Lakatoi Universal Pty Ltd v Walker
[2000] NSWSC 113
•10 March 2000
CITATION: Lakatoi Universal Pty Ltd v L.A. Walker; Ensile Pty Ltd v Walker Consolidated Investments [2000] NSWSC 113 FILE NUMBER(S): SC 50035/98; 50109/98; 50110/98; 1798/98 HEARING DATE(S): 21, 22, 23, 27, 28, 29, 30.9.99; 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 25, 26, 27, 28, 29.10.99; 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 29, 30.11.99; 1, 2, 3, 6, 7, 8, 9.12.99 JUDGMENT DATE: 10 March 2000 PARTIES :
50035/98 Lakatoi Universal Pty Ltd v Langley Alexander Walker & Ors
50109/98 Ensile Pty Ltd v Walker Consolidated Investments Pty Ltd
50110/98 Ensile Pty Ltd v Walker Consolidated Investments Pty Ltd and Ors
1798/98 Ensile Pty Ltd v Walker Consolidated Investments Pty Ltd (D. Court)JUDGMENT OF: Einstein J
COUNSEL : R.J. Ellicott QC, V.R.W. Gray, A.E. Galasso,
S.D. O'Campo (Plaintiffs)
A.B. Shand QC, D.P.F. Officer QC, R.J. Powell,
C.J. Leggat (Defendants)SOLICITORS: Gye & Associates (Plaintiffs)
Perkes & Stone (Defendants)CATCHWORDS: Environmental Law - Environmental Planning and Assessment Act 1979 - Process necessary to obtain a rezoning of land - Commission of Inquiry - Failure to properly prepare for or present submissions to Commission of Inquiry - Contract - Joint venture contract related to lands proposed to be initially rezoned to permit redevelopment as residential subdivision - Oral representations inducing entry into Heads of Agreement subsequently followed by formal agreement - Construction of Contract - Commercial and business transaction - Whether defendants warranted that rezoning would be achieved - Whether defendants strictly liable for failure to obtain rezoning - Defendants' covenant to provide their expertise at cost to promptly secure rezoning of land - Obligation construed as obligation to use best endeavours [this is the promise] to secure the rezoning of the land promptly [this is the intended result of the promise] by the use of their expertise [this is the tool by the medium of which the best endeavours are to be applied] - Alternatively term to be implied into subject agreements to the same effect - Parole Evidence Rule - General rule that contract be interpreted objectively - Relevant intention is intention manifested in the words of contract or conduct of the parties as reasonably understood by the other party - Evidence of negotiations prior to execution of Heads of Agreement and formal agreement not admissible to establish subjective intention and expectations of parties, but admissible to establish objective background facts known to both parties and the subject matter of the contract - Rectification - Implied Terms - Oral evidence of parties' actual intention not admissible to establish implied term - Oral evidence admissible to negative implication of a term - Causation - Breach of contract need only be a cause of damage - Need not be sole or predominant cause - Causal relationship between individual breaches and ultimate loss - Breaches of Heads of Agreement and formal agreement both causes of the loss - Presumption against wrongdoers - Applicable where action of parties have made an accurate determination problematic - Loss of Chance - Principles applicable - Implied obligation to use best endeavours to promptly secure rezoning of land - Breach enables innocent party to bring action for loss of commercial opportunity - Opportunity need not be equal to or greater than a 50 per cent likelihood - Damages for breach of contract - Damages for loss of a chance - Plaintiff must show commercial opportunity was of some value, though not negligible value - Damages awarded by reference to the possibilities and probabilities of what would have happened - Difficulties and uncertainty of assessment of damages for loss of chance does not relieve from the court the responsibility of assessment as best it can - Equity - Fiduciary relationship - Joint venture - Contractual relationship may give rise to fiduciary obligations - Fiduciary obligations may exist between parties who embark upon conduct of the venture before the precise terms of the joint venture arrangements have been settled - Joint venturers may occupy relationship demanding trust, confidence and the exercise of good faith - Joint venturers undertaking to act for and on behalf of the joint interest in the venture and not as to prejudice joint interest - One joint venturer's interest vulnerable to another - Incidents of joint venture relationship gleaned from negotiations prior to execution of joint venture documents - Trade Practices - Misleading and deceptive conduct - Necessity for applicants seeking relief to establish what applicant would have done had applicant not relied on the representation - Necessity for comparison between hypothetical and actual state of affairs - Evidence - Failure of one party to call evidence - Application of principle in Jones v Dunkell - Administrative Law - Statutory decisionmaker may not fetter statutory discretion - Estoppel does not lie to fetter future exercise of statutory discretion LEGISLATION CITED: Clean Waters Act 1970
