Felsink Pty Ltd v City of Maribyrnong

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 8873 of 2003

FELSINK PTY LTD (ACN 006 225 403)	Plaintiff
v
CITY OF MARIBYRNONG AND REGISTRAR OF TITLES	Defendants

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JUDGE:	HABERSBERGER J
WHERE HELD:	MELBOURNE
DATES OF HEARING:	3-6, 10-13 MARCH 2009
DATE OF JUDGMENT:	1 APRIL 2010
CASE MAY BE CITED AS:	FELSINK PTY LTD v CITY OF MARIBYRNONG
MEDIUM NEUTRAL CITATION:	[2010] VSC 110

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Contract – Agreement to transfer certain land to the Council if multi purpose public facility not built within ten years – Repudiation – Frustration – Uncertainty – Misrepresentation – Implied term of good faith.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr GD Bloch	Goldhirsch and Schnider
For the First Defendant	Mr JH Gobbo QC with Mr JD Atkins	Best Hooper
For the Second Defendant	No appearance

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

The Factual Background................................................................................................................... 1

The Proceeding................................................................................................................................. 31

Concealment of the Conveyancing Error.................................................................................... 33

Mr Osborne’s Knowledge of the Transfer of Land B............................................................... 38

Construction of the s.173 Agreement........................................................................................... 42

Claim for Land A.............................................................................................................................. 45

Repudiation....................................................................................................................................... 46

Frustration......................................................................................................................................... 59

Uncertainty........................................................................................................................................ 66

Misrepresentation............................................................................................................................ 68

Breach of an implied term of good faith..................................................................................... 70

Other Claims..................................................................................................................................... 72

Orders................................................................................................................................................. 72

HIS HONOUR:

Introduction

This proceeding arises out of a dispute between the plaintiff, Felsink Pty Ltd (“Felsink”) and the first defendant, the City of Maribyrnong, formerly the City of Footscray, (“the Council”)[1] over ownership of an area of land used as a car park which is adjacent to the historic Pioneer Hotel site at 2-4 Ballarat Road, Footscray. Much of the dispute centres around the respective rights and obligations of the parties under an agreement between them concerning the development of “a multi purpose public facility” on “adjoining Crown land” and the relationship between that development and ownership of the area of land used as a car park.
[1]As the second defendant, the Registrar of Titles, took no part in the proceeding, I refer on occasions to the Council as simply “the defendant”.

By agreement between the parties, the hearing was concerned only with questions of liability or entitlement. Assessment of damages, if appropriate, was deferred to a subsequent hearing.

The Factual Background

In order to understand the dispute it is desirable to set out the factual background in some detail. Because the relevant events and conversations occurred so many years ago and because the memory of Felsink’s only witness, its director John Osborne, was very poor, greater reliance than normal must be placed on the documents.

In 1991 a planning permit was granted by the Governor in Council to redevelop the old Pioneer Hotel site into 34 residential apartments and a restaurant/bar. Some years prior to this, the hotel building had been damaged by fire and become derelict.

On 8 February 1993, Felsink became the registered proprietor of the fire damaged and derelict hotel site and of part of the adjoining car park which was on a separate title (“the car park land”). It purchased the properties following a mortgagee’s auction. Mr Osborne said that he had been a property developer for 40 years, during which time he had been involved in ten residential developments, but this was his first subdivision.

The hotel site was a roughly square block fronting Ballarat Road to the south and backing on to Footscray Park to the north. The car park land was a strip of land to the east of the hotel site at its southern boundary, in a “pan handle” shape. It would have been a rectangular shape running east west except that its northern boundary was about 16 metres longer than the southern boundary. An easement of way ran east west along the car park land between the hotel site and a driveway in from Ballarat Road. There was also an easement of drainage running in the same direction on the car park land. There was another part of the car park to the north of Felsink’s land but this was on Council land. Access to the Council’s part of the car park was through the car park land.

Initially, the Council was of the view that the old hotel site should be restored because of its historical significance and its value to the community as a public venue. Mr Osborne had a different view. He would have preferred to demolish the burnt out shell of the Pioneer Hotel. He put forward several persuasive reasons why the permitted mixed residential and commercial development of the site was not viable.

Following lengthy negotiations, the plaintiff and the Council reached a compromise whereby Felsink would be allowed to construct the residential units without the restaurant/bar, so long as the original façade of the hotel was maintained, and on condition that a “multi purpose public facility” was “provided in adjoining Crown land”. A new planning permit was accordingly issued on 31 May 1993.

The exact boundaries of the “adjoining Crown land” were never specifically defined. There was agreement that the land intended for the facility was a roughly triangular shaped area of land bounded by the Maribyrnong River to the north, Ballarat Road to the south, Lynch’s Bridge to the east where the land tapered to a point as the Maribyrnong River and Ballarat Road came together, and somewhere towards the old Pioneer Hotel site to the west. But exactly where this western boundary was situated was the subject of some disagreement. Mr Osborne said in his witness statement that Robert Spence, the Chief Executive Officer of the Council at this time, “physically showed” him the roughly triangular shaped piece of land adjoining the Pioneer Hotel site, including the western boundary which was:

a line running north south from the eastern extremity of the Pioneer Hotel car park to the Maribyrnong River.

Mr Spence said that he did not “believe” that he ever had a meeting with Mr Osborne where he described “the four boundaries of the land”. He said that it was his recollection that the western boundary was “never specifically identified”. I accept his evidence. As Mr Osborne eventually said in cross-examination, there was agreement about the general area of land which was available for use by the multi purpose public facility. How much would be leased depended on what proposal was put forward. Mr Spence gave similar evidence.

The new permit contained reference to the agreement which Felsink was required to enter into, pursuant to s.173(1) of the Planning and Environment Act 1987 (Vic) which provided that:

A responsible authority may enter into an agreement with an owner of land in the area covered by a planning scheme for which it is a responsible authority.

After further negotiations, including between their solicitors, the parties eventually entered into an agreement which was dated 26 November 1993, (“the s.173 agreement”). There were recitals setting out much of the above history. Recital D referred to the Council having considered the plans submitted by Felsink for the development of the hotel site and having resolved:

to support the proposals of the Developer for the development of the development site and the public facility.

Recital F referred to the restaurant and bar having been omitted from the plans:
with the intention that a similar public facility be created nearby on Crown Land leased by the Developer.

The s.173 agreement then relevantly provided:
4.THE Developer and the Council have agreed to the detailed plans and specifications (Annexure A) of the landscaping to be undertaken on the parkland to the north of the development for the purposes of screening the residential development from the parkland. The Developer covenants that the landscaping works shall be completed by the time the last unit has received its certificate of occupancy. The works will be undertaken by the Developer at his cost.
5.THE Developer covenants that he will transfer to the Council, free of all encumbrances, the land marked “A” on the plan (Annexure B) annexed to this agreement. The Council will pay no consideration to the Developer for this transfer which will be done at the cost of the Developer. The transfer will be given by the Developer prior to the certificate of occupancy being issued to the last unit.
6.THE obligations of the Developer contained in paragraphs 4 and 5 above are together performed by the Developer and accepted by the Council in full satisfaction of the Developer’s obligations for the provision of open space pursuant to the provisions of the Subdivision Act 1988.
…
8.THE Developer covenants that he will grant to the Council a licence for the car park owned by the Developer as marked “B” on the plan in Annexure B. The licence will permit public car parking use for visitors to the private units, the public using the park and generally, and the public using the public facility. It will not be conditional upon the erection of the public facility nor will its use be restricted to persons using the public facility.
9.THE Licence will be for a period of ten years. It will contain no payment by the Council to the Developer.
10.THE cost of any works to be undertaken on the car park whether by way of development, improvement, maintenance, repair or otherwise shall be the responsibility of the Developer but will not be undertaken until the approval of the construction of any part of the public facility. Any maintenance of the car park until that time shall be shared equally by the council and the Developer.
11.THE Council’s support of the plans and proposals of the Developer was expressed on the basis of the Developer’s agreement and willingness to erect, on a staged basis, adjacent to the development site, a multi purpose public facility to include some, or all, of the following uses:
·     Kiosk
·     Display for Footscray Historical Society
·     Eating areas (restaurant & bar)
·     Devonshire Tea
·     Business Lunches
·     Reception Centre
·     Conference Centre
·     Bicycle hire & storage
·     Boat hire and mooring
·     Café/Restaurant/Bar
·     and other such uses that the Developer and the Council may agree upon.
The term “public facility” in this Agreement shall mean all or any of the above uses conducted on or from a building or structure erected on Crown land adjacent to or near the development.
12.THE public facility is to be erected on Crown Land of which the Council is the Committee of Management. The Council will support the Developer’s application for consent by the Minister to a long term lease of such parts of the Crown Land as may be required for the public facility. Subject to the proper performance of its obligations as a Committee of Management of [sic] the Council agrees to grant such a lease to the Developer.
13.IT is agreed that the public facility, or parts of it, will only be constructed by the Developer when it is commercially feasible to do so. The Developer covenants that he will at four yearly intervals, in consultation with the Council, undertake detailed research into the commercial feasibility of some or all of the public facility proposals. The result of such research will be made available to the Council.
14.THE terms of reference, instructions objectives and details of the research shall be agreed to by Council and the Developer prior to it being commenced. If agreement is not reached on these matters 4 months prior to the 4 year period they will be arbitrated upon by an arbitrator appointed by the President for the time being of BOMA [Building Owners and Managers Association] and the decision of the arbitrator shall bind both parties.
15.THE parameters of commercial feasibility will be agreed to by the Council and the Developer prior to each of the research investigations being conducted. If agreement is not reached on this matter 4 months prior to the 4 year period it will be arbitrated upon by an arbitrator appointed by the President for the time being of BOMA and the decision of the arbitrator shall bind both parties.
16.IF the research is positive the Developer covenants that he shall construct such parts of the public facility as are feasible with the prospect of adding to these facilities as this becomes feasible in accordance with an agreed concept plan. If the result is negative on both the first and second research investigations, then the Developer will be relieved of any further obligation in relation to the construction of the public facility.
17.THE Developer covenants that the public facility will be erected at the cost of the Developer and managed by the Developer or his agent.
18.IN the event that:-
18.1the public facility is not constructed by the end of the ten year licence period, or
18.2the result of the two investigations into the commercial feasibility of the public facility are negative, or
18.3the result of an investigation into the commercial feasibility of the public facility is positive but the Developer is unable or unwilling to proceed with the construction of the public facility within one year

then the Developer will transfer to the Council free of all encumbrances and charges and at no cost to the Council, the land marked B on plan in Annexure B in full satisfaction of the Developer’s obligations in relation to the public facility.
…
21.EACH of the parties hereto shall execute all documents and do all acts and things as the other party shall reasonably require to complete and implement this Agreement and all of its terms.

