials and soil.
25.The validity of this approval shall cease if construction is not substantially commenced within 12 months of the date of grant of Planning Consent.
The planning consent concluded with a so‑called 'Important Note' to the effect that:
This Planning Consent is NOT an authorisation to commence construction. A BUILDING LICENCE MUST BE OBTAINED from Council's Building Services Department prior to commencing any work of a structural nature
The importance of this note was highlighted by the use of bold print and being placed in a special box at the end of the planning consent form.
Let me now turn to the 'attached plans' the subject of the application and the related 18 December planning consent.
The planning consent plans
It was common ground at the trial that the planning consent plans were the three coloured sketch plans marked 40893 SK03 rev G, SK04 rev F and SK05 rev D showing three multiple or stacked dwellings on the property that had been forwarded to the City of South Perth. These sketch plans formed part of exhibit 9.
SK03 is described as the site plan. The other two plans show the north, south, east and west elevations, and the basement car park plan. The dimensions of the uppermost or penthouse unit (unit 3) are given as 'floor area 267 m2, entry 31 m2, balcony 6m2'. The position of various trees on the site are depicted.
I pause here to note that although the 18 December planning consent plans are to scale and measurements are provided, they were, according to Mr Hames, simply schematic design plans prepared for the purpose of obtaining planning consent only.
Having regard to Mr Hames' evidence, and the evidence of Mr Davison from Pindan Constructions, I accept, and so find, that the exhibit 9 planning consent plans could not be regarded as contract or working drawings sufficient to obtain a building licence or to commence construction. It is a matter of controversy, which I will come to later, as to whether these were plans from which the proposed building could be accurately costed. On the defendant's case, Hames Sharley had completed the scope of work defined by the agreement between the parties, namely, the firm had completed schematic design plans suitable for lodgement with the City of South Perth for development approval purposes. Further, as foreshadowed by Mr Hames in his earlier correspondence, various consultants had to be appointed before contract or working plans and specifications could be finalised.
Events after 18 December planning consent
It appears from earlier discussion that in order to obtain planning approval in principle Hames Sharley had managed to persuade the plaintiff to commission an arboricultural report as a means of obtaining the Council's dispensation concerning a multiple dwelling development on the subject property. According to Mr Hames, the plaintiff said that he did not want to pay for such a report, but eventually recognised that it had to be provided to assist the Council in considering whether to approve multiple dwellings. Indeed, the plans submitted to the Council initially had to be modified in order to accommodate the recommendations in the report. The arboricultural report was mentioned in condition 18 of the 18 December planning consent.
Further, by letter dated 20 December 2001 Mr Bercov, the Manager of City Planning at the Council, advised Hames Sharley that in addition to conditions set out in the planning consent the Council had resolved that two lemon‑scented gum trees on the property were to be included within the registry of Tree Preservation Orders and the plaintiff's agreement was required in that regard (exhibit 28).
Mr Hames said in his witness statement that in January 2002 he met with the plaintiff to discuss the planning consent and the conditions that had to be attended to. He emphasised that the conditions had to be complied with because the Council had granted the plaintiff approval for multiple dwellings rather than grouped housing and on the basis of protecting the amenity of the area. The plaintiff protested, saying that he was not going to lower the level of the structure or put the trees in the Register. He felt that he ought to be able to do what he wanted with the trees.
By letter dated 18 January 2002 the plaintiff wrote to Mr Hames as follows:
I am still concerned that the Council wants to reduce the base level of the new structure by approx 300mm. I do not believe this is a reasonable request taking into account that the present structure has been in place for many decades.
However if the Council is prepared to reconsider this particular provision I would be more than happy to discuss the inclusion of the two particular lemon scented gums on their tree register. (exhibit 11)
Mr Hames said in his witness statement that he then had a further discussion with the plaintiff and made it clear that the plaintiff was not in a position to barter with the Council in that way. The conditions were non‑negotiable. Further, as to reducing the floor level of the ground floor, this was a comparatively small matter which could be re‑evaluated once the engineering drawings were obtained.
According to Mr Hames, at about this time also the plaintiff said that he wanted a balcony to take advantage of the river views, although the proposed balcony overlooked a neighbour's house. Mr Hames drafted a letter to be signed by the neighbour indicating that he had no objection to the proposal.
Further, by letter dated 26 February 2002 Mr Hames wrote to the plaintiff seeking instructions to engage a firm of quantity surveyors, HW & Associates, to give an indicative cost estimate of the project (exhibit D23) mentioning that their fees would be $2,400 exclusive of GST. The enclosed letter from the quantity surveyors indicated that costing a project of this kind was a sophisticated exercise whereby a detailed estimate would be 'broken down into approximately 25 elements such as external walls, roof, floor finishes etc so that it can clearly be seen where costs would occur. Within each element all items of work will be measured and priced separately in detail'. Where details were not available (such as structural and services designs) it would be necessary to make assumptions based upon experience and talking to other consultants or subcontractors.
Mr Hames did not receive a response to the 26 February D23 letter so he spoke to the plaintiff by telephone and was told that the plaintiff refused to appoint a quantity surveyor. The plaintiff allegedly said that he did not want to spend the money.
I pause to say that the plaintiff did not refer to the 26 February D23 letter concerning the appointment of quantity surveyors and there was no evidence in rebuttal. Thus, I find that the evidence given by Mr Hames about this matter is correct.
Mr Hames went on to say that, after speaking to the plaintiff, he wondered how Hames Sharley could advance the job without an indicative cost estimate. He believed that the only way to advance the project was to appoint engineering consultants.
As to this phase of the relationship between the parties, the plaintiff in his evidence at trial presented a slightly different picture. He said that the various conditions were acceptable to him, although he did ask if anything could be done about condition 17. This led to steps being taken to get the consent of neighbours. The plaintiff understood from what Mr Hames said that to satisfy condition 25 concerning the 12 month time limit all that was required was demolition of the house and the laying of the cement pad for the ground floor unit.
The plaintiff said in evidence that the letter dated 18 January 2002 (exhibit 11) was written by him at Mr Hames' suggestion in an attempt to 'trade off' with the Council, by agreeing to have specified trees placed on the Preservation Register in exchange for the Council agreeing to vary the height limits in condition 17. He was concerned about the conditions concerning reduction of the level and the trees but he did not say at any stage that he was not prepared to comply with the same. It was his belief at this time that there were no problems with the planning consent and he was well on the way to developing his property as permitted by the consent.
Under cross‑examination the plaintiff said that he was not minded to appoint a quantity surveyor at this stage because building plans had not been finalised and there were outstanding matters to be attended to.
I feel obliged to say in passing that I cannot easily accept that at this stage the plaintiff truly believed that he was well on the way to developing his property as permitted by the 18 December planning consent. There is no independent evidence or contemporary document reflecting or providing grounds for any such belief. In fact, the surrounding documents and circumstances are to the contrary. The plaintiff had been told by the defendant that he would have to engage third party professional consultants, including quantity surveyors, in order to advance the project. He had declined to appoint the quantity surveyors and had not taken any step towards the appointment of professional consultants.