Corporations Law
Environmental Planning and Assessment Act 1979 (NSW)
Fair Trading Act 1987 (NSW)
Protection of Environmental Administration Act 1991 (NSW)
Trade Practices Act 1974 (Cth)CASES CITED: Abbott v Hessen (1913) 15 WALR 80
Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310
Ashington Piggeries v Christopher Hill [1972] AC 441
Australasian Performing Rights Association Ltd Austrama Television Pty Ltd [1972] 2 NSWLR 467
Australia Hotel Co Ltd v Moore (1899) 20 LR(NSW) Eq 155
Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540
Bennett v Minister for Community Welfare (1992) 176 CLR 408
Bishops Gate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd (1981) 1 NSWLR 429
Boska v Sterling Drug Co (1969) 416 F (2d) 417
Breen v Williams (1995) 186 CLR 71
British Homes Assurance Corporation Ltd v Paterson [1902] 2 Ch 405
Chamberlain v Thornton (1892) 18 VLR 192
Chaplin v Hicks [1911] 2 KB 786
Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 WLR 1
Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337
Collette v Morrison (1851) 9 Hare 162; 69 ER 458
Commercial Union Assurance Co of Australia v Ferrcom (1991) 32 NSWLR 389
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460
Ex parte Wright (1812) 19 Ves Jun 255; 34 ER 513
Export Corporation v Asia Australian Express Ltd (1990) 19 NSWLR 285
Eyre v Measday (unreported, 16 October 1985. Court of Appeal, England)
Fink v Fink (1946) 74 CLR 127
Gissing v Gissing [1971] AC 886
Greaves & Co (Contractors Ltd) v Baynham Meikle & Partners [1975] 1 WLR 1095
Hodgkinson v Simms (1994) 117 DLR (4d) 161
Houghton v Immer (No 155) (1997) 44 NSWLR 46
In re European Assurance Society Arbitration Acts and Wellington Reversionary Annuity and Life Insurance Society (1875) 1 Ch D 335
In re Head; Head v Head [1894] 2 Ch 236
Kenny v Scholl (1905) 7 ALR 197
Kitchen v Royal Air Force Association [1958] 1 WLR 563
Kurtovic v Minister for Immigration, Local Government and Ethnic Affairs (1990) 92 ALR 93
LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499
Malec v JC Hutton Proprietary Ltd (1990) 169 CLR 638
Mallett v McMonagle [1970] AC 166
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Milliman v Rochester Ry Co 3 App Div 109; 39 NYS 274 (1896)
Minister for Urban Affairs and Planning v Rosemount Estates PtyLtd (1996) 91 LGERA 31
Mortimer v Cradock (1843) 12 LJCP 166
Multi-Malls Inc v Tex Mall Properties (1980) 108 DLR (3d) 399
Navigazine Libera v Newtown Creek (1938) 98 F (2d) 694
Nesterczuck v Mortimore (1965) 115 CLR 140
NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740
Olsson v Dyson (1969) 120 CLR 365
Pacific Coal Pty Ltd v Indemitsu (Qld) Pty Ltd (unreported, Supreme Court of Queensland, 21 February 1992, Ryan J.)
Pedler v Richardson (Unreported, New South Wales Supreme Court, October 16, 1997, per Young J)
Penvidic Contracting Ltd v International Nickel Co of Canada Ltd [1976] 1 SCR 267
Performance Cars v Abraham [1962] 1 QB 33
Prior v McNab (1976) 78 DLR (3d) 319 (Ontario High Court)
Pukallus v Cameron (1982) 180 CLR 447
Reardon Smith Line Ltd v Yngvar Hansen- Tangen (trading as HE Hansen Tangen) [1976] 1 WLR 989
Sapwell v Bass [1910] 2 KB 486
Scarf v Jardine (1882) 7 App Cas 345
Schipp v Cameron (unreported, 9 July 1998, Supreme Court of NSW, Equity Division, Einstein J.)
Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315
Secured Income Real Estate (Australia) Limited v St Martins Investment Pty Ltd (1979) 144 CLR 596
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Shirlaw v Southern Foundaries [1939] 2 KB 206
Thake v Maurice [1986] QB 644
The City Bank of Sydney v McLaughlin (1904) 9 CLR 615
Thomas v Nottingham Incorporated Football Club Ltd [1972] 1 Ch 596
Toikan International v Plasteel Windows (1989) 15 NSWLR 641
United Dominion Corporation v Brian (1985) 157 CLR 1
Utica City National Bank v Gunn (1918) 118 NE 607
Wood v Grand Valley Railway Co (1915) 51 SCR 283DECISION: Short Minutes of Order to be brought in.