The land marked “A” on the Annexure B plan (“Land A”) was a small virtually triangular part of the car park land at its eastern end. Mr Osborne agreed in cross-examination that this requirement to transfer Land A was in part satisfaction of the plaintiff’s obligation for the provision of open space pursuant to the Subdivision Act 1998. Indeed, this was stated in the s.173 agreement. He also agreed that as a result of the s.173 agreement he received the benefit of being able to build the residential units and the benefit of not having to develop the public facility if he did not want to (albeit at the cost of losing Land B) and he also gained the opportunity to build the public facility if the Council was satisfied it was viable.

On 19 January 1994 the s.173 agreement was registered with the Titles Office. However, it was incorrectly registered over both the title to the hotel land (Volume 9714 Folio 185) as well as the title to the car park land (Volume 10170 Folio 523). This caused difficulties for Felsink in selling the units. The error was not rectified until September 1994.

To give effect to the transfer of Land A, the title to the car park was subdivided into two lots by plan of subdivision 336211N. The plaintiff’s former solicitors, Price Brent, prepared an instrument of transfer, and forwarded it together with a copy of the Plan of Subdivision and Certificate of Title Volume 10170 Folio 523 to the Council’s former solicitors, Secombs, for execution. The instrument of transfer referred to “Lot 2 on Plan of Subdivision 336211N”, which was a correct description of the area described as Land A, except that the Plan of Subdivision was yet to be registered. The Certificate of Title forwarded by Price Brent was the title to the whole of the car park land. Both parties executed the transfer and it was lodged with the Titles Office by Secombs.

Some weeks later, in early October 1994, after the instrument of transfer had been lodged but before it was registered, the Titles Office contacted Secombs and apparently asked that the Plan of Subdivision be checked and that a reference to either the parent Certificate of Title or the new Certificate of Title be included on the instrument of transfer. On 3 October 1994 Secombs sent a letter to Price Brent requesting the information required by the Titles Office.

Despite reminders, the plaintiff’s solicitors did not respond to the request for some time. In June 1995, Wendy, the secretary of Roger Batrouney, a partner of Secombs, contacted Price Brent by telephone to request the title particulars and dealing number sought by the Titles Office. The conversation between Wendy and an employee of Price Brent, called Liz, was documented in a file note dated 20 June 1995. According to the file note, Liz provided Wendy with the following information:

C/T 10170.523
Being Lot 2 on PS001835D
(Parent C/T 8601.036).

The first two lines were references to the title to the whole of the car park land (that is both Land A and B). It appears that Wendy, or Mr Batrouney, erroneously thought that the information provided dealt with and described only Land A. Accordingly, the transfer was amended to describe the subject land as follows:

Lot 2 on Plan of Subdivision No. 001835D being the land described in Certificate of Title Volume 10170 Folio 523.

The amended transfer was relodged without being resealed. The name of the lodging party on the Order to Register was changed from Price Brent to Secombs at this time.

The amendments made to the instrument of transfer were clearly incorrect. There was, in fact, no such Plan of Subdivision number, the correct reference being 336211N. The number 1835D was the number of the relevant title plan. The description Lot 2 on Title Plan 1835D described the whole of the car park land. Despite the inaccuracies the instrument was registered by the Registrar of Titles (the second defendant) and the whole car park was thereby transferred to the Council. Certificate of Title Volume 10170 Folio 523 issued in the name of the Council was sent back to Secombs by the Titles Office. By a letter dated 18 August 1995, Mr Batrouney forwarded the title to the Council. He said that it represented “the car park to the development pursuant to the Agreement between the parties”.

Thus, by an error the whole of the car park, not just Land A, was transferred to the Council in 1995. Both parties agreed that what occurred with respect to the registration of the instrument of transfer was a genuine mistake, and that the question of who was responsible had little bearing on the outcome of this proceeding.

The date set for the first four yearly research study, 26 November 1997, passed without any action by Felsink. Mr Batrouney, however, reminded the Council of this date by a letter dated 22 September 1997. This resulted in some activity at the Council’s end. Following a conference with Council officers, Mr Batrouney wrote to the Co-ordinator, Development Projects of the Council by a letter dated 28 May 1998. In his letter Mr Batrouney referred to “elements of the strategy discussed in the conference”. He then concluded his letter with the following:

It must be borne in mind that the Council licence for the carpark expires in 10 years from the date of the Agreement. If the Council does not take action under Clause 18 of the Agreement, then the public could be excluded at the expiration of the Licence period.

Mr Osborne agreed that he did nothing about the proposed public facility for a number of years. It was not until late 1999 that Felsink started to investigate its options with respect to the public facility. On 23 November 1999, Katerina Staikos, a strategic planner employed by the Council, rang Mr Batrouney. He was not available. The message left for him suggested a possible meeting on 30 November. It noted that Felsink was wanting to develop public facility on Crown land and that “Council need to know what are their options”.

By an internal memorandum dated 26 November 1999, Ms Staikos wrote to the Council’s valuers seeking a valuation of the car park land. In the memorandum, Ms Staikos referred to the fact that the developer had not met the requirement of undertaking the first four yearly research study “and is now wanting to proceed with the public facility regardless”. Importantly, Ms Staikos went on to say:

Unfortunately, a public facility at this location is not consistent with the various policies that have recently been adopted by Council eg: Footscray Park Masterplan and we need to work out the best solution.

The Footscray Park Landscape Masterplan was prepared by the Landscape Advisory Service of the Melbourne Western Region Commission in May 1994. Councillors and Council officers were on the Steering Committee which supervised the work. Chapter 6 of the Masterplan was headed “Policy & Design Guidelines”. At paragraph 6.5.6 the following appeared:
6.5.6 Lynch’s Punt/Dock
As part of the Pioneer Hotel redevelopment it has been proposed that a restaurant be constructed on the river bank. There are a number of arguments against this proposal which are outlined as follows. The proposed restaurant will be constructed on an area of designated flood plain, it is located directly under high voltage transmission lines and may be effected by the traffic noise and vibration associated with Lynch’s Bridge. As an alternative it is proposed that a simple timber dock is to be constructed to create a historic marker and promote River activity (fishing, etc.) at the original location of the historic punt crossing of the Maribyrnong River. A small car-park could be constructed to assist access to the river, and promote the use of this area by local fishermen. (refer 6.7.3)

In paragraph 6.7.3 there was a recommendation that:
a new building, a tea room/restaurant/function room facility, combined with a smaller, specific Footscray Park maintenance depot, be established on the current depot site.

It was suggested that “the proposal by developers for a restaurant facility at Lynch’s Bridge” was an opportunity for the “prominent” depot site.

A private contract valuer was apparently engaged by the Council and she valued the car park land as at 29 November 1999 at $200,000. Felsink’s counsel suggested that this step showed that Council was by now focused on gaining the land rather than facilitating the development.

A file note of Mr Batrouney dated 30 November 1999 about an attendance with Council officers concerning this matter stated:

-     Enforcement of Developer’s obligation
-     Letter to him requiring observance
-     Note Council’s change of position
-     Change of Planning Scheme study etc
-     Ask him to define what he wants
-     Then respond to that
-     Further investigation.[2]

[2]Mr Batrouney was generally able to explain in evidence the numerous abbreviations used by him in his file notes.

Mr Batrouney said that he was not certain whether the note of “Council’s change of position” was a reference to a change of position due to the Council’s view of the desirability of the public facility as a commercial development or whether it was as a result of the new format Planning Scheme which came into force in 1999. With respect to areas such as this, which came under the Public Park and Recreation Zone, four purposes were set out. The second purpose was “To recognise areas for public recreation and open space”, and the fourth was “To provide for commercial uses where appropriate”. The application for a permit requirements read as follows:

An application for a permit by a person other than the relevant public land manager must be accompanied by the written consent of the public land manager, indicating that the public land manager consents generally or conditionally either:
·To the application for permit being made.
·To the application for permit being made and to the proposed use or development.

But as Selwyn Custance, a town planner who was a friend and neighbour of Mr Osborne, pointed out in a facsimile to Mr Osborne on 6 April 2001, no consent was required for Retail premises and Food and Drink premises so long as they were “A use conducted by or on behalf of a public land manager …”, which was the Council.

In about December 1999 Mr Osborne put forward a proposal for a reception centre and kiosk with car park. He sought in principle support from the Council.

By a letter dated 13 December 1999, Dwayne Singleton, the Co-ordinator, Strategic Development at the Council, wrote to Mr Osborne referring to a recent meeting Mr Osborne had attended with Ms Kay Rundle, the Council’s then Chief Executive Officer, and others “regarding the proposed development of a public facility on Crown land adjacent to the Pioneer Hotel residential site”. The letter continued:

I have had preliminary discussions with the relevant Council staff regarding your proposal. In order to progress this matter, it would be appreciated if you could provide a brief written summary of your proposal which includes a plan showing the location of the proposed facility.
It would also be appreciated if you could advise me of your intentions regarding the feasibility study outlined in the Section 173 agreement.