The second site potential report
The plaintiff said in his witness statement that in March 2002 the plaintiff's son was negotiating for the purchase of a property at 11 Ridge Street adjoining the subject property. The plaintiff's son acquired the site in question soon afterwards with funds provided by the plaintiff. Thus, the plaintiff effectively controlled the combined properties being Lot 2 (20) Hensman Street and Lots 4 and 5 (11) Ridge Street, South Perth. This caused him to discuss with Mr Hames what could be done to develop the land as one parcel. He then requested Mr Hames to provide another site potential report.
It was common ground at the trial that Hames Sharley prepared and delivered a second site potential report dated March 2002 concerning the combined lots (exhibit 12).
The second site potential report noted that the three residential lots in question gave rise to an L‑shaped configuration. The purpose of the report was to outline the planning controls governing redevelopment and to investigate how amalgamating the lots might increase the overall development potential of the land for strata title development. The report noted at par 1.1.3 that the existing zoning of the three lots was residential R35. The City of South Perth was currently reviewing existing TPS5 which was to be superceded by TPS6. The new scheme proposed a residential coding of R25/40.
The second site potential report at par 1.1.8 to par 1.1.12 dealt with development potential under TPS5 and development potential under TPS6. The report emphasised that the potential of the three lots was likely to reduce with the introduction of the City's TPS6. If the current potential of the properties was to be secured a subdivision application had to be submitted to the planning commission 'as soon as possible'.
The report contained further observations concerning the timing of the new scheme. It noted that TPS6 had been a work in progress since 1998. The report continues in this way:
With the introduction of any new Scheme there will be a period of overlap. This is where the current Scheme continues to have the force of law and yet the authority refers to the proposed Scheme as a 'seriously entertained planning proposal' and has regard to the provisions therein.
TPS No.6 has already been advertised and is currently being readvertised with modifications requested by the Hon Minister for Planning and Infrastructure. After this round of advertising the Scheme will again be forwarded to the Hon Minister for final approval. Given that the proposed Scheme has progressed this far, the City regards it as a seriously entertained planning proposal.
If a development application was submitted now, for either Lot 2, 4, or 5, the City would assess the application in accordance with the proposed zoning, being R25/40. This is outlined further in the City's policy P34, (attached as Appendix 3)
Importantly, for present purposes, the report goes on to note at par 1.1.11 and par 1.1.12 that the maximum building height prescribed by the current town planning scheme is 10.5 metres. However, as to proposed development controls, the City of South Perth had advised that specific development controls relevant to the lots would generally not change with the introduction of the new scheme, though a number of interpretations of the scheme and certain policies may have been reworded.
The report then says:
The maximum building height prescribed by the Scheme will be 7.0 metres.
The proposed Scheme also refers to the provisions of the Residential Planning Codes.
The second site potential report suggested that there was benefit in amalgamating and re‑subdividing the subject properties. However, for present purposes, it is not necessary to explore the reasoning in the report because the proposal did not proceed further.
Before leaving the report, I note that in the final paragraph the author of the report asserted again, having regard to the likely introduction of TPS6, that if the current potential of the properties was to be secured a subdivision application should be submitted as soon as possible.
Evidence concerning the site potential reports
The plaintiff was cross‑examined at some length as to what he knew about the possibility of changes to the relevant planning controls. He confirmed that he read the first site potential report and observed a reference to the City of South Perth being in the process of reviewing their existing town planning scheme and related comments, although he probably did not understand the observations concerning R Codes. He acknowledged that he received the second site potential report but said that he did not read it in detail (ts 230).
The plaintiff conceded that he knew that there was a current town planning scheme, being TPS5, but did not know that there was a proposed scheme, TPS6 (ts 232). According to him, he read the second site potential report but did not take it in. He could not recall reading the passage at par 1.1.12 of the second site potential report to the effect that under the new scheme the maximum building height prescribed by the scheme would be 7 metres (ts 235).
It is clear from the plaintiff's answers under cross‑examination that he decided not to proceed with the venture concerning the three lots, but not necessarily because of any information or reasoning contained in the second site potential report.
I pause here to note that the second site potential report was said by the defendant to be relevant because that report spelled out clearly to the plaintiff that if TPS6 came into force his project for three multiple dwellings on the subject property - Lot 2 (20) Hensman Street, South Perth - would be adversely affected because the maximum building height prescribed by TPS6 would be 7 metres.
On the defendant's case, the second site potential report made it clear also that TPS6 might come into force in the near future. This meant that, if anything had to be done with a view to ensuring that TPS5 was the operative point of reference, it had to be done 'as soon as possible'.
I will return to these issues later.
The River Stone estimate of building costs
It seems that in mid 1999 the plaintiff had formed a relationship with the proprietor of a design business in Subiaco, Rosemaree Cunningham. They were closely involved with each other at the time the 18 December planning consent was obtained and for several years thereafter, although they did not cohabit.
It was clear from the evidence given by the plaintiff and Ms Cunningham at trial that the plaintiff trusted Ms Cunningham and respected her judgment about matters of interior design and the layout of buildings. She began to play an increasingly important role in assessing plans relating to the project and in communicating with Mr Hames and others at Hames Sharley. There was some evidence before me that as matters concerning the project progressed she became an informal or de facto 'project manager' on the plaintiff's behalf.
At about the time that the plaintiff was giving consideration to the second site potential report Ms Cunningham took it upon herself to approach a building firm known as River Stone with a view to obtaining a budget estimate for the construction of the proposed development on the subject property, that is, three luxury multiple units on the property at 20 Hensman Road, South Perth.
By letter dated 27 March 2002 Diane Wainwright, a building and design consultant at River Stone, provided a budget estimate based on the concept sketch provided and upon River Stone's standard level of specification (exhibit 13). It was said that the cost of the development should fall within the $1.5 million to $1.7 million range. The standard specification was said to include all working drawings, engineer's plans, building licence fees, construction and site costs.
I pause here to note that after some controversy at the trial the River Stone estimate was admitted as an exhibit for the limited purpose of establishing that such an estimate was received. It was thought to be relevant as a piece of evidence serving to explain later conduct by the plaintiff. The author of the River Stone estimate was not called as a witness and a ruling was therefore made by me, pursuant to evidentiary rules concerning the exclusion of hearsay and evidence of opinion (otherwise than by a qualified expert), that the letter could not be received as evidence to establish the truth of the matters asserted, especially as to the likely cost of the development.
The Rix estimate
The plaintiff presented evidence from Kerry Rix who was the principal of the building firm known as Site Project Management Pty Ltd to say that, following an approach from the plaintiff in May 2002, he costed the project at $2,354,926.60 all inclusive.
The plaintiff agreed under cross‑examination that in May 2002 he gave Hames Sharley plans for the project to a Mr Rix of Site Project Management Pty Ltd or SPM and asked him to provide a budget estimate. He could not recall receiving an estimate from Mr Rix in the sum of $2,354,926.60. Mr Rix made it clear that he would not build the apartments so the matter was not taken further.
Under cross‑examination Mr Rix was of the view, to the best of his recollection, that he probably provided the plaintiff with a verbal estimate that the project would cost between $2.3 million and $2.5 million (ts 374). He did not have any further involvement with the proposed development. Mr Rix confirmed that to provide an accurate costing and to obtain a building licence he would have required a full set of working drawings. He acknowledged that the steps to be taken or process to go through in order to move from the sketches with which he had been provided to a building licence could be about six months (ts 376).