JUDGMENT
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LISTEINSTEIN J
Friday, 10 March 2000
50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS
50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors
50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED
1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED
1 Presently before the court are several sets of related proceedings being heard together concerning dealings between the parties relating to extensive land holdings at Helensburgh in New South Wales. Those dealings led to the creation of a joint venture relationship under a written “Heads of Agreement” document executed between 11 November and 1 December 1993 [“the Heads of Agreement”] pursuant to which an agreement called the “Helensburgh Unit Trust Unit Holders Agreement” [“the HUTA”] dated 6 April 1994 was entered into. 2 Central to the disputes between the parties at a factual level are the circumstances in which attempts were made to secure the rezoning of the Helensburgh lands so as to allow a substantial portion thereof to be developed as a residential subdivision. It is common ground that those attempts were and remain unsuccessful and that a principal claim to relief pursued by the plaintiffs arises by reason of the failure to secure the rezoning of the subject land. Other claims to relief generally dealing with the terms of the HUTA and alleged breaches thereof are also pressed. These include the plaintiffs’ claims that the defendants misused the Joint Venture vehicle and otherwise acquired private advantages at the expense of the Joint Venture. 3 It is convenient to commence a recitation of the issues by reference to what I shall call “the principal proceedings”, namely proceedings No 50035 of 1998. 4 The first plaintiff [“Lakatoi”] is the trustee of the Genepa Investment Trust [“GIT”] created by trust deed of settlement dated 10 May 1982 between Mr A J Williams and Genepa Pty Ltd [“Genepa”]. 5 The second plaintiff [“Mr Hogarth”] has at all material times been a director of four of the relevant companies namely:
This judgment is divided into the following parts:
PART 1 Overview identifying the proceedings, the parties and their relationships
[Volume 1]
[pages 1-45] Outline of the plaintiffs’ casesDetail of the Lady Carrington Estate
The planning background of the land the subject of the Commission of Inquiry
The process of achieving a rezoning
PART 2 The facts
PART 3 The witnesses called
[Volume 2]
[pages 46-346]
[Volume 3]
[pages 347-426] Assessment of the reliability of the evidence given by Mr Hogarth and Mr Kidd
Evidence given by Mr LesterFindings as to the essential backdrop to the negotiations
Dealing with the representational cases
Dealing with the fiduciary obligation case
Dealing with the misleading and deceptive conduct case
Dealing with the terms of the agreement and rectification cases
Dealing with the implied term case
Dealing with the proper construction of clause 7.3 of the HUTA
PART 4 Dealing with the best endeavours case
Loss of chance in relation to the $1.75 million “further contribution”
[Volume 4]
[pages 427-629] Damages relating to the plaintiffs’ rezoning cases
PART 5 Dealing with the sundry breach of covenant cases and the ancillary breaches of obligation cases relating to the HUTA
[Volume 5]
[pages 630-706] Short minutes of order and further submissionsPART 1
Overview identifying the proceedings, the parties and their relationships
6 It is common ground that each of Lakatoi, Highfield Grove, and Ensile has at material times been a wholly owned subsidiary of R & B Hogarth Investments Pty Ltd [“R & B Hogarth Investments”]. The directors of R & B Hogarth Investments are Mr Robert Martin Hogarth, his wife Mrs Barbara Florence Hogarth, their daughter Mrs Janene Anne Kidd and their son Mr Curtis Hogarth. The principal shareholders are Mrs Kidd and Mr Curtis Hogarth. 7 It is also common ground that a non land holding company, Lady Carrington Estates Pty Ltd [‘Lady Carrington Estates’ or ‘LCE’] was used as a management vehicle representing the Hogarth interests in dealing with regulatory authorities. The directors and shareholders of Lady Carrington Estates were Mr Hogarth, Mr and Mrs Kidd and Mr Curtis Hogarth. 8 The first defendant is Mr Langley Alexander Walker [“Mr Walker”] who has at all material times been:
(b) the third plaintiff, Highfield Grove Pty Ltd [“Highfield Grove”];
(a) Lakatoi;
(c) the fourth plaintiff, Ensile Pty Ltd [“Ensile”]; and
(d) the seventh defendant, which became the joint venture vehicle, namely Rosamond Pty Ltd [formerly known as Ibenmore Pty Ltd] [“Rosamond” or “Ibenmore”].
9 Walker Consolidated has at all material times been a wholly owned subsidiary of Walker Corporation. 10 Mitsui has at all material times been a wholly owned subsidiary of McRoss Developments Pty Ltd [“McRoss Developments”], the majority shareholding of which has been at all material times held by Mr Walker with the balance of the shareholding being held by his wife, Mrs Suzanne Merle Walker. McRoss Developments has at material times been the holder of approximately 46 per cent of the issued capital of Walker Corporation. 11 Rosamond is the trustee of the Helensburgh Unit Trust created by deed dated 29 March 1994, the settlor being Mr David Thackeray [“the HUT Deed”]. All transactions entered into by Ibenmore/Rosamond were entered into by Ibenmore/Rosamond in its capacity as trustee of the Helensburgh Unit Trust. 12 At all material times the second defendant, Mr Peter James Dransfield, has been a director of:
(a) the managing director of:
(i) the fifth defendant, Walker Corporation Ltd [“Walker Corporation”]; and
(ii) the fourth defendant, namely Mitsui Mining Resources Pty Ltd [“Mitsui”];
(b) a director of Rosamond and a member of its policy committee;
(c) a director of:
(i) the third defendant, Walker Consolidated Investments Pty Ltd [“Walker Consolidated”];
(ii) the sixth defendant, Vamden Pty Ltd [‘Vamden”].13 Each of Messrs Walker and Dransfield has at material times been a holder of shares and or other securities in Walker Corporation or holds and or held shares and or other securities in an entity which itself held shares in Walker Corporation.
(b) Walker Consolidated;
(a) Walker Corporation;
(c) Vamden;
(d) Rosamond.