On 24 January 2000 Mr Singleton sent a facsimile to Mr Osborne attaching a facsimile from Melbourne Water dated 11 January 2000 concerning flood levels in Footscray Park, in which Melbourne Water stated:

Without more detailed information, it would appear that there are notable limitations to constructing a bar/café/reception restaurant in this location, as it would be necessary to undertake substantial earthworks …

In his facsimile, Mr Singleton added:
I have spoken to Parks Victoria, and it also has concerns about a building at this location as it is not consistent with their planning for the Regional Park.

A file note by Mr Batrouney of a telephone conversation with Mr Singleton on 25 January 2000 read:

-     Discussion with Osborne and Council
-     Council not in favour
-     Can try DNRE approval
-     Need to work through termination process re s.173
-     What if proceed and what if not?
-     Not sent letter to him re surveys
-     Discuss.

Mr Batrouney agreed in cross-examination that the second and fourth of the above points indicated that Mr Singleton was telling Mr Batrouney that the Council was opposed to a commercial facility and that it was focusing on acquiring the car park land under clause 18 of the s.173 agreement.

In about February 2000 Mr Osborne put forward another proposal, this time for a “Stokehouse” style restaurant. Again he sought in principle support from the Council.

According to his file note, Mr Singleton spoke with Mr Osborne on 23 February 2000. Mr Singleton suggested that he could write to the “Crown” about the development proposal. Mr Osborne was noted as floating other options:

including Council paying him for the land he had taken or giving the land back to him. I asked him to put this in writing but he said he would rather explore the development option first.

Following that conversation, Mr Singleton wrote, as discussed, to the Department of Natural Resources and Environment (“DNRE”) seeking its preliminary comments on the proposal. He said:

The developer, Mr John Osborne of Felsink Pty Ltd, recently contacted Council stating that he was keen to honour the Agreement by constructing a “Stokehouse – St Kilda” style entertainment and restaurant complex on Crown land to the east of the car park. He also said that he was not prepared to spend money on developing this idea any further until he had in principle support from the key stakeholders. He has not undertaken a feasibility study which is a key requirement of the Agreement.
The proposal to construct a commercial facility in this location is not consistent with the Maribyrnong River Regional Park Plan or the Footscray Park Masterplan, and is not likely to gain Council approval.
Mr Osborne has been advised of this, however, is still keen to pursue discussions with other key stakeholders regarding his proposal, including the relevant Ministers if necessary.
Mr Osborne was not interested in pursuing commercial development opportunities at the Footscray Boathouse near Farnsworth Avenue or at Saltwater Crossing in Hopkins Street. Commercial development at both these sites is supported by Council’s strategies.
Council has received preliminary comments from various State agencies including Melbourne Water, Parks Victoria and VicRoads. Melbourne Water has stated that it will object to the proposed development in its capacity as a Statutory Referral Authority because the land is affected by flooding from the Maribyrnong River. VicRoads is concerned about vehicle access/egress to Ballarat Road, and Parks Victoria is concerned about the visual impact of the proposed development on the River Valley.
The land chosen by Mr Osborne is also encumbered by high voltage electricity transmission lines. I have not received comments from the GPU Powernet at this stage, however, I suspect that setbacks from the easement would be required.

Mr Singleton noted in the letter that “the car park remains in the ownership of the developer”.

By an email dated 6 March 2000, Mr Singleton forwarded a copy of this letter to Ms Rundle. His email concluded:

Mr Osborne has indicated that he would like to talk to us about other options if he doesn’t get anywhere with DNRE. The options he has flagged are:
·Council paying him for the car park; or
·Council relinquishing its rights over the car park Title.

The DNRE replied to Mr Singleton’s query by a letter dated 30 March 2000. It pointed out that “according to the Department’s records the site of the proposed development is not on Crown land, even though the land may be managed as part of Footscray Park”. It said that it was, therefore, not appropriate for the Department:

to review the merits of Mr Osborne’s proposal, other than to offer the comment that if the subject land had indeed been Crown land, it would be very difficult to imagine the development being granted a tenure.

Following this, on 6 April 2000 Mr Singleton asked Mr Batrouney to look into the question of the ownership of the land proposed for the public facility. On the same day, Mr Singleton sent a facsimile to Mr Osborne advising him that the DNRE had told him that:

the subject land is not Crown land, which is contrary to maps provided to Council by the State Government. I have organised for a Title search to be done. I’ll call you when I receive this information.

On 22 June 2000, Mr Osborne told Mr Singleton by facsimile that he was “awaiting results of the your [sic] title search”.

By a letter dated 10 July 2000, Mr Batrouney wrote to Mr Singleton:

Following your enquiry in relation to the Titles, we have searched and checked the Title positions carefully.

Mr Batrouney then set out the relevant requirements of the s.173 agreement and continued:
5.The car park title (Volume 8601 Folio 036) was subdivided by registered plan 1835D which created two lots. Lot 1 was the development which was further subdivided into the Units. Lot 2 was the whole of the car park.
6.Lot 2 issued into Certificate of Title Volume 10170 Folio 523. This was transferred into the name of the Council by Transfer on 22 June 1995 from the Developer.
7.Therefore, although the initial obligations of the Developer were to transfer to the Council part of the car park, it has transferred the whole of it to the Council. The obligations in Clause 18 to transfer to the Council have already been attended to without the condition precedents having been complied with.
…
9.It [the car park title] is also subject to the s.173 Agreement which is obviously inappropriate as none of it is now in the name of the Developer. This should be removed.

Rather surprisingly, there was no mention by Mr Batrouney that the transfer to the Council of the whole of the car park land had resulted from an error. The terms of this letter will be considered below.

On 2 August 2000, Mr Osborne asked Mr Singleton by facsimile whether he had been able “to fix up” the issues “as per your last letter 6/4/00”.

A file note by Mr Batrouney of a conversation with Mr Singleton dated 15 August 2000 contained the following comments:

Discussed letter of advice.
Okay.
Council meet with Osborne.
Briefing to officers in due course.
He didn’t comply with Agreement.
He did the Plan of Subdivision and Transfer.
Can’t now complain or require compensation.

Mr Osborne met with Mr Singleton, Soma Thevarajan and Mr Batrouney on 22 August 2000. Mr Singleton referred to this meeting in an internal email dated 15 November 2000 sent to John Luppino, General Manager City Development, and copied to various other Council employees and Mr Batrouney. In his email Mr Singleton referred to the s.173 agreement and stated:

Under the agreement, if no action on developing a commercial facility had been taken within 10 years, Mr Osborne was required to transfer the car park to Council. For some reason, Mr Osborne voluntarily transferred the car park to Council on 22 June 1995. He has not conducted any feasibility studies for a commercial development.
Mr Osborne has made enquiries with several people at Council over the years. In the Maribyrnong days they have included Kay Rundle, former Cr Mai Ho, Vincent Ryan & myself.
At the 22 August meeting, Mr Osborne said that he was really keen to develop a commercial facility near the Pioneer Hotel. I explained to him that Council’s current strategies (Footscray Park Masterplan & Maribyrnong Valley Regional Park plan) did not support a commercial facility in this location. I further explained the Footscray Boathouse (owned by Parks Vic) & Site 3 Saltwater Crossing were the desired locations for such facilities, and that I was happy to put him in touch with the land owners.
Mr Osborne has his heart set on land near the Pioneer and believes that he can convince the relevant decision makers to change the strategies to accommodate his development proposal. He also seems to think that Council is obliged to help him in some way. The only documentation Mr Osborne has produced to support his proposal is the menu and some photos of the Stokehouse complex in St Kilda. He is using this as an example of the development he wants to build.
He asked for my opinion on whether to pursue the development. I advised him that it would be difficult for him to overcome issues such as flooding, traffic, riverscape, transmission lines, Crown/Council sale or lease requirements, and therefore it would be best to look at other sites along the river. He said he would think about my advice. I also advised him that he needed to provide more information about his development ideas (i.e. at least a sketch plan) before speaking to Council or State agencies again.
In summary, I believe that:
·     Council has no obligation to Mr Osborne regarding a development adjacent to the Pioneer site;
·     Council & Parks Victoria strategies do not support a commercial facility in this location;
·     Mr Osborne must provide more detail of his development ideas before speaking to Council again;
·     the Section 173 Agreement should be removed from Title.

Mr Osborne said that he had no recollection of the meeting on 22 August 2000.

Mr Singleton sent another email to Mr Luppino and others including Mr Batrouney on 17 November 2000. It read:

Further to my previous e-mail, I spoke to John Osborne today.
He asked me whether any progress had been made in respect his [sic] development proposal. I reminded him that the “ball was in his court”, and that he wouldn’t get anywhere unless at least a sketch was produced.
He said that he didn’t want to spend money unless we could guarantee that the project would be approved.
I questioned why he had voluntarily transferred the car park to Council before the s.173 Agreement had run its course. He said that he had been coerced to do so by Council staff who have since left.
I suggested that he should write to us about this issue. He said that he would prefer to meet with the relevant decision makers. I told him that there would be little point. He said he would get his solicitor to write to us.
I think we are a step closer to concluding this matter.

Again, Mr Osborne said that he did not remember this conversation.

By a facsimile dated 4 February 2001, an architect, Roger Burns, wrote to Mr Osborne, as follows:

Thank you for your instructions last week to prepare sketch plans for the proposal at Footscray Park.
I confirm your advice that you need to put forward an application for assessment in order for the s.173 agreement to be advanced to allow development of the site.
I confirm your instructions to design a “Stokehouse” style building, development, and operational concept, to be located on the Footscray Park site.
This will be designed in conjunction with the advice from your Planning Consultants (Selwyn Custance and Associates).
Roger Burns Design Services will prepare
1A design for the building which will form the primary basis for the Town Planning assessment

2 Plans, photos and accompanying documents
3 A Design Response.

By a letter dated 29 March 2001, Mr Custance, wrote to Melbourne Water advising that Mr Osborne now wished:

to reactivate the kiosk proposal and before formally lodging a planning application with the City of Maribyrnong we are seeking your view as to the development of this area.

Melbourne Water wrote to Mr Osborne on 6 June 2001, and again on 25 June 2001, and advised that it would “in principle” have no objection to the development of the site, subject to a number of conditions. It stated that the subject land was “contained within the Maribyrnong River’s flood plain”.