The Pindan estimate
According to the plaintiff, in early April 2002 he had a conversation with Mr Hames in which he made it clear that he was not interested in proceeding with the venture addressed by the second potential report. However, he did wish to proceed with the project on the subject property. He asked Mr Hames to get on with the drawings so that the plaintiff could get the building licence from the City of South Perth.
Further, the plaintiff referred to the figures obtained from River Stone and asked Mr Hames to account for the difference between the building costs estimated by River Stone at $1.5 million and the building costs foreshadowed by the Hames Sharley letter dated 18 September 2000 of $1.25 million to $1.5 million. The plaintiff said that he needed more accurate figures so that he could go to his bank and request a loan for the required amount.
The plaintiff allegedly made it clear also that henceforth Mr Hames should talk to Ms Cunningham about everything concerning the project. The plaintiff and Ms Cunningham were going to travel to Melbourne in May 2002 to look at developments of a similar kind with a view to picking up ideas concerning the finishes and external appearance of the units as the plaintiff had decided that he would live in the top floor unit.
Mr Hames is alleged to have replied that in order to go to the next stage Hames Sharley would have to prepare more detailed design drawings. In addition, he would get a quote from a builder and would send the plaintiff a cost proposal for the next stage of the works.
This evidence was contested by Mr Hames at the trial. He said in evidence that he had worked with Ms Cunningham on another project. He knew of her role as a designer and of her relationship with the plaintiff. He accepted that she became increasingly involved in the project as a spokesperson for the plaintiff. However, according to Mr Hames, he did not know that the plaintiff, with her assistance, had asked for and obtained an estimate from River Stone. He did not see the River Stone letter until after the present proceedings had commenced.
Mr Hames said in evidence that by May 2002 he had become increasingly frustrated with the lack of progress on the project. Engineers and a quantity surveyor had to be appointed in order to advance the project. With that thought in mind, he spoke to the plaintiff and suggested that Pindan Constructions be retained. The plaintiff was reluctant to proceed in that way because he thought that Pindan, being a big company, was likely to have high overheads and be too expensive. Nonetheless, Mr Hames said that he proceeded to approach Pindan with a view to obtaining a budget estimate for no charge on drawings that Hames Sharley had prepared.
It was common ground at the trial that by letter dated 21 May 2002 Pindan by its Business Development Manager, Scott Davison, provided what was described as a 'budget estimate submission' (exhibit 14).
Scott Davison gave evidence at the trial of the action as a witness called by the plaintiff. He said that Mr Hames asked him to give an estimate for the project upon the basis that the owner wanted to build upmarket dwellings. At that time Pindan was involved in construction of the Princeton Apartments which were to be finished to the standard of upmarket residences and it was decided that these could be used as a benchmark 'but with a bit extra'. He then personally prepared an estimate based upon a reasonably high standard of finish to fit in with the quality of the proposed development. He said in evidence that in 2002 estimates which he provided were reasonably accurate within 5% to 10% of firm prices.
The 21 May Pindan estimate was $2,007,500 'for the complete construction of three high quality residential apartment units over three levels on an undercroft carpark including all site works'. The estimate was said to be based upon the Hames Sharley preliminary plans numbered 40893 SK03 rev G, SK04 rev F and SK05 rev D and associated discussions. It was said to be 'an indicative budget estimate only' based upon square metre rates, preliminary documentation and was subject to confirmation. According to attached documentation the budget estimate was valid for a period of 90 days only from the date of the estimate. No allowance had been included for any cost escalations. No allowance had been included for any design or consultancy fees, disbursements or contingency sum. Further, no allowance had been included for any demolition works or clearance of the site.
Mr Davison said in his witness statement that Pindan did not usually become involved in the process of obtaining a development approval or building licence. Usually an owner provided the approval and building licence and Pindan then negotiated a contract with a firm price.
He said further that when a contract has been signed, the client has established that it has the required finance, and the building licence is available, then, within an agreed timeframe, usually in the order of four to six weeks, Pindan commences work on site.
Mr Davison estimated it would have taken 12 to 18 months to build the proposed units, depending on supply of materials and labour. The estimate provided was the building cost of Pindan, GST inclusive. The owner would have incurred further costs for an architect and other consultants which he estimated to be 10% of the amount of the Pindan building costs, which were outside of Pindan's direct control or contract. The owner would also have incurred financing, sales and marketing expenses.
Mr Davison said further that if the owner had entered into a building contract with Pindan in late 2002 or early 2003 the price for the building would have been the estimated $2,007,500 plus 5% to 10%. If the owner had contracted with Pindan and provided a clear and unobstructed site, with the existing building demolished, and met all of Pindan's requirements, then Pindan would have probably commenced work on site, with a construction period of between 12 to 18 months.
I pause here to note that on the plaintiff's case at trial this evidence was relied upon to support an inference that in the absence of the defendant's alleged breach of duty building work on the subject property could have been commenced early in 2003 and been completed in or about November 2004. Accordingly, the plaintiff's particulars of claim, and much of the valuation evidence on both sides, was directed to the value of the subject property as at November 2004, including reference to hypothetical development exercises calculated by reference to such a date, and the Pindan estimate.
Evidence concerning the Pindan estimate
Under cross‑examination Mr Davison confirmed that the Pindan estimate was produced in response to instructions from Mr Hames. He did not meet the plaintiff or Ms Cunningham then or at any time thereafter. The Pindan estimate was 'indicative information' so it was by no means a firm quotation and it was not something that Pindan would enter into a building contract with. It was a 'reasonable approximation' of what you would expect the building to cost. There would be a lot of work to do, including discussions with the client, to arrive at a firm quote.
Mr Davison went on to say that the plans he had seen were very preliminary. There were no architectural structural details and no confirmed or finished schedule. He could foresee months of negotiation work with the architect or the client to come to a fixed point where he would be prepared to give a fixed price quote.
More particularly, he would need structural drawings, confirming the actual structural details, such as suspended slabs and load‑bearing walls. These would normally be provided by a structural engineer. Service drawings would be provided by hydraulic, electrical and mechanical engineers. Bearing in mind what he had at May 2002 it would probably be not less than six months to reach a point at which he could give a fixed price quotation. It was considerations of this kind that lay behind the comment as to exclusions that the budget estimate was valid for 90 days only. It was not an estimate to be accepted for the purpose of a contract (ts 363).
The next phase
By letter dated 28 May 2002 Hames Sharley delivered the Pindan estimate to the plaintiff (exhibit 15). Mr Hames said in his covering letter that, as discussed, in order to advance the project more detailed design documentation was now required. He went on to describe the work to be completed as follows:
Detailed Design : Scope of Work
Detailed design takes the approved sketch design and develops and adds detail, refinement and clarification to all aspects of the design. The work of other consultants is coordinated and integrated with the architectural design and documentation.
•An updated estimate is prepared.
•The client's approval is sought before proceeding to documentation.
We will also require the appointment of secondary consultants such as civil, structural, mechanical and electrical engineers in order to incorporate their detailed design and advice into the building. This will then allow us to accurately assess the cost and building complex.
This work will then allow a more accurate cost estimate to be completed as it will determine much of the issues of design as we have discussed and will also determine the specification in regard to materials and quality of finishes.