Background
14 Companies owned or controlled by Mr Hogarth had since the early 1980’s owned land at Helensburgh which had a non urban zoning. Mr Hogarth had since at least 1985 been attempting to have the land zoned to residential for the purpose of being developed. 15 In the early 1990s Mr Hogarth and companies associated with him were in dispute with Westpac Banking Corporation [“Westpac”] and AGC (Advances) Ltd [“AGC”] which dispute arose from a foreign currency loan made by Westpac/AGC to the Genepa Investment Trust. 16 The plaintiff’s case is that commencing in or about 1990 Mr Hogarth commenced discussions with Mr Walker with a view to a joint participation in the development of the subject land. The plaintiff’s case is that from about this time Mr Hogarth authorised and requested Mr Walker to negotiate with Westpac/AGC on behalf of Mr Hogarth and interests with which Mr Hogarth was associated. The plaintiff’s case is that in connection with and solely for the purposes of those negotiations, Mr Hogarth gave to Mr Walker considerable confidential information concerning Mr Hogarth and companies controlled by him. Particulars of that information is set out in para 19 of the fourth amended summons and includes details of previous negotiations with LandCom regarding the residential development of certain of the land to be later referred to as “the Ensile land”. Other of the confidential information then furnished by Mr Hogarth to Mr Walker, on Mr Hogarth’s case, included details of an area of land south of Otford Road, Helensburgh and west of Walker Street, Helensburgh, being an area known as ‘the Land Pooling Area’.
17 On the plaintiff’s case Mr Hogarth sought and obtained the advice of Mr Walker as to the best way of dealing with Westpac/AGC and as to the terms on which Mr Hogarth should or might be able to settle his differences with Westpac/AGC. 18 Since 1980 (see para 21 of the fourth amended summons) Ensile was at all material times the principal owner of the subject land comprising approximately 1110 acres.
Alleged formation of joint venture and creation of fiduciary relationship
19 It is common ground that at all material times up to the execution of the Heads of Agreement, no part of the Ensile land, including the Lady Carrington Estate, could be subdivided for residential development because of its zoning.
Within the Ensile land is an area which is said by the plaintiffs to be suitable for residential re-development adjoining the town of Helensburgh and presently known as “Lady Carrington Estate”. [See paragraph 64 below]. The parties tended to use the terms “Lady Carrington Estate” and “Ensile land” interchangeably, even though, to be precise, the Lady Carrington Estate in fact forms only part of the Ensile land. In the same way, the Judgment uses the terms interchangeably.
20 The plaintiff’s case is that prior to 23 November 1993 Mr Walker represented and warranted to Mr Hogarth that Mr Walker was in a position to provide political contacts, resources and expertise to secure the rezoning of the Ensile land to permit its use for residential development within twelve months of an agreement being reached for Mr Walker to provide such political contacts, resources and expertise.
The first representations
[Contentions paragraph 24A]
21 The particulars furnished are:
22 The plaintiff’s case is that subsequent to the making of the first representations but before 23 November 1993, Mr Hogarth and Mr Walker agreed as follows:
‘The representation and warranty was oral and was given to Mr Hogarth and Mr Kidd by Mr Walker. The representation and warranty was to the effect pleaded and was amplified by an assurance that Mr Walker had the political contacts, resources and expertise to ensure that any Commission of Inquiry under the Environmental Planning and Assessment Act would report favourably to the rezoning of the Ensile Land within a few months of the Commission being established, that such rezoning was a foregone conclusion and that Mr Hogarth and Mr Walker should proceed on the basis that the requisite rezoning of the Ensile Land was a formality.’
The alleged agreement
23 The plaintiffs claim that in reliance upon and in consideration of the representation and warranty said to have been given by Mr Walker, and to give effect to the above described agreement, Mr Hogarth agreed with Mr Walker as follows:
(a) Mr Hogarth and Mr Walker would as joint venturers undertake the development of the Ensile land;
(b) Mr Hogarth would procure Ensile to make available the Ensile land for the joint venture;
(c) the value of the Ensile land in its existing condition and zoning was $9 million;
(d) Mr Walker and his interests would pay to Mr Hogarth and his interests, $4.5 million to acquire a 50 per cent interest in the Ensile land in its then existing condition and zoning, and that Mr Walker and his interests would pay this amount to Mr Hogarth and his interests whether or not the Ensile land was rezoned;
(e) Mr Walker would provide political contacts, resources and expertise to ensure the securing of the rezoning of the Ensile land.Further terms of agreement and alleged reliance conduct
[Contentions paragraph 24B]
24 The plaintiff’s case is that overnight on 10/11 November 1993 and pursuant to the above described agreement between Mr Hogarth and Mr Walker, Mr Kidd produced the Heads of Agreement which was thereafter duly executed by Mr Hogarth and Mr Walker.