On 19 June 2001 there was a meeting between Mr Osborne, Mr Burns, Cr Horrocks, Ms Rundle and others at which Mr Osborne presented his latest proposal, for a four level multi purpose public facility, comprising reception centre and entertainment venue, conference venue, corporate centre, car parking for 69 cars, boat and bike hire, kiosk, café, restaurant and historical display area. Following this meeting, Mr Burns sent an email to Ms Rundle on 27 June 2001:

Thank you for seeing us last week in regard to the above project. As we left it last Tuesday, you were going to contact the other parties who would be involved in the decision making process.
Just wondering how you got on with this and if there is any further information you may require from us at this very early stage of the development.
…
We have had some further thoughts on the project and I am sure you have too, however, for anything to “get off the ground” we believe we need to establish some common objectives which can provide an outcome that benefits both the community and the developer.
John is very keen to move on this and to get a feeling from you of what the Council see as an achievable outcome.

This led to a meeting of relevant Council officers. On 2 July 2001 Mr Luppino sent an email to Ms Rundle advising her that one outcome of the meeting was that:

We decided that we need to quickly meet with Roger Batrouney to understand what our obligations are under the agreement if any. We believe this is critical. A meeting with Roger will also help us understand the history a little better.
David, Katerina, Gavin and Ian will continue to work on establishing what the strategic issues are with respect to their proposal and whether it stacks up. We will also look at alternatives, though we don’t have enough information to do this properly without a proper feasibility and economic analysis, and knowing what the parameters are.
We will formulate an interim reply to John Osborne advising him of what we are doing. To put it simply we are not in a position yet to properly comment on his proposal. There is simply not enough information.

By a letter dated 3 July 2001 Ms Rundle asked Mr Osborne to forward a copy of “the economic feasibility study conducted as part of the public facility proposal”.

On 5 July 2001, David Walmsley, the Council’s Manager, Strategy and Economic Development, sent the following email to Ms Rundle and other Council employees:

I have contacted Roger Burns the designer and asked him to keep in contact with either me or Katerina. He said they haven’t conducted a feasibility study yet, the only feasibility study related to the functions/convention centre which was done by Peter Rowlands and needs updating. It seems to me that they are very much waiting on us without quite understanding the public processes that we may need to go through if we were to support their proposal.

Mr Batrouney met with a number of Council officers including Mr Walmsley and Ms Staikos late in July 2001. His file note, which was probably prepared as an aide-memoire for the meeting, rather than as a record of the meeting, refers to the provisions of the s.173 agreement and subsequent history. It continued:

Is the s.173 Agreement legal and enforceable?
-     It was when it was entered into.
-     See Recital G.
-     To be registered on Developer’s car park land in C/T Vol 8601 Fol 036. See Recital H.
-     Proposed that that land be subdivided and [Land] A transferred to Council and [Land] B held against the public facility proposal (clauses 5 and 18).
-     Whole lot transferred to Council [in] 1995 and s.173 Agreement superfluous – Council can’t agree with itself in relation to its land. As though clause 18 just happened earlier.
-     Agreement should be removed and Council can do this.
-     Do any of the agreements between Council and Developer survive. Probably not.

Again, the absence of any reference to this situation being brought about by error was a conspicuous omission.

By a letter dated 30 July 2001, Ms Rundle wrote to Mr Osborne. Given the importance of this letter, I will quote it in full:

I refer to our meeting on 19 June 2001, when you presented a concept, which proposed the development and use of land east of the Pioneer residential apartments on the Footscray Park for the purpose of a multi-use public facility. You will recall that at the meeting I undertook to discuss your proposal with other relevant Council Officers, so as to provide feedback to you on Council’s likely attitude to the project and issues that may require further investigation.
Since our initial meeting, Officers from relevant branches namely City Development, Assets and Open Space, and Community Development have met on two separate occasions to carefully assess your concept and to formulate a response. I am pleased to say that I am now able to advise you on the outcome of these meetings.
Leaving aside the question of the status, or otherwise of the Section 173 Agreement, I unfortunately must advise you that Officers are not able to support your concept as presented. The reasons for this are outlined in detail below, but in summary the location you have chosen for such a facility does not accord with Council’s land use and open space planning policies and strategies for this part of Footscray Park, as contained in the Maribyrnong Planning Scheme (MPS), Municipal Strategic Statement (MSS), Maribyrnong Valley Vision 1997, Future Directions Plan for Maribyrnong Regional Parklands 1998, and Footscray Park Master Plan 1998.
Officers found that the proposal for a multi-use facility on this site is inappropriate on several grounds:
1.There are no specific policy references in the Maribyrnong Planning Scheme or the Municipal Strategic Statement relating to the development of a multi-use public facility on Footscray Park, as proposed:

The Maribyrnong Valley Vision 1997 and the Municipal Strategic Statement identify the Footscray Park as forming an integral part of the Maribyrnong Regional Parklands wherein the cultural and historic expression and interpretation of the river environs are to be protected, the visual amenity and landscape character are to be preserved and enhanced, and opportunities for new leisure, recreation, entertainment and tourism activities are to be provided.
It is considered that the facility proposed is not in keeping with the above objectives and will not enhance the values of Footscray Park, but could detract from the passive recreation focus of the precinct, and interrupt the magnificent vistas to the Valley from the Ballarat Road gateway, when travelling to the City of Maribyrnong from the east.
2.The proposal does not accord with the design objectives in Schedule 1 to the Design and Development Overlay:

The Maribyrnong Planning Scheme contains a number of design objectives which aim to enhance the design and built form of new development along the Maribyrnong River and Valley, so as to:
·protect areas along the Maribyrnong River from visual intrusion caused by the inappropriate siting or appearance of buildings and works
·encourage development in keeping with the character and appearance of the area
·protect and enhance the skyline when viewed from the River and its banks
·to protect and enhance remnant vegetation and sites of biological significance
·encourage development consistent with the objectives of the Lower Maribyrnong River Concept Plan 1984, which include:
o   the provision of greater public access to the River and adjoining land from a variety of recreational pursuits
o   providing the public with a range of recreational opportunities while ensuring that recreational pursuits harmonise with other legitimate uses
o   ensuring that the character of the valley is not impaired by unsightly buildings and other structures.

It is considered that the proposed use of the multi-use facility as a conference venue, reception centre and corporate centre is not in keeping with the intent and objectives of the Lower Maribyrnong River Concept Plan, which seeks to encourage passive recreational activities that compliment the river environment. Similarly, the scale and intensely prominent built form of the proposed development will not be sympathetic to the sensitive and significant location of the River environs, and may therefore impact significantly on the existing Riverscape panorama and the Park’s amenity.
3.The proposal does not meet the purpose of the Public Park and Recreation Zone:
The purpose of the zone is to:
·implement the State Planning Policy Framework and the Local Planning Policy Framework, including the Municipal Strategic Statement and local planning policies
·recognise areas for public recreation and open space
·protect and conserve area of significance where appropriate
·provide for commercial uses where appropriate.

Pursuant to the zone, a planning permit is required for the construction of a building or the carrying out of works. The planning application must also be accompanied by the written consent of the public land manager, indicating that the public land manager consents generally or conditionally either:
·to the application for permit being made
·to the application for permit being made and to the proposed use or development.

The proposed development does not accord with Council’s strategic vision for the Maribyrnong River and Valley as contained in its Local Planning Policy Framework, and can therefore not be supported.
4.The proposal does not accord with the Future Directions Plan for Maribyrnong Regional Parklands:

The Future Directions Plan for Maribyrnong Regional Parklands proposes a major activity node at the Footscray City Rowing Boathouse, not the site proposed here. The Plan suggests that the existing public car park be retained and enlarged on this site and the gateway nature of this site be planted and signed.
5. The proposal does not meet objectives for pedestrian access:
The proposal does not address Council’s objectives of improved pedestrian access to Footscray Park, as the proposed multi-use facility is too far from the historic gardens within the park. As this development is out of sight of the ornamental section of the park, it is unlikely to form any links with it. The proposal does not offer uses that will enhance the values of Footscray Park. A conference centre or reception centre will not necessarily result in more use of the park, but could detract from the passive recreation focus of the precinct.
6.There is not a demonstrated need or net community benefit for this facility in this location:

Council Officers believe adequate café/kiosk facilities already exist along the river, from Afton St bridge to Ballarat Rd, there are several planned or existing facilities, including Edgewater, Essendon boathouse, Poyntons, Anglers Tavern, Grimes Reserve, Henderson House. Conference facilities already exist at Flemington Racecourse, Showground, Epsom Rd.
Council Officers preferred use of this site would be to link it with the “natural” environment uses on the south side of the bridge at Newells Paddock, by means of complimentary planting.
7.The site is not identified as a development site in any of Council’s other strategies:

Other plans for Footscray Park do not include a major development at this site. The Footscray Park Master Plan suggests the site is a major gateway, with “bold mass tree planting and clear vistas” (p18). Plans exist for improvements to Moore St and Mills Close as main pedestrian entry points. The Footscray Central Urban Design Framework suggests use of plantings or banners to mark entrance into Footscray at this site (p76).
CONCLUSION
I understand that this was not the response you had hoped for, however Council’s strategic thinking for this part of Footscray Park has moved a long way since its initial ideas and vision for the land, as demonstrated in the strategic analysis above. If you are still interested in pursuing the development and are interested in discussing other possible locations please do not hesitate to contact Council’s Coordinator Strategic Planning, Katerina Staikos on 9688 0351.

The Maribyrnong Regional Parklands Future Directions Plan was published in September 1998. It was a joint initiative of Parks Victoria, the City of Maribyrnong and the City of Moonee Valley. Councillor Horrocks and a senior Council officer were on the Steering Committee and three other Council officers were on the Project Working Group. In dealing with the Footscray Park precinct, the Plan listed a number of Key Actions under the heading “Access and Circulation”. The first two were:

·Recognise Lynch’s Bridge as a major park gateway through signage, planting, access and improved views to the river valley
·Upgrade and expand the existing car park at the former Pioneer Hotel site, near Lynch’s Bridge gateway and return car park to community ownership.