Once that has been determined and agreed by yourself the subsequent stages are Contract Documentation, Tendering of the works and Contract Administration.
The fee to complete the Detailed Design stage of works will be $24,900 (twenty four thousand nine hundred dollars).
We can commence this work when you require and it would take approximately 6 weeks to complete.
The letter enclosed a document headed 'Description of General Scope of Works for Stages of Works to Delivery of Product'. This corresponds to the Scope of Works document mentioned earlier. The list included reference to various forms of design work such as architectural, structural, mechanical and hydraulic indicating in most cases that a separate consultant was required.
The list went on to refer to contract documentation services in which respect, at par 5.15, the list refers to the need for a building application consisting of preparation of documents by the architect for lodgement with the relevant authorities for building approval. Further, the list ran on to refer to tendering and negotiating services and contract administration.
I feel obliged to observe at this point that the plaintiff and/or his 'representative' Ms Cunningham did not seem to be in the habit of responding in writing to letters or reports submitted to them. They generally made no attempt to summarise in written form what had been discussed or decided upon at any of the meetings. Certainly, on this occasion it appears, and I so find, that the plaintiff did not provide any written instructions in response to the 28 May Hames Sharley letter.
In his witness statement the plaintiff asserted that the plan of action including the fee of $24,900 specified in the defendant's 28 May letter was acceptable to him. He did not suggest that he or Ms Cunningham took any steps to appoint secondary consultants or that he instructed Hames Sharley to proceed accordingly. Moreover, there is no evidence in writing to that effect.
According to the plaintiff, at about the date of the defendant's 28 May letter, he told Mr Hames that he was happy with the upgraded proposal and for him to proceed with the work. He and Ms Cunningham went to Melbourne in May 2002 and took photographs of buildings which had finishes they liked. They had a further meeting with Mr Hames upon their return.
The plaintiff said in evidence that this further meeting took place in early July 2002. Mr Hames showed him drawings prepared by Hames Sharley. He gave Mr Hames the photographs he had taken in Melbourne and asked him to consider those when preparing the next set of drawings. According to him, he asked Mr Hames how the project was going and whether he thought they were running out of time to comply with the planning approval. Mr Hames allegedly replied that time was not a problem and if it became a problem he would get a 12 month extension of the planning approval. The plaintiff could not point to any document or other evidence corroborating his version of this meeting.
Ms Cunningham asserted in her witness statement that she and the plaintiff travelled to Melbourne in May 2002 and took photographs of a number of apartment buildings for the purpose of getting ideas for the design of the proposed apartments. In her statement she did not comment directly upon the Pindan estimate and related events such as the request for a quote given to Mr Psaros. She simply asserted that from mid 2002 to mid 2003 she attended a number of meetings with the plaintiff, Mr Hames and others from Hames Sharley at which the plans and drawings for the project were considered.
According to Ms Cunningham, changes were discussed. Mr Hames or others from Hames Sharley, undertook to make alterations. By this process the design of the proposed units was advanced. She said in evidence that she did not take notes of the meetings. She recorded the dates of meetings in an electronic form on her computer but those records have now been deleted and cannot be retrieved.
The Hames evidence concerning the 28 May letter
Mr Hames in his witness statement and evidence at trial presented a different picture. According to him, after receipt of the Pindan estimate, he conveyed to the plaintiff that the project could not be progressed unless engineers were appointed to allow completion of the design development stage and to bring the project to the contract documentation stage. He said that once the contract documentation stage was completed tenders could be called for or negotiations undertaken directly with a builder. It would take a period of six to eight weeks for the design development and then Hames Sharley would have to produce the contract documents which would take approximately 12 weeks.
According to Mr Hames, the plaintiff said that he did not want to appoint engineers. He did not want to proceed yet. Then, in July 2002, the plaintiff phoned Mr Hames and said that his mates had recommended he speak with Danny Psaros of Psaros Developments regarding the project. He had in mind to obtain a quotation from Mr Psaros to undertake the construction. If Mr Psaros was appointed, it was contemplated that the role of Hames Sharley in the project would come to an end.
The plaintiff asked whether Mr Hames would have an issue if Psaros took over the project. According to Mr Hames, he said that he did not have an issue, and agreed to accompany the plaintiff and Ms Cunningham to inspect a development in Cottesloe which had been undertaken by Psaros.
According to Mr Hames, there was a meeting on site at an apartment development in Eric Street, Cottesloe which was being built by Psaros Developments. Mr Hames was accompanied by a fellow architect from Hames Sharley, Mark Popplewell, who had become involved in the preparation of drawings by Hames Sharley. The meeting led to a confirmation by Mr Hames, for the plaintiff's benefit, that the Psaros development was of a quality equal to the proposed development and an arrangement for the drawings prepared by Hames Sharley to be handed over to Mr Psaros so that the latter could take over the project.
By this time, after lengthy periods of what Mr Hames described as 'client inactivity', it seemed to Mr Hames that the project lacked a sense of purpose. After handing over the drawings to Mr Psaros, he believed that the Hames Sharley brief in relation to the project had come to an end.
The plaintiff's property listing and bank application
The plaintiff said in evidence that at about this time (mid 2002) an estate agent from the firm Paxton Hoad mentioned that the building company Multiplex could be interested in buying the subject property. This led to the plaintiff giving the agent authority to sell dated 3 July 2002 at $1.825 million. According to the plaintiff, he was then told that Multiplex was not interested and that was the end of that matter. The land was never offered for sale to the public nor advertised and it was not his intention to do so.
The plaintiff said also that at about this time, based on the cost estimate received from Pindan, he made an application to borrow $2.5 million from the Commonwealth Bank to build the units. By letter dated 29 July 2002 the bank gave approval in principle to such a loan for two years at 7% (exhibit 17).
The plaintiff was cross‑examined about his application to the Commonwealth Bank on 22 July 2002 for finance and the suggestion contained in his letter that the building would be completed and marketed over an 18 month period, and the facility cleared at this point. He said that this came about because a particular person had indicated that if he decided to sell one of the units she would be interested in purchasing a unit. He agreed, as indicated above, that a few weeks earlier he had listed the property for sale (in its undeveloped state) for $1,825,000. The exclusive agency agreement signed by the plaintiff dated 3 July 2002 was received in evidence (exhibit D3).
The plaintiff agreed under cross‑examination that he did not deal with Pindan in relation to its estimate; this was done by Mr Hames (ts 251). He agreed that he received the Pindan estimate with the 28 May Hames Sharley letter. He agreed that he did not give the instructions sought by Mr Hames in that letter concerning the appointment of secondary consultants (ts 252).
These exchanges occurred between the cross‑examiner and the plaintiff concerning the position in mid 2002:
You personally never contacted Pindan, did you?‑‑‑No.
You didn't contact them in May 2002 when the budget estimate was being obtained by Mr Hames?‑‑‑No, I didn't.
And you did not contact them at any time thereafter?‑‑‑Not that I recall.
Not after you were not going to go ahead with Psaros in August 2002, you didn't go back to Pindan?‑‑‑No, I did not.
After you got the quote from Zorzi in December 2002 or January 2003, you didn't go back to Pindan then?‑‑‑No I didn't; no.