(a) Mr Walker or interests associated with him would pay to Mr Hogarth or interests associated with him $4.5 million to acquire a 50 per cent interest in the Ensile land in its existing condition and zoning whether or not the Ensile land was rezoned and that such payment would be made in two instalments, namely:
(i) $2.75 million forthwith upon the arrangements of the joint venture being documented;
(ii) $1.75 million forthwith upon the Ensile land being rezoned to enable the proposed joint venture development to proceed; or at the expiration of 12 months from the completion date, whichever first occurred;
(b) these terms would be recorded in an informal “Heads of Agreement” document to be prepared overnight by Mr Kidd and which Mr Hogarth and Mr Walker would then sign the following day.
Heads of Agreement
[Contentions paragraph 24C]
25 The plaintiffs claim that it was the mutual intention of Mr Hogarth and Mr Walker that the Heads of Agreement would reflect and give effect to their common intention and agreement referred to above. The claim is that pursuant to this agreement, Mr Hogarth and Mr Walker each instructed their respective legal representatives to more fully and formally document their agreement and that pursuant to those instructions, their respective legal representatives drafted and re-drafted the document which became the HUTA which was thereafter duly executed by the respective parties to it. 26 The plaintiffs claim that it was the mutual intention of Mr Hogarth and Mr Walker and their respective associated interests who or which executed the HUTA, that the HUTA would reflect and give effect to their common intention and agreement earlier referred to. 27 The claim is then that contrary to the mutual intention of Mr Hogarth and Mr Walker referred to above:
Rectification counts
28 In those circumstances Mr Hogarth claims against Mr Walker an order rectifying the Heads of Agreement and rectifying the HUTA [see the detailed claim set out in Contentions paras 24J and 24K].
(a) the Heads of Agreement does not give effect to their common intention and agreement insofar as the Heads of Agreement do not expressly provide that Mr Walker and interests associated with him will pay to Mr Hogarth and interests associated with him $4.5 million to acquire a 50 per cent interest in the Ensile land in its existing condition and zoning whether or not the Ensile land was re-zoned;
(b) the HUTA did not give effect to Mr Hogarth’s and Mr Walker’s common intention and agreement earlier referred to insofar as the HUTA does not expressly provide that Mr Walker and interests associated with him will pay to Mr Hogarth and interests associated with him $4.5 million to acquire a 50 per cent interest in the Ensile land in its existing condition and zoning whether or not the Ensile land was rezoned.
29 Mr Hogarth further and in the alternative asserts that it is an implied term of the Heads of Agreement that in the event of the Ensile land not being re-zoned to permit residential development within a reasonable time of the Completion Date, Mr Walker and/or interests associated with him would forthwith at the expiration of such period pay to Mr Hogarth or to interests associated with him the balance of the sum of $4.5 million then remaining unpaid. 30 Again in the alternative Lakatoi, Ensile and Mr Hogarth assert that it is an implied term of the HUTA that in the event of the Ensile land not being re-zoned to permit residential development within a reasonable time of the Completion Date, Walker Consolidated would forthwith at the expiration of such period pay to Highfield Grove the sum of $1.75 million constituting what was referred to in the HUTA as “the Further Contribution”.
The implied term case
31 The plaintiff’s further assert that during October and November 1993 and prior to 22 November 1993 Mr Walker on behalf of himself and Walker Consolidated and/or Walker Corporation made the following further representations to Mr Hogarth:
The further representations
32 The plaintiffs then allege that on the face of and in reliance on the further representations it was agreed between Mr Hogarth and Mr Walker shortly prior to 22 November 1993 that:
(a) that in the opinion of Mr Walker and Walker Consolidated the Lady Carrington Estate was immediately suitable for rezoning for residential purposes;
(b) that Walker Consolidated and/or Walker Corporation was a company experienced in developing broad acre land into residential subdivisions and obtaining all the necessary approvals and in developing residential town land into residential strata unit development;
(c) that the securing of the rezoning of the lands would be jeopardised if Mr Hogarth continued to have any involvement in the process and that Mr Hogarth must take a back seat in relation to the rezoning process;
(d) that if Mr Hogarth entered into a joint venture in relation to the Ensile land neither Mr Walker nor Walker Corporation nor any of its subsidiaries or associated companies would during the term of the joint venture undertake any land development activities in and around Helensburgh except on the basis that such lands would form part of the lands to be subject to the joint venture.
Reliance and further terms of agreement
[Contentions paragraph 25]
33 The plaintiffs then assert that on or about 22 November 1993 on the face of and in reliance upon the above representations and pursuant to their oral agreement, Mr Hogarth and Mr Walker entered into the Heads of Agreement which established the framework of the joint venture between them in relation to the Ensile land. A copy of the Heads of Agreement document is appended to this judgment. [Appendix ‘1’]
(a) Mr Hogarth would procure those interests with which he was associated to provide the Ensile land and any other lands obtained by him or interests with which he was associated during the term of the joint venture to a joint venture between them for their development;
(b) he, Mr Hogarth, would not be involved in the processes necessary for obtaining the rezoning and subdivision of the land and that in consideration thereof;
(c) Mr Walker and/or Walker Consolidated and/or Walker Corporation would, or alternatively would use their best endeavours to, procure the rezoning of the land promptly; and
(d) neither Mr Walker nor Walker Corporation nor any of its subsidiaries or associated companies would during the term of the joint venture undertake any land development activities in or around Helensburgh except on the basis that such land development activities would be undertaken under and in pursuance of the joint venture.