In his evidence, Mr John Waugh, the senior planner for the Council until 1998, disagreed with the suggestion by Ms Rundle that the Maribyrnong Planning Scheme, Municipal Strategic Statement or Maribyrnong Valley Vision 1997 were inconsistent with commercial development in that location. He said that he could not comment on the two 1998 documents because they came after he left the Council.

Mr Osborne’s solicitors, Goldhirsch & Schnider, replied to the Council’s letter by a letter dated 20 December 2001. The solicitors sought to arrange a meeting “to attempt to resolve this matter amicably”. They also pointed out that:

Our client transferred valuable property to the Maribyrnong City Council, on the understanding that it would be able to undertake a development of the adjacent site.

By a letter dated 8 January 2002, Mr Luppino, as Acting CEO, wrote to Mr Osborne’s solicitors advising that the Council’s position remained “unchanged from that detailed” in the letter of 30 July 2001. Mr Luppino said that he saw no need to meet to discuss the issue further “unless you can provide any additional information other than what has been provided to date”.

Another Batrouney file note dated 18 January 2002 records a telephone conversation with Mr Luppino. It noted in part:

-     Nothing stopping him for applying for permit.
-     See little point in discussions because Osborne doesn’t seem to be serious.
-     Call his bluff.

By a facsimile dated 24 June 2002, Mr Burns confirmed Mr Osborne’s instructions:

to design either a “Stokehouse” style or “the observatory” style building, development, and operational concept, to be located on the Footscray Park site.

Mr Burns also repeated his advice to Mr Osborne that:
you need to put forward an application for assessment in order for the s.173 agreement to be advanced to allow development of the site.

By a letter dated 18 July 2002, Mr Osborne wrote on behalf of Felsink to Cr Bill Horrocks, the Council’s then Mayor. He said in part:

I also refer to the payment in the form of the land valued at $1,000,000 that my company made to Council at the time, as its part to this agreement.
We now want to activate the Council’s part to this agreement giving our company the right to develop this site as a Tea House, restaurant and functions room as is stated in the document.
…
… we want to discuss the proposal with you and other appropriate officers further and arrive at a workable “win win” solution before proceeding with a detailed planning application and procedures to activate our formal agreement.
… Should I not hear from Council by 30^th August 2002, I will assume that Council does not wish to discuss this proposal further and I will proceed with a detailed planning application and formal procedures to activate the agreement.

This Tea House proposal, with virtually no accompanying detail, was the fourth concept suggested by Mr Osborne.

Mr Luppino replied by a letter dated 14 August 2002. He said in part:

Having regard to Council’s duties as the responsible authority for administering the Maribyrnong Planning Scheme, Council would be only too pleased to receive and process your application.
I understand that Council officers’ attitude to such an application have previously been communicated to you in a letter sent by the Chief Executive Officer Ms Kay Rundle dated 30 July 2001.
Finally I would be pleased to receive copies of the commercial feasibility research, required pursuant to clause 13 of the Section 173 Agreement, as entered into with Council on 26 November 1993.

Soma Thevarajan, the Council’s General Manager Assets and Open Space, also wrote to Mr Osborne on 14 August 2002. That letter asked him to provide copies of the “periodic feasibility studies on the proposed facility” undertaken to date, and of the lease for which he was “seeking Council support” and to identify the land in question.

A meeting between Mr Osborne, Cr Horrocks and Mr Walmsley was held on 11 September 2002. Part of Mr Walmsley’s file note of that meeting read:

Mr Osborne discussed the approval of the Pioneer Hotel, which led to the section 173 agreement and the contract. He explained the transfer of the car park land to Council and his interest in bringing a tourist facility to Footscray. He explained his frustrations with getting direction from Council as to what was required for his proposal to gain Council support. All he received were the letters asking for a feasibility report, which he said he had done ten years ago.
Mr Osborne used examples such as the Stoke House, Williamstown and the Observatory Café at the Botanic Gardens to demonstrate what his idea was and the benefits it would bring to the local area. He was suggesting a teahouse/café that could be built as modules and added to if proved popular. He had obtained Board of Works approval to build on the flood plain.
Council reps restated the need for the feasibility study on agreed terms as provided for by the contract as a prerequisite to further discussions. Mr Osborne stated he was not prepared to spend $20,000 if Council was not supportive of the concept. It was explained that Council could not provide its support until the contract was satisfied and the planning and other approvals went through proper process. After further requests Mr Osborne tabled his feasibility report prepared by Peter Rowlands (undated) which he said was ten years old. Mr Osborne was unable to provide any evidence that this was prepared on an agreed basis with Council, as required in the contract.
Mr Osborne asked that Council consider the report and advise him of any further requirements and that he was prepared to update the report. He seemed to want Council to ignore the contract requirements. The Mayor quoted the report to Mr Osborne and its recommendation for further work and a feasibility study when questioning the relevance of the report.
Mr Osborne made mention of discussions with Rob Spence and Fred Maddern as willing to provide evidence if he took legal action. Although he didn’t want this he wasn’t prepared to walk away without getting his land back from Council which he said was worth $1m.
Discussions repeated [sic] returned to the need for the feasibility study to justify the proposal to Council, as required by the contract. It was explained that Council needs that evidence as the party to the contract and as the land manager. He would also have to demonstrate this through the planning process. Council had to be sure that the proposal was feasible so that it did not face any risks.
The meeting concluded with David Walmsley saying he would look at the Peter Rowland report and advise Mr Osborne of Council’s position.

The Peter Rowland Catering Reception and Conference Centre development proposal was Mr Osborne’s fifth proposal.

Mr Osborne rang Mr Walmsley the next day, asking him whether he had Mr Walmsley’s support. The latter’s file note of the conversation continued:

During our conversation John indicated he needed to know what to do to get his idea supported. Once again, as we did yesterday I stated that the feasibility study was necessary. He replied that he could do feasibility studies “until I’m blue in the face” but wanted to know what he had to do. He stated it was straight forward and his money on the line and he wasn’t going to lose $1m without suing Council. He then told me it was my job to support his proposal to which I stated it wasn’t; my job was to advise Council in its decisions and to follow the agreement. I repeated that a feasibility study was needed. John seemed unwilling to accept this but just kept trying to pressure me to agree with his proposal.
In the end John mentioned legal action and his $1m of land and asked if was [sic] going to explain my views to my constituents, that I wasn’t supporting a tea house. He said Council was broke and has a bad reputation did it want more bad publicity. In disagreeing with his statements I advised John that I would get back to him next week, as we agree [sic] yesterday. …

Mr Osborne rang Mr Walmsley again on 19 September 2002, asking about progress. Mr Walmsley’s file note read in part:

I responded that I had read his report it was obviously out of date and not relevant to his current proposal, which he agreed with.

We had a circuitous discussion about what was required. He did not want to prepare plans until we told him what we liked or did not like. He said he could find any one to provide an economic feasibility study and complained that it would cost him $20,000, which wasn’t prepared to pay. I repeated the information we needed as a basis for further discussions including more details of what it was he was now proposing such as plans, written details and the economic study.
I stated that like any development proposal or application we needed some plans and details of his proposal. He kept citing examples suggesting meeting on site and visiting the examples such as the Observatory and Stoke House. I said I saw no point to this as I was familiar with these places and that he needed to present details. He again resisted these suggestions because of costs.
He considered the land as just unsafe open space. I said it is part of Footscray Park area and Council as Committee of Management was responsible to the community for its use and development. Council must be sure of the viability of the proposal so it wasn’t a white elephant. Again, John made comment about suing Council for the value of the land $1m and that Council was broke and had a bad image.

Mr Walmsley advised Cr Horrocks by email that day that Mr Osborne might ring him. In his email Mr Walmsley said:

We must have something which we can assess and consider not just a vague idea.

By a letter dated 20 September 2002, Mr Walmsley wrote to Mr Osborne as follows:

I refer to your meeting on 11 September 2002 with the Mayor, Cr Bill Horrocks, and myself regarding this proposal, as well as our subsequent telephone conversations. At that meeting you indicated you were no longer proceeding with the proposal as outlined in your previous submission prepared by Roger Burns Design Services Pty Ltd dated June 2001. Instead, you cited examples of the Stoke House, Williamstown and the Observatory Café as reflecting your current ideas for the proposal.
You indicated during our discussions your reluctance in preparing an economic feasibility study, as required under the section 173 agreement, and tabled an undated competitive analysis report prepared by Peter Rowlands Catering, which I undertook to review and consider. I have now reviewed the Rowlands report, which I consider has limited value as it is out of date, does not relate to your current proposal and is not an economic feasibility report. Indeed, the report identifies the need for additional investigation and recommends further feasibility assessments of the project that was being considered at that time.
It is difficult for Council officers to provide you with any further direction until Council has more detailed information about your current proposal. Apart from citing examples of other facilities elsewhere in Melbourne there is no detail about what it is you are proposing now. Therefore, the information sought in Council’s previous letters of 14 August is still required before Council officers can provide any further guidance. More specifically, the information Council requires to assess any proposal includes initial plan and elevation design concepts, site and locality plans, written planning report and explanation of the proposal, copy of title/s, the basis for any proposed lease, traffic and car parking assessment report, drainage and infrastructure assessment and an economic feasibility study of the proposal.
This information is standard practice for developments requiring planning approval and will enable officers to assess your proposal against the requirements of the Maribyrnong Planning Scheme (Public Park & Recreation Zone) and as the Committee of Management for the Footscray Park area.
I await your submission of further information.

Mr Osborne responded by advising Mr Walmsley by telephone on 24 September 2002 that he would produce a feasibility study. In an email to fellow Council officers, Mr Walmsley said that although he was not confident that the work would be “as required”, at least they would have “some basis for understanding what it is that John proposes”.