So as at August, or as at early September 2002, isn't the position this: the estimates for carrying out the work to achieve what you wanted were getting higher?‑‑‑That's correct.
They had reached a point by that stage where they were unacceptable to you?‑‑‑Certainly two of them were.
And because they were unacceptable you had to then further consider whether you were going to go ahead. Correct?‑‑‑I certainly considered it but never changed my mind. (ts 283)
The Psaros letter
It was common ground at the trial that in mid 2002, after his receipt of the Pindan estimate, the plaintiff attended a meeting at the Eric Street apartments that were being built by Psaros Developments. This led him to asking Mr Psaros to provide him with a quote for the three proposed multiple dwelling luxury apartments to be constructed on the subject property in South Perth. It remained a live issue at the trial as to whether these events or anything said or done by the plaintiff amounted to a termination of the contractual relationship between the plaintiff and Hames Sharley.
The Psaros response to the plaintiff's request is contained in a letter to the plaintiff dated 15 August 2002 (exhibit 32). The letter included a passage to the effect that a reliable 'budget estimate' to erect and complete the development would be $2,713,538. In order to provide the estimate it was assumed that the level of finish required would be of a standard equivalent to the Psaros Eric Street development. The estimate included a project management fee of $130,000 which covered the cost of secondary consultants and related architectural and design documentation which would be managed and co‑ordinated by Psaros.
The Psaros measurement of sketch plans provided by Hames Sharley revealed in summary form interior areas as follows: undercroft (315.59), ground level (295.41), first floor (302.18), second floor (302.18). Mr Psaros said in his 15 August letter also that he had taken the liberty of making some fundamental design suggestions including the deletion of four covered carparking bays, an increase in the basement size and changes in the design of the basement.
The Psaros letter concluded by asserting that if the budget estimate was acceptable the programme outlined by him would permit a start on the site in mid January 2003. The steps envisaged by the programme were a letter of intent to be signed by the parties, a meeting with the architect to arrange handover of the project and an understanding of planning approval conditions, documentation and liaison with consultants which would take approximately 10 to 12 weeks. An application for building licence was to be submitted to the Council by the third week in November. Estimates would be firmed up and a building contract would be available for signing prior to Christmas. Demolition was to commence in the first week of January 2003 with the builder to take site possession on the third Monday in January if demolition was complete.
I note in passing that in outlining the programme of action, Mr Psaros observed: 'We assume that planning approval has been granted'. Further, he said that any planning condition/revised documentation was to be prepared and submitted by the architect to the South Perth Council. Fees associated with that phase of work had not been allowed for in the estimate. This suggests that in the course of instructing Mr Psaros the plaintiff had not drawn his attention to the existence of the 18 December planning consent, and the important condition 25 that building work had to be substantially commenced within 12 months of the approval.
Cross‑examination of plaintiff as to Psaros letter
Under cross‑examination, the plaintiff's recollection was that he inspected the Eric Street apartments with Mr Psaros and the latter's friend Mr Unmack. However, he did recall an occasion when Mr Psaros turned to Mr Hames in his presence and asked whether he was prepared to make available the drawings that Hames Sharley had prepared so that Psaros could take over the project. The plaintiff recalled Mr Hames saying that he was prepared to allow that to be done (ts 255). He could not recall the details of the conversation. He believed that Mr Hames did in fact provide the drawings to Psaros.
The plaintiff agreed under cross‑examination that he asked Mr Psaros to prepare a budget estimate. However, having looked at the Psaros estimate, and after taking some advice from Mr Hames: 'I decided to stick with him' (ts 257). 'The Psaros estimate quote was too dear' (ts 258). The plaintiff agreed that while he was dealing with Mr Psaros there was nothing that Mr Hames was expected to do (ts 258). The plaintiff agreed with the cross‑examiner's proposition that Mr Hames was 'out of it' for the time being. The plaintiff added 'until I had made up my mind, correct' (ts 259).
Cross‑examination of Mr Hames as to Psaros letter
Under cross‑examination Mr Hames agreed that he was never specifically told by the plaintiff that his role (the Hames role) had come to an end because the plaintiff was looking to Mr Psaros for further action. However, this was the inference Mr Hames drew because he had been asked to hand over his documents upon the basis that Psaros was going to prepare the working drawings and carry forward the project, with the result that there was no further role in the matter for Hames Sharley (ts 562). Mr Hames confirmed that the plaintiff did not show him the 15 August Psaros estimate and he never knew at what figure Psaros had priced the project (ts 545).
Events after the Psaros letter
I find as a fact that the plaintiff did not reply to the Psaros letter and did not have any further dealings with Mr Psaros. However, there is a contested issue as to how this came about.
The plaintiff said in his witness statement that at some time between 15 August 2002 and 3 September 2002 he saw Mr Hames in his office in Subiaco and showed him the quote contained in the Psaros letter. Mr Hames allegedly responded to the effect that the price was too dear, the plaintiff and Ms Cunningham should look at a development in Fremantle built by Pindan, a result of that kind could be produced for the plaintiff by Mr Hames and Pindan, more detailed costs would be discussed in detail at their next meeting.
According to the plaintiff, he accepted this advice and said that he wanted Mr Hames to carry on with the project. The plaintiff had not been seriously in negotiation with Psaros but had only wanted to get a check on the various costings. At about this time he requested and obtained a valuation from Simon Martin to the effect that the three units would be worth $4.35 million upon completion, and this valuation gave him further comfort about the proposed development. Ms Cunningham's witness statement did not refer to these matters.
On the other hand, Mr Hames said in his witness statement (at par 296) that on 4 September 2002 the plaintiff told him that he did not want Psaros to proceed with the project. He did not provide Mr Hames with any reasons as to why he did not want to deal with Psaros. Until discovery in these proceedings Mr Hames was unaware of the Psaros quote or the conditions mentioned in the Psaros letter.
Mr Hames said further in his witness statement that in September 2002 Hames Sharley were 'recommissioned by Peter'. Under cross‑examination, Mr Hames described the course of events in slightly different language by saying that at that time he was engaged to 'restart the project'.
I must now look at certain crucial issues arising out of events that are said to have taken place in early September 2002, that is, a little more than three months prior to expiry of the 12 month period prescribed by the grant of the 18 December planning consent.
Certain issues
The plaintiff alleged at par 16 of his statement of claim that between 18 December 2001 and 18 December 2002 the plaintiff proceeded with the project. The claim referred to the obtaining of estimates and said further that the agreement was varied so that Hames Sharley agreed to prepare detailed design drawings and other documents for the project as proposed in the Hames Sharley 28 May letter for an additional fee of $24,900.
It was said further in the claim that at a meeting between the plaintiff and Mr Hames on or about 3 September 2002 at the office of the defendant the plaintiff told Mr Hames that he was prepared to demolish the existing home on the property and to lay a concrete pad for the project so as to comply with condition 25 in the planning consent, but the plaintiff did not cause that work to be done because in response Mr Hames said it was not necessary.
The plaintiff pleaded further at par 17 of the claim that at the alleged 3 September meeting Mr Hames told the plaintiff in substance that to comply with condition 25 in the planning consent required demolition of the home and laying the concrete pad for the project, but there was no need for the plaintiff to undertake that work because the defendant would take care of getting a 12 months renewal or extension of the consent, and so there was no need to worry about the expiry date of 18 December 2002.