[Contentions - Paragraph 26]
34 The plaintiff’s claim is that the relationship between Mr Hogarth and Mr Walker under the Heads of Agreement was that of joint venturers. The claim is that the relationship was based in part on trust and confidence and that by virtue thereof that Mr Hogarth and Mr Walker each owed to the other and continued to owe to the other duties and obligations of a fiduciary nature including:
Joint venture and fiduciary obligation under the Heads of Agreement
35 The plaintiffs claim that by virtue of their relationship evidenced in part by their oral agreement, the terms of the Heads of Agreement and the steps needed to carry into effect the objectives thereof and by virtue of the circumstances and conversations between them from 1990 onwards and leading to the execution of the Heads of Agreement, Mr Walker stood in a position of control over the property and affairs of Mr Hogarth and his associated companies so far as they related to the fulfilment of those objectives and that Mr Hogarth relied upon and imposed trust and confidence in Mr Walker in relation to such fulfilment. [Denied on the pleadings.]
[Admitted on the pleadings.]
(a) to act at all times honestly and in good faith and with loyalty to each other to achieve the objectives of the joint venture;
[Admitted on the pleadings.]
(b) to make full and proper disclosure to the other of all matters of significance to the objectives;[Admitted on the pleadings.]
(c) not to place himself in a position where his duties to achieve the objectives conflicted with his private interests;[Admitted on the pleadings.]
(d) not to acquire a private advantage at the expense of the joint venture; and
(e) to make available or cause to be made available to the joint venture any interest in land acquired by either of them or Walker Corporation Ltd or their associated companies in or about Helensburgh for the fulfilment of the objectives.[Denied on the pleadings.]
Trust and confidence
36 The plaintiffs then plead that it was a term and condition of the Heads of Agreement that Mr Walker would promptly procure or, alternatively, would use his best endeavours promptly to procure, rezoning of the Ensile Land so as to enable the residential subdivision and development of the Lady Carrington Estate. [Contentions paragraph 31A] 37 The plaintiffs claim that it was a term and condition of the Heads of Agreement that a company and joint venture structure would be developed by Mr Walker to be mutually acceptable to Mr Walker and Mr Hogarth and that pursuant thereto Mr Walker caused ‘Ibenmore’ [now called ‘Rosamond’] to be incorporated. It is common ground that the shareholders of Rosamond were as at 6 April 1994 and remain Walker Consolidated and Lakatoi, each of which holds one share therein out of the total issued shares of two. It is common ground that the directors of Rosamond have at all material been and remain Messrs Walker, Dransfield, Hogarth and Kidd.
Terms of Heads of Agreement
38 The plaintiffs assert that in pursuance of the Heads of Agreement Mr Hogarth caused Ensile and Lakatoi and Mr Walker caused Walker Consolidated to enter into the HUTA on 6 April 1994. A copy of the HUTA is appended to this judgment. [Appendix 2] 39 The plaintiffs claim that on the same date, namely 6 April 1994, Mr Hogarth caused Ensile to grant to Rosamond an option to purchase the Ensile land and that Mr Hogarth thereby fulfilled his obligations under the Heads of Agreement to provide the Ensile land to the joint venture. 40 It is common ground that the unit holders of the Helensburgh Unit Trust under the HUT deed were as at 6 April 1994 and remain Walker Consolidated as to 50 units and Lakatoi as to the remaining 50 units. 41 The plaintiffs claim that the relationship between Lakatoi and Walker Consolidated under the HUTA was and is that of joint venturers.
Reliance
42 The plaintiffs assert that like the relationship between Messrs Hogarth and Kidd under the Heads of Agreement, the relationship between Lakatoi and Walker Consolidated under the HUTA was and is in part based on trust and confidence and that by virtue thereof Lakatoi and Walker Consolidated each owed to the other and continue to owe to the same fiduciary duties and obligations. These are set out at paragraph 26 of this judgment. Again (a) to (d) are admitted on the pleadings, (e) is denied.
Fiduciary obligations under the HUTA
43 The plaintiffs assert that under the HUTA, Walker Consolidated and Lakatoi covenanted and agreed that the purpose of Rosamond was to carry out the project and that each of them covenanted and agreed to do all things necessary, desirable or ancillary to the carrying out and fulfilment of the project in accordance with feasibility studies which included those reports and studies previously prepared for and on behalf of Lady Carrington Estates Pty Ltd and any further feasibility studies carried out by Walker Consolidated and/or Rosamond. 44 A critical threshold issue in terms of the way in which the plaintiffs put their case concerns the proper construction of clause 7.3(a) of the HUTA which provides:
HUTA covenants
45 The plaintiffs submit that the proper construction of this clause imposed an absolute obligation upon Walker Consolidated to promptly secure rezoning of the land. If this construction be correct, then difficulties which the plaintiffs face in terms of their alternative ‘best endeavours’ case [to the effect that if properly construed, the HUTA provided for Walker to carry out its best endeavours to use its expertise at cost to promptly secure rezoning of the land], fall away. These difficulties principally arise in terms of the necessity to reach a conclusion in terms of the Amann decision. [Commonwealth of Australia v Amann Aviation Pty Ltd [1991] 174 CLR 64]. If the best endeavours case requires to be addressed in order to furnish the plaintiffs with relief, the plaintiffs in pursuing this loss of chance case must deal with several complexities including the need for the court to assess what were the chances, had best endeavours been used:
‘Walker will provide its expertise at cost to promptly:
(a) secure rezoning of the land . . .’