Mr Osborne then wrote to Mr Walmsley on 27 September 2002 advising him that he had received Mr Walmsley’s letter of 20 September 2002, and that he had “embarked already on another economic feasibility for the proposal”.

In about December 2002, Mr Osborne submitted a proposal and feasibility study for a two level mixed-use development, under the name of the Footscray Gardens Teahouse.

Mr Osborne, Cr Horrocks and Mr Walmsley met on 13 January 2003. Mr Walmsley’s file note read:

Mr Osborne advised that he had consultants, Tourism Synergy, prepare an economic feasibility report which we briefly went through. He had also approach [sic] a prospective tenant Event Coordinators who run a number of venues in Melbourne. A copy of the principals and their c.v. was presented. In addition they had prepared a projected annual profit and loss statement and assumptions on a confidential basis. No site plan or design was provided, which John said would be done with the planning permit application. The reports have been prepared based on the floor layout and mix presented by John last year except that the building would be reduced to two storeys. The feasibility report has a site location plan within it.
John indicated that he wanted architectural guidance from Council. Did we want modern or traditional design? Do we want a landmark or low key design? He cited examples such as the Observatory Café or an Edwardian style tea house. I mentioned that that would come later through the application process and he may need to provide some conceptual options, which he said he was prepared to do. John indicated that he had no particular architect in mind and was open to suggestions from Council to get the right approach. Only involvement was the previous architect involved with the earlier submission who was suggested by planning consultant Selwyn Custance as he had worked with councils before.
John is still looking at the same location against the road and bridge with similar combination of uses to the previous proposal but the design could be varied. No additional car parking is proposed. The project will be reliant upon the existing car park. Still looking at staged approach although the building would be built as one (unclear what then would be staged). Looking at picking up wedding business which he thought there was a strong demand for in Footscray Park.
John mentioned he is prepared to invest $2.5m in the project, which incidentally comes from his aged care developments. In previous discussion I think John has referred to $1m investment.
John hasn’t approach [sic] other authorities although he did say that Melbourne Water has provided their acceptance, which would be on our file.
The Mayor and I indicated we would need to read the report before we could ad [sic] much more.

Mr Walmsley circulated copies of the report to other Council officers so that they could read it and then meet “to discuss the project and our next steps in our discussions with John Osborne”. Mr Walmsley described the report as supporting the feasibility of the project. In another email he said that it was:

more than a simple tea house as it comprises a number of uses and functions including tourism information, restaurant/bar, reception/conference centre, bike hire, boat hire and moorings operating at most hours through the day and evening. No additional car parking is proposed other than about 70 spaces already existing in that part of the park.

Mr Walmsley spoke to Wayne Malone at DNRE on 21 January 2003. Mr Malone was noted as making the following points:

·If located on Crown Land the provisions of the Crown Land Reserves Act apply.
·Term of lease is restricted to 21 years given the reservation of the land. Otherwise goes to Parliament.
·Dept would be guided by Council’s support for the proposal. However, that type of commercial operation in public open space could be seen as eroding the provision of open space in the area.
·Dept has leasing principles to follow such as transparent process, public process, market terms and overall economic benefits are considered.
·From Wayne’s understanding the proposal is not on Crown land but on Council owned freehold.
·He thought getting the approval of Government given Metro Strategy and Government interest in open space and its protection would be difficult and unlikely.

Felsink’s Teahouse proposal was examined by Council officers. In an email dated 23 January 2003, Mr Walmsley received the following advice from Julian Harvey:

In short I am not convinced of the viability of the proposal, and should Mr Osborne wish to proceed a more detailed analysis of the viability of the proposal should be undertaken by a consultant with economic feasibility knowledge in the Tourism and Entertainment sector.
Of course my concern that this proposal is not in accordance with the 173 agreement as it is proposed to be located on Council Freehold land and not Crown land stands.

Mr Osborne and Mr Walmsley spoke again on the telephone on 28 January 2003. Part of Mr Walmsley’s file note read:

John believed it would be feasible. He wouldn’t invest his money if it wasn’t and anyway not Council’s concern. He had got a prospective tenant lined up. He thought we shouldn’t get too concerned about the feasibility as the tea house would bring people to the park, which at the moment wasn’t used.
He wasn’t about to let Council get his $1m worth of land and would get the lawyers involved. Did Council want more bad publicity and more debt?

The proposal for a “Footscray Gardens Teahouse” was provided in about December 2002. Mr Walmsley sent a detailed response by a letter dated 19 February 2003:

Thank you for providing the Mayor, Cr Horrocks and me with copies of your consultant’s report on the proposed “Footscray Gardens Teahouse”. I will respond to the report and Council’s direction, as you have requested.
Planning agreement requirements and feasibility report
I assume the report prepared by Tourism Synergy is in response to our previous requests for a commercial feasibility report based on detailed research, as required under clause 13 of the section 173 planning agreement. I note that the contents of the report and the selection of consultants were not discussed or agreed upon by Council as required under the agreement but rather were undertaken at your own initiative. I am not familiar with the consultant’s experience or expertise in preparing commercial feasibility studies and no resume of their skills and previous work is included in the report.
The report relies upon some general reports and research to justify the proposal and the proposed location. However, as the report indicates (and as we have previously indicated to you) there is nothing in the cited studies that nominate this site as a preferred location for this type of development. The report reinforces the fact that there is a lack of planning policy supporting this site.
The report is unconvincing in its assessment of the commercial feasibility of the proposal. Its competitive analysis does not provide any assessment of the local catchment area, existing and prospective facilities along the Maribyrnong River or assessment of the current market place for the various elements proposed for the “teahouse”. A more thorough analysis of comparable facilities would be needed.
The report in its Strategic Audit doesn’t consider the competition from existing and proposed facilities at Edgewater, Northern Maribyrnong Defence site or within adjacent areas in the City of Moonee Valley. The section of the report discussing the challenges does not address the financing of the project, the type and timeframes for obtaining approvals, lease arrangements, the limitation of car parking and the infrastructure costs that may be associated with this project as part of the development costs borne by the project developer.
The general popularity of “teahouses” is well understood, however, a more detailed analysis of the viability of this project and location would have been needed under this agreement. I note that the demographic analysis is using optimistic data, as the population projections through to 2011 now over stated and the estimates of new homes for estates are also over estimated. Further, there is little analysis of this population data in relation to the proposed project, such as income, prospective market catchment, retail expenditure projections amongst other things.
The financial analysis provided in the report is very limited and lacks adequate substantiation. For instance, how the estimated visitor numbers is derived is not clear or justified. Also, there is no provision for a ground rental that would be required or details of the overall development costs. Similarly, the financial statements provided by the prospective tenant lack any detailed justification and basis for their assumptions.
Proposed location
In our letter of 14 August 2002 we requested you to identify the land for the proposal and details of the lease you were seeking from Council. You have not provided a specific response to this letter other than nominating the same site proposed in your earlier submission to Council.
The site selected is not Crown land and as such is not within the land specified in clause 12 of the agreement. Council, as the owner of the identified land, is unlikely to support a proposal of this commercial nature on this site as there is insufficient planning policy supporting it. This preliminary advice would not fetter the consideration by the Council as the relevant Responsible Authority of any application for a permit made under the Maribyrnong Planning Scheme. Another factor to be taken into account by the Responsible Authority would be that the commercial feasibility of such a facility on public land has not been demonstrated.
Agreement requirements
Even if an application were made now it is clear that the time limits of clause 18 of the agreement for construction of the public facility could not be satisfied. Council is not to be taken as having waived its rights in relation to past failures to comply with the covenants of the agreement.
Conclusions
The submitted report would not have been a satisfactory commercial feasibility study under clause 13 of the terms of the agreement. The site selected is not Crown land and is therefore not land that was covered by the agreement.
Given the impending expiry of the term of the agreement and the obligations under it which have not been met, further negotiations would seem to have limited, if any, benefit. The current proposal and location is unlikely to be supported by Council as the owner of the land responsible for the provision and management of open space in this area of Footscray Park and the current proposal would appear to face serious obstacles in obtaining approval under the Planning Scheme.

Nothing further was heard from Mr Osborne until 19 November 2003 when Felsink commenced this proceeding, shortly before the ten year period, under the s.173 agreement, expired.

The Proceeding

The causes of action pleaded in the plaintiff’s third further amended statement of claim were as follows:

(a)rectification of the s.173 agreement to embody the common intention as to which land was to be used for the public facility;
(b)unjust enrichment as a result of the Council obtaining Land B by mistake;
(c)wrong description of Land A in the instrument of transfer within the meaning of s.42(1)(b) of the Transfer of Land Act 1958 (“the TLA”);
(d)repudiation by the Council of the s.173 agreement;
(e)breach by the Council of an implied term of the s.173 agreement that, in exercising its discretion to approve or reject Felsink’s proposed concept plans for the public facility, it was obliged to act reasonably and in good faith;
(f)frustration of the s.173 agreement;
(g)rescission of the s.173 agreement under a common mistake of fact;
(h)discharge of the s.173 agreement for uncertainty;
(i)false representations;
(j)misleading or deceptive representations under the Trade Practices Act 1974 (Cth) (“the TPA”) and the Fair Trading Act 1999 (“the FTA”);
(k)unconscionable conduct under the TPA;
(l)misleading and offensive conduct under the TPA;
(m)misrepresentation by silence;
(n)misleading or deceptive conduct by silent representation in contravention of the TPA and the FTA;
(o)estoppel.

The plaintiff did not persist with all of these claims. Estoppel was abandoned during the course of the hearing. Although not formally abandoned, the claims made under the TPA were in the end only faintly pressed. This was because Mr Bloch of counsel, who appeared for Felsink, accepted that there was virtually no evidence on which it could be concluded that the Council was engaging in trade and commerce.