The plaintiff pleaded further that as a consequence of the alleged 3 September meeting the terms of the agreement were varied so that Hames Sharley agreed to make an application to the City of South Perth for a renewal or extension of the consent.
The defendant at par 8 to par 12 inclusive of its statement of defence denied these allegations. In essence, it contended that the plaintiff refused to satisfy the conditions of the 18 December planning consent concerning a reduction in the floor height (condition 17), placement of trees on the registry of tree preservation orders (condition 18), a substantial commencement of construction within 12 months in order to preserve the validity of the approval (condition 25).
Likewise, it has been held in the context of commercial litigation, as in Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281, there may be circumstances in which it is permissible to take into account subsequent events in the course of assessment. For example, in that case the court took into account relevant events that occurred after the purchase of the business in question which bore upon the determination of the value of the business at the date of purchase. Thus, in Kizbeau it was thought appropriate to take into account amendments to a planning scheme that occurred after the purchase of the business and had an effect upon what activities could be conducted on the premises.
In the present case, I am not persuaded that a departure from the general rule is justified. My principal finding against the defendant is that it was in breach of various duties prior to the gazettal of TPS6 on 29 April 2003 in failing to warn or inform the plaintiff about the potentially adverse consequences of such a gazettal. The case was argued at trial by both parties upon the basis that for the purposes of calculating loss, and with a view to avoiding unnecessary complexity, the date of breach in respect of such a finding could be calculated back to December 2002. It was on that basis that the plaintiff's alternative claim was presented, and challenged by the defendant, by opinions as to value referable to that benchmark.
It is apparent that the alternative claim contains various elements of prophecy as to future events, but these are of a kind that are familiar in cases involving the expression of expert opinions. As it happens, the experts have been in a position to take account of actual comparable sales in formulating their opinions and estimating loss. This is all part of a familiar process of estimating loss in a case where opinions as to value are required.
To my mind, in circumstances where a building programme was not actually embarked upon, and where the gazettal of TPS6 does not impact upon the purported values in respect of an 'as if complete' valuation of the project, because the valuers are presuming the existence of a project completed in accordance with a consent granted under TPS5, it cannot be said that there are subsequent events of the kind alluded to in Johnson v Perez and Kizbeau. There are no subsequent events which can truly be said to reflect or bear upon the loss earlier suffered. Compensation for delay in obtaining relief is ordinarily provided for by an allowance of interest.
Accordingly, in the present case, I am of the view, and so find, that the damages are to be assessed at the date of breach. This means that the primary point of reference as to the first part of the task before me is the plaintiff's alternative claim (alleged loss as at December 2002) for loss of opportunity, being a claim for loss of $1,503,000. The calculation underlying that figure is the first of the two calculations appearing under the heading 'Overview of plaintiff's expert evidence' earlier in this judgment.
In effect, as I noted in earlier discussion, the plaintiff proceeds from the premise that the plaintiff would have completed the project by November/December 2004 and the figure claimed represents the value of the economic benefit he would have had but had to forego due to the defendant's breach of duties.
In the alternative claim the value attributed to three multiple dwellings as at November/December 2004 is given as $5,625,000. I have reviewed the evidence bearing upon this figure. It emerges from earlier discussion that the figure in question is based upon the evidence given by the plaintiff's valuer, Mr Liggins. However, for the reasons given previously, I have reservations about the Liggins evidence and am not persuaded that such a figure can be adopted. In that regard, it is material to note that the evidence given by the plaintiff's other valuer, Mr Edwards, was that the 'as if complete' value of the three units was $4.9 million. This compared to the evidence given by Mr Moore on behalf of the defendant that the gross realisation of three multiple dwellings as at November 2004 was $4,841,600.
The reasonably close relationship between the figures given by Mr Edwards and Mr Moore reinforces my view that the Liggins figure should be treated with caution. Moreover, as I look at the comparable sales relied upon by the valuers, I incline to the view that there is some force in the opinion advanced by Mr Moore on behalf of the defendant that a site of this kind, in a part of South Perth set well back from the riverfront (albeit on rising ground), could be over capitalised.
Further I give weight to Mr Moore's view that the size of the proposed luxury apartments might lead to what he described as price compression. I am conscious also that Mr Edwards had to acknowledge that it was difficult to identify precisely equivalent comparable sales because a development of the kind proposed had not been undertaken in that part of South Perth.
Accordingly, for all these reasons, in the end, I am of the view that the evidence of Mr Moore should be preferred. Thus, I consider, and so find that the value of three multiple dwellings as at November/December 2004 of the kind proposed should be regarded as $4,841,600.
It then becomes necessary, as appears from the alternative claim, to set off against the value of the completed project various items commencing with the cost of construction in the period August 2003 to November 2004. The figure contended for by the plaintiff in that regard, is $2.7 million in which respect the plaintiff relies principally upon the evidence of Mr McEvoy.
It emerges from earlier discussion that the evidence concerning the cost of construction is not entirely satisfactory. Building plans sufficient to obtain a building licence, and reflecting the input of professional consultants, were never finalised. It emerges from the McEvoy evidence that he was left to calculate the building costs upon the basis of various assumptions made by him as to the quality of the premises and having regard to inferences based upon the schematic plans that were in fact prepared.
In my view, the evidence given by Mr Davison from Pindan cannot be regarded as a satisfactory basis for checking the opinion expressed by Mr McEvoy because the Pindan estimate was prepared in May 2002 and did not purport to be a firm quotation. It was simply 'indicative information' (ts 358). Further, and in any event, the Pindan estimate is considerably less than the figure contended for by Mr McEvoy. On the other hand, I accept that Mr McEvoy is an experienced quantity surveyor and there is no challenge to his credentials in that regard.
In the end, notwithstanding a degree of hesitation about his evidence, arising from cross‑examination and the matters I have mentioned, I am inclined to give weight to his evidence and to find, as I do, that the cost of construction in the subject period would have been $2.7 million. In arriving at that conclusion I am conscious also that I was not presented with persuasive evidence to the contrary.
Having regard to the evidence given by Mr Davison from Pindan I will accept also that if the required planning consent was in force, and detailed building plans had been finalised, the project could have been completed within the subject period of August 2003 to November 2004. I consider that there is sufficient evidence before me to justify a finding that interest on the construction finance of the kind contended for in the plaintiff's alternative claim calculation of $122,000 is justified.
It appears from the plaintiff's alternative claim calculation that the final item to be set‑off against the value attributed to the 'as if complete' project is the value of the land as at December 2004.
I noted in earlier discussion, especially under the heading Observations on Mr Moore's evidence‑in‑chief, that there was a divergence of opinion between the valuers as to this item.
The figure contended for of $1.3 million as the purported value of the land at December 2004 was based essentially upon the Edwards evidence that the fair market value of the subject property as at that date was $1,100 per square metre, making a total value of $1.3 million. This contrasted with the Moore evidence that the market value of the subject property at that date was $1.1 million. Again, for the reasons I have given previously, I give greater weight to the evidence of Mr Moore. I am not convinced that the potential of the property was of the order contended for by Mr Edwards and, in my view, there is little in the sales figures relied upon which directly underpins his estimation of value. Accordingly, I prefer the evidence of Mr Moore and will find that the value of the land as at December 2004 was $1.1 million.