46 Paragraphs 38-50 and 58-85 of the fourth amended summons comprise the alleged breaches of covenant, breaches of statutory duty and breaches of fiduciary obligation claimed by the plaintiffs. The statutory duties pleaded arise under Corporations Law sections 232(3) and 232(4), namely:
(a) that a form of alternate set of recommendations are likely to have been brought down by the Commissioner of Inquiry;
(b) that such recommendations would, regardless of the political situation [the likely attitude of the Council and of the Minister to such recommendations] have been implemented by the rezoning.
Sundry breaches of covenant, statutory duty and fiduciary duty
(a) duties as directors of Rosamond to act honestly in the exercise of their powers or the discharge of their duties as a director;
47 Paragraphs 38 to 50 and 58 to 85 are in the following terms:
(b) duties in like capacity to exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporations circumstances.
In each case the term of the relevant agreement or covenant, and the alleged breaches are set out in detail.
‘ 38 . Under the HUTA Walker Consolidated covenanted to pay to Highfield Grove an Initial Contribution of $2.75 million on 8 April 1994.
Particulars
Clause 7.1(a) of the HUTA.
39 . Walker Consolidated did not pay and has not paid to Highfield Grove the said sum of $2.75 million or any part thereof. In fact Mr Walker and Mr Dransfield on or about 2 June 1994 caused Walker Corporation with the knowledge and consent of Walker Consolidated:
(a) to pay $2,000,000 to AGC (Advances) Limited in discharge of certain indebtedness to that company by Mr Hogarth and his associated companies;
(b) to pay $700,000 to Lakatoi;
(c) to treat the total sum of $2.7 million as a loan to Highfield Grove secured by a first mortgage from Ensile to Walker Corporation over the Ensile Land; and
(d) to show the said sum of $2.7 million in the accounts of Walker Corporation as an advance by Walker Corporation to Highfield Grove and to show interest thereon accruing in the books of Walker Corporation since the said sums were paid.
The entries in the said accounts have allowed Walker Corporation to claim that it has a substantial asset of $2.7 million in respect of which it is receiving substantial income.
Breaches of Covenant, Statutory Duty and Fiduciary Duty
(i) Wrongful Charging of Expenditure to Rosamond
40 . Pursuant to the HUTA Walker Consolidated agreed to provide accounting expertise to the Helensburgh Unit Trust and to prepare monthly budgets and cash flow projections for Rosamond. It was an implied term of the Agreement that Walker Consolidated would be responsible for keeping the books of account of Rosamond and to ensure that those books and records accurately recorded the financial transactions in which Rosamond was engaged pursuant to and in accordance with the HUTA.
Particulars
(i) Clause 7.1(c) of the HUTA;
(ii) Item 3(c) to the Schedule of the HUTA;
(iii) Clause 12.1 of the HUTA.
41 . As directors of Rosamond Mr Walker and Mr Dransfield caused Rosamond to accept a liability to Walker Corporation purportedly for management fees and other items including interest in relation to the achievement of the objectives of the joint venture when in truth and in fact, as Mr Walker and Mr Dransfield well knew, Walker Corporation had not provided those services to Rosamond.
Particulars
( i ) Fees charged to Rosamond Amount
during the period06.04.94 - 30.06.94
project management fees $ 500,000
work in progress to June 1994 $ 593,04901.07.94 - 31.03.95
project management fee to December 1994 $ 565,000
security warehouse $ 17,868
direct alarm supplies $ 5,170
work in progress to March 1995 $1,116,241
$2,797,328( ii ) Interest and other charges to 30.06.96 $ 643,545
( iii ) Further amounts in relation to work in progress or for other matters including costs incurred may have been charged to Rosamond since 31 March 1995 but this information is not presently known as work in progress reports have not been provided.
( iv ) In a letter dated 13 September 1996 from Walker Corporation to Mr Hogarth confirmation was sought for the purposes of audit of Walker Corporation by KPMG that an amount of $2,126,804 was due in respect of costs incurred for and on behalf of the Helensburgh Unit Trust.
( v ) Rosamond was shown and is still shown as a debtor to Walker Corporation in the books of Walker Corporation in respect of the whole or a substantial portion of the said amounts and Walker Corporation treated those amounts as income in respect of the years above mentioned. More precise particulars of the amount or amounts will be provided following discovery.
42 . (a) Mr Walker and Mr Dransfield’s actions as alleged in paragraph 41 were contrary to the interests of the joint venture and were undertaken with the knowledge and consent of Walker Consolidated either for the benefit of themselves, Walker Consolidated and Walker Corporation or falsely in order to inflate the assets and income of Walker Corporation.