The relief sought in the statement of claim included a declaration that the Council held Land B on trust for the plaintiff; an order that Land B, or Land A and Land B, be transferred back to the plaintiff; a declaration that the plaintiff was not bound by or alternatively was discharged from its obligations under the s.173 agreement, including the obligation to transfer Land B to the Council; an order that the s.173 agreement be rectified so as to embody the agreement actually made between Felsink and the Council or their true intentions and to have the agreement treated as being so rectified and a declaration that the agreement as so rectified stood discharged for the Council’s breach; and damages for loss of profits under the s.173 agreement.

By its amended defence the Council agreed that the s.173 agreement should be rectified so that the land was described without any reference to a western boundary; that the land available for the public facility was not described as solely Crown land; and that clause 12 be rectified to include an agreement by the Council to grant a long term lease to Felsink of any Council owned land as may be required for the public facility. Otherwise, the Council denied the plaintiff’s claims. With respect to the allegation that Land B had been wrongly transferred to it, the Council denied that Felsink was the beneficial owner of Land B and pleaded that in the events that had happened under the terms of the s.173 agreement, it became entitled on 27 November 2003 to a transfer from Felsink of Land B. The reference to the s.173 agreement was a reference to clause 18.1 which provided that in the event that the public facility was not constructed “by the end of the ten year licence period” Felsink would transfer Land B to the Council “free of all encumbrances and charges and at no cost to the Council”, in full satisfaction of its obligations in relation to the public facility. The day, 27 November 2003, was the first day after the expiration of the ten year licence period.

Although the Council alleged that it had become entitled to Land B under the terms of the s.173 agreement, and accordingly had refused to transfer it back to the plaintiff, Mr Gobbo QC, who appeared with Mr Atkins of counsel for the defendant, accepted that, if for any reason this was not the case, then the Council would hold Land B on trust for Felsink and appropriate orders could be made to restore Felsink’s legal ownership. This concession, which I consider was correctly made, meant that it is unnecessary to consider the plaintiff’s submissions concerning constructive trusts, unjust enrichment or correction of the title pursuant to s.42(1)(b) of the TLA.

Counsel for the plaintiff was, however, not content with this concession. He maintained that, as there was no counterclaim by the Council, once it was conceded that Land B had been transferred into the Council’s name in error, that mistake should be corrected by ordering that the land be transferred back to Felsink. This was regardless of the fact that the Council might have become entitled pursuant to the s.173 agreement to a transfer of Land B on 27 November 2003.

The defendant submitted that any inaccuracy of the assumptions referred to above did not frustrate the s.173 agreement. It submitted that, apart from the Crown land issue, the assumptions were not incorrect, and in any event, they did not constitute a radical change of circumstances that rendered performance of the s.173 agreement impossible.

Counsel for the defendant analysed the relevant circumstances in support of this submission. First, the defendant’s counsel submitted that the fact that the land in question was located on a flood plain did not prevent construction of the facility. I agree. As stated above, Melbourne Water wrote to Mr Osborne on 6 June 2001, and again on 25 June 2001, advising that it would “in principle” have no objection to the development of the site, subject to a number of conditions. Mr Osborne obviously did not regard the conditions as an impediment because he later told Council officers that he “had obtained Board of Works approval to build on the flood plain”. Further, he conceded in cross-examination that the flood plain issue “was the only impediment in the end” and that, because Felsink had received in principle support from Melbourne Water, the flood plain issue was not unsurmountable.

Secondly, the defendant’s counsel submitted that the mistake about the ownership of the land in question did not mean that it was impossible to construct the facility thereon. The question of a lease from the Council of the Council owned land is dealt with below. Insofar as the facility was to be built on Crown land, the lease from the Minister was already covered by the s.173 agreement. This left that part of the land in question that had been a government road reserve. The defendant’s counsel submitted that the procedures contemplated by the s.173 agreement would have also operated in relation to the government road land. Further, any potential complications could have been sorted out in the planning permit process with adjustments to the siting of the facility if needed. I therefore agree with the defendant’s submission that the existence of the road reserve was not necessarily a frustrating event.

Thirdly, the defendant’s counsel submitted that it was not correct that neither Melbourne Water nor the Council would permit or consider permitting the construction of any multi purpose public facility on the land in question. It has already been mentioned that Melbourne Water agreed in principle to the development of the site.

The critical point is whether the Council refused to consider permitting the construction of the facility. In my opinion, the weakness in the plaintiff’s case in this regard is that Felsink never made an application for a planning permit and never sought the Council’s written consent to making such an application, if that was required by the relevant planning scheme. As previously stated, Mr Custance advised Mr Osborne in April 2001 that no consent was required in circumstances which could have been applicable to a Felsink proposal. Thus, the plaintiff cannot point to any refusal by the Council and can only speculate about whether or not the Council would have inevitably refused Felsink’s application. Even then, as was pointed out by the Council, it was open to Felsink to appeal to the Victorian Civil and Administrative Tribunal.

Therefore, I am not persuaded that the Council had definitely set its face against any approval of the facility on that site, in anticipation of thereby gaining ownership of Land B, and that no proposal by Felsink could have succeeded in obtaining a planning permit.

Fourthly, the defendant’s counsel submitted that it had not been shown that the Council would not or could not grant a lease to Felsink of the Council owned land. The question of the lease did not arise until a planning permit had been obtained and the subject land precisely identified. If no planning permit was obtained, then no question of the lease arose. I agree with the defendant’s submission that if the planning permit was obtained, one could not assume that the Council, having received advice about its obligations under the s.173 agreement, would not grant the lease. There would be no necessary frustration. I am not persuaded that if Felsink had been in a position to ask for the lease, the Council would not have granted it, even though it might have been opposed to the development.

Fifthly, the defendant’s counsel submitted that the minor changes in the Council’s land use and open space planning strategies did not mean that it would never agree to the construction of the facility. It relied on the evidence of Mr Whitney, Mr Waugh and Mr Walmsley.

The plaintiff’s contention on this point really depends on acceptance of its submission that the Council engaged in a deliberate strategy of concealment, misinformation and dissembling in pretending to still be open to persuasion about the construction of the facility whilst in reality only being interested in the ten year licence period expiring without that occurring so that its right to retain Land B could not be challenged.

I do not accept that this is a correct analysis of the Council’s conduct during this period. No support for the plaintiff’s submission was gained from the cross-examination of the defendant’s witnesses. Certainly, there are damaging comments made in the documents from time to time by representatives of the Council. I have referred to these previously. But they have to be weighed against other helpful comments made in the documents by Council officers. Some examples are:

(a)In Mr Luppino’s email to Ms Rundle on 2 July 2001 concerning Felsink’s latest proposal, he said:
David, Katerina, Gavin and Ian will continue to work on establishing what the strategic issues are with respect to their proposal and whether it stacks up. We will also look at alternatives, though we don’t have enough information to do this properly without a proper feasibility and economic analysis, and knowing what the parameters are.
We will formulate an interim reply to John Osborne advising him of what we are doing. To put it simply we are not in a position yet to properly comment on his proposal. There is simply not enough information.

(b) In Mr Luppino’s letter to Mr Osborne dated 14 August 2002, he said:
Having regard to Council’s duties as the responsible authority for administering the Maribyrnong Planning Scheme, Council would be only too pleased to receive and process your application.

(c) In Mr Walmsley’s email to Cr Horrocks on 19 September 2002, he said:
We must have something which we can assess and consider not just a vague idea.

(d) In Mr Walmsley’s letter to Mr Osborne dated 20 September 2002, he said:
It is difficult for Council officers to provide you with any further direction until Council has more detailed information about your current proposal. Apart from citing examples of other facilities elsewhere in Melbourne there is no detail about what it is you are proposing now.

(e)In Mr Walmsley’s email to fellow Council officers on 24 September 2002 advising that Mr Osborne had told him that he would produce a feasibility study, Mr Walmsley said although he was not too confident that the work would be as required:
At least we [will] have some basis for understanding what it is that John proposes.

(f)In Mr Walmsley’s file note of the meeting between Mr Osborne, Cr Horrocks and him on 13 January 2003, he recorded the following exchange:
John indicated that he wanted architectural guidance from Council. … I mentioned that that would come later through the application process and he may need to provide some conceptual options, which he said he was prepared to do.

(g)In Mr Walmsley’s email of the same day to fellow Council officers he noted that Felsink’s report on the teahouse/multi purpose facility supported the feasibility of the project. He continued:
I will circulate copies of the report to you, if you could spend the time to read it. I think it worthwhile if some of us met to discuss the project and our next steps in our discussions with John Osborne. I will send an invitation to meet for next week. Sorry for the short notice but John will be back in touch with me when he returns from overseas in 7-10 days.

In my opinion, these comments, particularly those in internal communications, demonstrate that the Council was genuinely attempting to comply with its obligations to Felsink. They are contemporaneous comments and should not be seen as self-serving. It was not until Mr Walmsley had a rush of blood in writing his repudiatory letter dated 19 February 2003 that the Council crossed the line in its dealings with Felsink.

I consider that the defendant was also correct in submitting that a change of planning controls or policies should not be regarded as a frustrating event. Developers should not assume that over the life of a ten year agreement there may not be changes that alter the prospects that any particular outcome might be achieved. Further, I do not accept the plaintiff’s submission that in deciding to adopt new open space planning policies and strategies the Council was acting external to the contract.

Finally, the defendant’s counsel submitted that the evidence did not support the allegation that there were impediments of a legal, procedural, environmental and/or engineering nature which prevented the construction of the facility. I agree. Apart from the flood plain issue, the plaintiff did not identify what these impediments were. And, as previously stated, Mr Osborne conceded in cross-examination that the flood plain issue “was the only impediment in the end” and that it was not insurmountable. Further, in any event, it must have been obvious to Mr Osborne that there might be a flooding issue in respect of land close to a large river.

Therefore, in my opinion, the plaintiff’s claim that the s.173 agreement was terminated on the basis of frustration fails.

Uncertainty

The plaintiff’s next argument was that the s.173 agreement, as rectified, was void for uncertainty. It submitted that clause 12, as rectified, was hopelessly vague and unclear with respect to the lease to be obtained by Felsink over any Council owned land required for the public facility. It was not disputed that any public facility would almost certainly involve some Council owned land. Yet, it was submitted, all that had been agreed was that the parties would enter into some form of leasing agreement. The agreement was silent as to three essential terms of any lease – the premises, the term and the rental.