The items to be set off against the value of the project as if complete amount to $3,922,000. When this figure is set off against the figure I have accepted as the value to the completed project, namely, $4,841,600 the difference amounts to $919,600. This contrasts with the amount claimed for loss of opportunity as at December 2002 in the plaintiff's alternative claim calculation of $1,503,000.
I note in passing that in the plaintiff's alternative claim the difference between the value of the project as if complete and the three debit items to be set off against it is described as the amount claimed for loss of opportunity. It follows from earlier discussion that, in my view, having regard to the reasoning in Sellars, the plaintiff's so‑called claim for loss of opportunity should properly be characterised as the amount of the economic benefit that might have been available to the plaintiff if the project had been completed or, putting it another way, if the opportunity had fully materialised. However, in a case involving a claim for loss of opportunity, as I have indicated, damages for deprivation of the opportunity must be ascertained by the court's assessment of the prospects of success of that opportunity, had it been pursued.
Accordingly, I must proceed to the second step of determining whether the potential benefit of $919,000 would have been realised, having regard to the surrounding contingencies and possibilities. However, before doing so, for the sake of completeness, I must deal briefly with the defendant's plea that upon the basis of Mr Moore's evidence, the proposed development did not add value to the site, with the result that the plaintiff suffered no loss.
If I understand the defendant's argument correctly, it is said, having regard to Mr Moore's figures, the undeveloped value of the land was $1 million as at 18 December 2002 and $1.1 million as at 16 November 2004; his hypothetical development method, utilizing the Pindan estimate, showed residual land values at the same dates of $981,125 and $1,102,065 respectively, which suggested that no benefit was to be gained by undertaking the development.
It is true that I have been prepared to give some weight to the evidence of Mr Davison in regard to the general feasibility of the project and the length of the construction period. However, in the end, I was not satisfied that the Pindan 'estimate' could be characterised as a reliable computation of the construction cost. I have held that the higher McEvoy figure of $2.7 million for construction costs should be treated as the operative point of reference in calculating the quantum of the alternative claim (although, admittedly there was no evidence before me that a builder was prepared to complete the project by November 2004 at that price). This means that the contrast between the developed and undeveloped values attributed to the land on the Moore figures is flawed.
Further, and in any event, there is evidence before me, which I accept, that upon completion of the project the plaintiff would have been in possession of a property capable of generating substantial rental income, in addition to allowing for his proposed residential occupation of the top floor. It follows that even if the capital appreciation of the property was fixed at $1,102,065 (as contended for by Mr Moore) or at $919,000 (as determined by me), being amounts which are either equal to or less than the undeveloped value of $1.1 million attributed to the land by Mr Moore (which was accepted by me), it cannot necessarily be said that the project was not worth pursuing and would not have been pursued.
The plaintiff would only be precluded from obtaining relief upon the basis that there was no causal connection between the breaches of the various duties complained of and any compensable economic loss if it had emerged from the evidence that the costs of the project would probably exceed the value of three multiple dwellings, leaving the plaintiff with no gain at all.
However, as it happens, I have been satisfied upon the balance of probabilities that by completing the project in accordance with the scenario and timeframe contended for by the plaintiff he would have secured a commercial benefit of $919,000. The size of that figure, compared to the value of the land in its residual or undeveloped state, can be regarded as a factor or contingency bearing upon the plaintiff's ambivalence and the prospects of the project being completed, but it does not, of itself, rebut the plea that there was a loss of a commercial opportunity of at least some value.
It is apparent from Bellgrove's case that a plaintiff who has secured to himself certain rights in respect of a building project is not obliged to undertake an alternative development (or, likewise, to refrain from any development) simply because such a course might be thought to produce a better financial outcome. In Cottrill v Steyning & Littlehampton Building Society [1966] 1 WLR 753 where both parties were aware that the subject land was to be developed for a profit, damages were assessed at the market value of the land at the date of completion less expenses attributable to carrying out the development.
It is for these reasons that I am of the view that the approach to the assessment of damages reflected in the plaintiff's alternative claim is the proper approach, subject to a further evaluation being made (having regard to the surrounding contingencies and possibilities) as to the prospects of the opportunity being fully realised.
Findings as to contingencies and possibilities
In the course of previous discussion I have reviewed the evidence bearing upon the strength of the plaintiff's commitment to the project. I have accepted, because it was an agreed fact at the trial, that the plaintiff had the financial means to complete the project. However, it is apparent from evidence I have touched upon previously that, quite understandably, he was not prepared to write a blank cheque in respect of the project. He said in evidence that certain of the estimates that were presented to him were unacceptable.
I drew attention also to certain matters evidencing the plaintiff's ambivalence concerning the project during the course of 2002. I concluded eventually that he would have been minded to proceed with the comparatively inexpensive task of obtaining a fresh consent under TPS5 if he had been properly informed that the gazettal of TPS6 could bar completion of the project. However, this does not necessarily lead to the conclusion that the project would have been completed within the timeframe reflected in the plaintiff's alternative claim. The plaintiff's claim is based upon that timeframe.
The decided cases reflect an awareness of the difficulty facing a court in trying to make an evaluation of the contingencies and possibilities. The cases indicate that it is permissible and appropriate for the trial judge in a case of this kind to make an informed estimate as to the prospects of the opportunity being pursued to a successful conclusion. I will proceed accordingly.
I am conscious that the plaintiff did not at any time appear to have a pressing personal need or financial incentive to complete the project. By his own admission he was comfortably accommodated in the existing residence upon the property and that remains his position today. It does not appear from the evidence that either he or any member of his family had an immediate requirement for accommodation in the completed project, although, as I have found, it was a project or ambition he wished to fulfil if that could be achieved. He had the financial means to achieve his ambition but was not willing to spend money recklessly or unwisely.
I have to take account of the fact also that upon the basis of the evidence before me I cannot necessarily assume that final building plans would have been prepared to his satisfaction by August 2003 or that a building programme would have been carried out with sufficient expedition to enable completion by November/December 2004. In other words, although I have been prepared to hold that a building programme could have been completed within that time, I consider that it is necessary for me to review certain contingencies and possibilities bearing upon the question of whether construction would have commenced in mid 2003 and been completed in November/December 2004 as envisaged by the plaintiff's alternative claim.
To my mind, the matters evidencing the plaintiff's ambivalence are significant. There is force in the defendant's testimony that the plaintiff's interest in the project waxed and waned. He, himself, admitted that by September 2002 his commitment to the project was faltering, 'although he never tossed the idea out of the window' (ts 287). It is true that he obtained a facility for bank finance of $2.8 million in late September and had the means to complete the project at that price but he thought the Psaros figure of $2,713,538 was too high and hoped that the project could be brought in for $2.4 million (ts 284). And yet, the McEvoy evidence shows that in reality it was more likely to be the former figure, and possibly higher. The plaintiff said that the Zorzi estimate of $3.3 million was out of the question (ts 267). Indeed, he almost fainted. Ms Cunningham gave evidence that he was nervous about the project and showed little interest in the detail of the plans (ts 325). The plaintiff accepted, under cross‑examination, that the trees were never entered on the municipal registry (ts 244). This creates a degree of doubt as to whether he was prepared to accept that condition.