Counsel for Felsink accepted that the part of clause 12, as rectified, relating to the obtaining of a “long term lease” from the Minister over any Crown land required for the public facility, and the Council’s obligations in that regard (supporting the application and, as the Committee of Management, granting the lease on the terms agreed between the Minister and Felsink), were certain and enforceable. This was to be contrasted with the impossible position both Felsink and the Council would be in with respect to negotiating their lease. It was submitted that Felsink would be at a significant disadvantage in attempting to agree terms with the Council, which could maximise the rental return simply by threatening that, if no agreement was reached, Land B would be forfeited. At the same time, the Council was in a position of conflict between its interest in negotiating a satisfactory lease for the public facility and its interest in gaining Land B for free. This could have been overcome by the parties agreeing on some machinery or formula for resolving the uncertainty.[18]
[18]Hawthorn Football Club Ltd v Harding [1988] VR 49, 55 (Tadgell J).

Mr Bloch further submitted that as clause 12 was void for uncertainty it logically followed that (at the very least) clauses 11 to 18 of the s.173 agreement must fall with it because the sole purpose of the lease was to enable Felsink to construct the multi purpose public facility on the site. The facility and the lease were inextricably coupled. Thus, with clause 18 deleted, there was no provision requiring the plaintiff to transfer Land B to the Council.

The defendant submitted that the fact that the terms of the lease had not been specified did not render the s.173 agreement uncertain. It submitted that the rights and obligations it afforded and imposed on the parties were capable of being readily understood. The parties did not intend to resolve the issues about the terms of the lease at this stage because they were not yet capable of articulation. But the lease terms were in no way necessary to give efficacy to the other terms of the agreement.

The Council further submitted that courts tried to uphold a contract despite any lack of clarity, particularly where, as in this case, there has been a significant amount of activity performed pursuant to that contract.

In my opinion, the plaintiff’s uncertainty argument fails. It seems to me that the formula for determining the allegedly missing essential terms in the hypothetical lease to be granted by the Council is that they follow what is agreed between the Minister and Felsink. After all, in this scenario the multi purpose public facility which has been shown by the research investigations to be commercially feasible and which Felsink has agreed to construct will have to be built partly on Crown land and partly on Council land. The agreement on the type of facility to be constructed will determine what land is required to be leased from the Minister and what from the Council. The term of the lease which is negotiated with the Minister will have to be the same in the lease from the Council. Otherwise, the absurd situation could be reached where Felsink’s right to occupy that part of the facility sitting on Council land was brought to an end even though its right to occupy that part of the facility sitting on Crown land continued. The same applies to the rate of rental. There is absolutely no reason why one part of the facility should cost more per square metre (or whatever) than another part simply because one is on Council land rather than Crown land. This approach, that the terms of the Council lease follow the terms of the lease agreed with the Minister, overcomes the problems, highlighted by counsel for the plaintiff, of the Council and Felsink attempting to reach agreement in the future when in conflicted situations. Moreover, this approach is readily understandable and appropriate given that before rectification of clause 12 as a result of the mistake about ownership of the land intended to be used for the public facility, all of the terms of the lease were to be agreed with the Minister.

Misrepresentation

Next, the plaintiff submitted that the s.173 agreement should be discharged for misrepresentation, with proprietary remedies to follow (restoration of Land B to the plaintiff) and damages to be assessed. The plaintiff alleged that there were three false representations made by the Council:

(a)that a multi purpose public facility could be constructed on land adjacent to the Pioneer Hotel site;

(b) that the land in question was Crown land; and
(c) that there were no impediments to such construction.

The plaintiff contended that these misrepresentations were material and that they induced it to enter the contract.

With respect to the first and third representations, the Council denied in its amended defence that any such statements were made. With respect to the second representation, the Council admitted that the parties had entered into the s.173 agreement on the mistaken assumption that the land in question was solely Crown land, and added that it had agreed to “a corresponding rectification of the agreement”.

In his witness statement, Mr Osborne made a number of assertions about representations made to him by particular named Council officers in the period between September 1992 and November 1993. I reject this evidence as unreliable insofar as it relates to the first and third representations. For example, Mr Osborne said that Randal Harkin attended a meeting at his house on 7 June 1993 with Robert Spence and Rhonda Dredge. Mr Harkin gave evidence that he had never been at any meeting at Mr Osborne’s place with Mr Spence and he did not know who Rhonda Dredge was. Sometimes, it was plainly wrong. For example, Mr Osborne could not have had discussions with Mr Walmsley about these matters during that period because he was not employed by the Council until much later. Further, when it came to giving oral evidence Mr Osborne was unable to recall with any clarity when each representation was made or what precisely was said or by whom. His evidence on this topic was vague, confused and unconvincing.

Mr Waugh agreed that he might have told Mr Osborne that the proposed site was Crown land, because that was his belief at the time. However, he denied that he said that there was no impediment to Mr Osborne building a facility there because he knew that there were impediments that had to be overcome. But they could have been reduced or avoided by negotiation.

As the defendant’s counsel pointed out, in one sense the first representation as pleaded was correct. Any statement that a public facility could be constructed on the relevant land, without more, as a statement of fact in 1993, would have been unarguably correct. But, in my opinion, the first representation is just another way of saying what was contained in the third representation – that there were no impediments to constructing the multi purpose public facility on the land adjacent to the Pioneer Hotel site.

With respect to the first and third representations, I have concluded that it was not established on the evidence that there were impediments which prevented the construction of the multi purpose public facility on land adjacent to the Pioneer Hotel site.

Whilst the second representation relating to the Crown land issue was false, in my opinion, it was not material. A misrepresentation constitutes an excuse for performance of contractual obligations only if it induced the making of the contract.[19] The second representation was not relied on by the plaintiff. It made no difference to Felsink’s position at the time whether the land in question was Crown land or Council owned land, or a mixture of both. What was significant was that it was public land rather than private land. Further, the misrepresentation did not impede the approval of the public facility and did not prevent the grant of a lease. Indeed, as Mr Osborne agreed, if all of the land had been owned by the Council this would have benefited the plaintiff in that it would have been easier to lease the land directly from the Council, rather than from it as the committee of management of the Crown land, when ministerial consent would have been required.
[19] Gould v Vaggelas (1984) 157 CLR 215, 236.

Breach of an implied term of good faith

The plaintiff submitted that a term should be implied into the s.173 agreement requiring the Council to exercise reasonably and in good faith its discretion to approve or reject the plaintiff’s concept proposals. The defendant submitted that there was no such discretion and I have previously concluded that this is the correct construction of the s.173 agreement.

While the s.173 agreement did not specifically give the Council discretion to approve or reject a proposal per se, it did give the Council discretion to agree to the terms of reference of the commercial feasibility research. However, I doubt whether this is a relevant discretion.

What would be the situation if there was such a discretion? In a series of relatively recent cases Australian courts have recognised an implied term of good faith in commercial contracts. While a term requiring contracting parties to carry out their obligations reasonably and in good faith has been formulated as a term implied universally, it is also clear that there is a reluctance to imply such a term as a matter of legal incident in all commercial contracts.

Warren CJ examined this reticence in Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL. Her Honour noted that the duty of good faith is not readily capable of definition, and that it tends to be viewed as vague or imprecise, which is why the courts have been hesitant in implying such a duty in all contracts, especially given that contract law is concerned with maintaining the certainty of commercial dealings. Warren CJ stated:

Ultimately, the interest of certainty in contractual activity should be interfered with only when the relationship between the parties is unbalanced and one party is at a substantial disadvantage, or is particularly vulnerable in the prevailing context. Where commercial leviathans are contractually engaged, it is difficult to see that a duty of good faith will arise, leaving aside duties that might arise in a fiduciary relationship. If one party to a contract is more shrewd, more cunning and out-manoeuvres the other contracting party who did not suffer a disadvantage and who was not vulnerable, it is difficult to see why the latter should have greater protection than that provided by the law of contract.[20]

[20] Esso Australia resources Pty ltd v Southern Pacific Petroleum NL [2005] VSCA 228 [4].

In the same case Buchanan JA, with whom Warren CJ and Osborn AJA agreed, stated:

I am reluctant to conclude that commercial contracts are a class of contracts carrying an implied term of good faith as a legal incident, so that an obligation of good faith applies indiscriminately to all the rights and power conferred by a commercial contract. It may, however be appropriate in a particular case to import such an obligation to protect a vulnerable party from exploitative conduct which subverts the original purpose for which the contract was made.[21]

[21]Esso Australia resources Pty ltd v Southern Pacific Petroleum NL [2005] VSCA 228 [25].

In this proceeding the parties could not accurately be described as commercial leviathans, however both parties were roughly equal in terms of bargaining power and experience in commercial dealings. It is difficult to conceive of Felsink or its director, Mr Osborne, as a vulnerable party. Felsink also had solicitors acting on its behalf at the time the s.173 agreement was concluded, and during its negotiations with the Council.

The Council’s discretion to reject or approve the plaintiff’s proposals was not completely unlimited. The s.173 agreement itself provided a measure of protection for the plaintiff. Clauses 14 and 15 set out a method for resolving the deadlock if agreement could not be reached on the terms and parameters of the commercial feasibility research.

For these reasons, the plaintiff cannot be said to be a vulnerable party which needed protection beyond that provided by the contract. In my opinion, no term of good faith should be implied.

In any event, even if such a term was implied, for the reasons given above I would not conclude that it had been breached by the Council.

Other Claims

I have said enough about my view of the Council’s conduct and other matters to indicate why I have expressed the conclusion that all of the plaintiff’s other claims, including claims such as mistake, unconscionability and representation by silence, which were not at the forefront of the plaintiff’s submission, also failed.

Orders

Once the parties have had the opportunity to consider these reasons, I will hear further from counsel on the orders that should now be made.

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[2010] VSC 110

1 APRIL 2010