In addition, to the considerations I have mentioned there is a degree of ambiguity in the evidence before me as to whether a builder could in fact have been engaged to embark upon and complete the project by November 2004 in the manner envisaged by the McEvoy estimate. It is open to me to infer from the Davison and McEvoy evidence that such an undertaking was feasible, but I do not have direct evidence from a builder to that effect. I understand from Sellars and the other decided cases that it is permissible for the trial judge to make an informed appraisal of the prospects in that regard.
To my mind, it follows from all of this that there was a real likelihood that even if the plaintiff had been warned, and had pressed ahead to obtain a fresh planning consent before TPS6 was gazetted, he might ultimately have been disinclined to proceed with the project. In arriving at this conclusion I give weight also to Mr Moore's opinion that the development represented a risk of over‑capitalisation of the site, with the corollary that the land could prove to be as valuable at November/December 2004 in its undeveloped state. The plaintiff's actions suggest that the plaintiff was a cautious man and the evidence as a whole gives me reason to believe that considerations of this kind might, in the end, have deterred him from demolishing his existing home and putting his hand to a building contract at a price in the order of $2.7 million which might not have produced a sufficient financial benefit.
Further, in the period after 3 September, although the plaintiff evinced a wish to proceed, the evidence reveals further uncertainty as to what was to be the final form of the development. The footprint of the building may have remained the same but there were significant internal changes, and these had to be approved by a man who, on his own admission, found it frustrating to deal with such matters and to focus upon the details.
In this context I give weight also to the evidence from Mr Davison from Pindan who said, under cross‑examination, that at a stage where only a planning consent had been obtained he could foresee months of negotiation work with the architect or the client to come to a fixed point where he would be prepared to give a fixed price quote. This too weighs against the likelihood of the plaintiff's project at a contracted price of $2.7 million or less being commenced in or about August 2003 and completed by November/December 2004.
In all the circumstances, and having regard especially to a history of indecision on the part of the plaintiff as matters proceeded, I consider that the plaintiff's prospects of completing the project successfully by November/December 2004 in the manner envisaged by the alternative claim must be discounted to a significant degree. In the end, I consider, and so find, that the likelihood of the plaintiff successfully completing the project by November/December 2004 was no higher than 33%. It follows from this that in my view the quantum of loss for which he is to be compensated should be fixed at $306,300 being one‑third of the figure of $919,000 which I defined in earlier discussion as the amount representing the value of benefit foregone.
I am of the view that the plaintiff is entitled to recover also the additional fees of $4,844.75 referable to the attempted reinstatement of the original height limit. These fees were incurred as a consequence of the defendant's default.
Having regard to s 32 of the Supreme Court Act 1935 (WA), I will allow a claim for interest at the rate of $6 per centum per annum upon $311,144.75, being the total amount in question, as from 31 December 2004 (being the date when the loss accrued) until the date of judgment.
Summary of findings
The terms and conditions of the agreement between the parties evidenced by the defendant's letter dated 18 September 2000 were as alleged at par 4 of the plaintiff's claim. The defendant was to act as architect and planner in advancing the plaintiff's project to construct three luxury multiple residential dwellings upon the subject land. The height of the project building exceeded 7 metres in the manner allowed for by the planning consent which was issued to the plaintiff under TPS5 on 18 December 2001.
The agreement included certain implied terms that in acting as architect and town planner the defendant would exercise reasonable skill and care in providing its services. This brought with it an obligation of the kind pleaded at par 23 of the claim that the defendant would do all things necessary to cause all of the conditions in the consent to be satisfied by 18 December 2002 or to inform or advise the defendant what was required to renew or replace the consent.
By early 2002 the defendant had fulfilled the first phase of the agreement by obtaining the 18 December planning consent pursuant to schematic designs of the project that were satisfactory to the plaintiff. The plaintiff had been provided with full and sufficient advice that the conditions attached to the 18 December planning consent had to be attended to within 12 months.
The agreement was not varied in May 2002 in the manner contended for by the plaintiff. The agreement was not formally terminated but a stage was reached when the plaintiff was not prepared to progress the project in the manner recommended by the defendant. Upon the plans being delivered by the defendant to Mr Psaros at the request of the plaintiff in mid 2002 there were no further services to be performed by the defendant and no liability can be attached to the defendant for any acts or omissions on its part between then and 3 September 2002. The parties had so conducted themselves as mutually to suspend performance of their duties under the contract between them.
The contractual relationship between the parties was varied at a meeting held on 3 September 2002 as a consequence of which the defendant undertook to provide further services to the plaintiff at his request. The consequence of this meeting was that the obligations imposed upon the defendant by the implied terms of the contract were revived. However, no representation was made by or on behalf of the defendant at that time to the effect that the defendant would obtain an extension or renewal of the existing 18 December planning consent. The services to be performed by the defendant were essentially to revise the existing plans in a manner satisfactory to the plaintiff and then to apply for a fresh planning consent under TPS5 in respect of the revised plans.
However, importantly, I have held that as a consequence of the implied terms the defendant was in breach of the contract in failing to give the plaintiff a warning or information to the effect that if the conditions of the 18 December planning consent were not satisfied prior to 18 December 2002, or if a fresh consent was not obtained before TPS6 replaced TPS5, it would not be possible for the plaintiff to complete the project, because the project did not comply with the 7 metre height restrictions contained in TPS6. The matters mentioned in the defendant's second site report of March 2002 were not a sufficient warning.
The defendant was therefore in breach of its duties under the contract and in breach of its common law and statutory duties in failing to warn or inform the plaintiff. I was not satisfied that if the plaintiff had been properly informed he would have done all things necessary to cause all of the conditions in the consent to be satisfied by 18 December 2002 because by 3 September it was too late to commence construction. However, I was satisfied that the plaintiff, if properly warned or informed, would have requested the defendant to immediately do what was required to renew or replace the consent.
It follows that upon gazettal of TPS6 on 29 April 2003 the defendant was in breach of its various duties because thereafter the plaintiff was deprived of the opportunity he had to complete the project by the height restrictions in TPS6. There is sufficient causal connection between the defendant's breach of duty and loss of opportunity suffered by the plaintiff. I was satisfied on the balance of probabilities that the breach was the cause of at least some loss.
The appropriate date for the assessment of damages in the circumstances of this case is the date of breach. Having regard to the way in which this matter was argued at trial the date of breach in the present case was characterised as December 2002 with damages to be assessed accordingly.
The assessment of damages required essentially that the assessment be related to the value of the chance to develop the property. Having regard to the reasoning in Sellars case, this required the court to assess the value of the commercial benefit foregone by the plaintiff and then to assess the prospects of the opportunity represented by the benefit being brought to a successful conclusion, having regard to the relevant contingencies and possibilities. The quantum of the plaintiff's loss in that regard has been assessed at $306,300. The plaintiff is entitled to recover also additional fees of $4,844.75 plus interest pursuant to s 32 of the Supreme Court Act upon the total amount ($311,144.75) as from 31 December 2004 (being the date when the loss accrued) to the date of judgment.
I will hear from the parties as to whether any further orders or directions are required.
3