(b) Mr Walker and Mr Dransfield acted as alleged in paragraph 41 not in the interests of the joint venture but with the knowledge and consent of Walker Consolidated in order to enable Walker Corporation falsely to include in its published accounts as revenue earned by Walker Corporation for the years in respect of which the alleged management fees together with interest were charged to Rosamond, the amounts of those alleged management fees and interest thereby falsely inflating the amount of such revenue and the resulting profit earned by Walker Corporation during those years.
43 . By reason of the matters alleged in paragraphs 41 and 42:
(i) each of Mr Walker and Mr Dransfield has acted in breach of his duties as a director of Rosamond under sections 232(2) and 232(4) of the Corporations Law that is to say:
(a) each of them failed to act honestly in the exercise of his powers or the discharge of his duties as a director;
(b) in the exercise of his powers and the discharge of his duties each of them failed to exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation’s circumstances.
(ii) each of Mr Walker, Mr Dransfield and Walker Consolidated acted in breach of their respective fiduciary duties alleged in paragraphs 29 and 36 above that is to say each of them:
(a) failed to act honestly and in good faith and with loyalty to achieve the objectives of the joint venture ;
(b) placed himself or itself in a position where his or its duties to achieve the said objectives conflicted with his or its private interests; and
(c) acquired a private advantage at the expense of the joint venture.
(iii) Walker Consolidated was with the knowledge of Mr Walker and Mr Dransfield in breach of the covenant alleged in paragraph 37 above.
43A None of the alleged liabilities referred to in paragraph 41 constitute “Walker Expenses” for the purpose of the HUTA.
Particulars
Walker Corporation did not itself make any such payments. (If any payments were made or liabilities incurred, they were made by Walker Group Pty Limited).
If any such payments were made they were not made or incurred with the approval or agreement or authority of the Policy Committee as required by paragraph (e) of Item 3 of the Schedule to the HUTA.
Insofar as the payments or liabilities made were made or incurred in relation to services provided by Walker Corporation (or another Walker company) personnel, those services and the cost thereof were not the subject of any estimated cost agreed prior to commencement as required by and were not calculated in accordance with sub-paragraph (iv) of paragraph (e) of Item 3 of the Schedule to the HUTA.
Insofar as the payments made or liabilities incurred were in relation to services or consultants provided or engaged in connection with the Commission of Inquiry:
then those payments were made or liabilities were incurred in breach of the covenant and agreement referred to in paragraphs 48 and 49 below and represented costs thrown away which are not chargeable by Walker Consolidated and/or Walker Corporation to Rosamond; and/or
(ii) if and insofar as the provision or engagement of those services and consultants did not accord with good practice (ie was negligent, eg because the services were engaged too late to be effectual) then such payments are not “Walker Expenses” for the purposes of the HUTA.
Insofar as the payments made alleged to constitute “Walker Expenses” are:
the management fees referred to in paragraph C41 of the Amended Summons;
the political donations referred to in paragraph C44 of the Amended Summons;
for matters unrelated to the joint venture, eg installation of a security system at Hunter’s Hill referred to in paragraph C41 of the Amended Summons;
they were not expenses actually, honestly and/or reasonably incurred for the purposes of the joint venture and therefore are not “Walker Expenses”.
(ii) Wrongful Use of Rosamond to Make Political Donations
44 . Purporting to act as directors of Rosamond Mr Walker and Mr Dransfield with the knowledge and consent of Walker Consolidated in or about the months of February and March 1995:
(a) caused Rosamond to accept from Walker Consolidated an advance of monies totaling $220,000; and
(b) caused Rosamond to donate $220,000 to political parties.
Particulars
Donee Amount of Donation Date Paid
Australian Labor Party $100,000 13/02/95
Liberal Party $100,000 10/03/95
National Party $ 20,000 20/03/95The said donations were not made for the benefit of Rosamond but for the benefit of Walker Corporation and its subsidiaries and themselves.
45 . The actions of each of Mr Walker and Mr Dransfield referred to in paragraph 44 was in breach of his respective duties as a director of Rosamond pursuant to sections 232(2) and 232(4) of the Corporations Law more particularly set out in paragraph 43(i) above. The said actions of Mr Walker and the consent of Walker Consolidated to those actions were in breach of their respective fiduciary duties alleged in paragraphs 29 and 36 above and more particularly described in paragraph 43(ii) above.
Particulars
(i) Each of the said donations was not made for the benefit of Rosamond but for the benefit of Walker Corporation Limited, its subsidiaries and the said directors. Rosamond or Ibenmore as it was then known was used by Mr Walker and Mr Dransfield as a front for Walker Corporation in order to make substantial donations perceived to be for the benefit of Walker Corporation, its subsidiaries and themselves as directors and shareholders of Walker Corporation.
(ii) Rosamond derived no benefits from the making of each of the said donations and at the time each of them was made each of the said directors should have been aware that the amount of each donation was and the total donations were far in excess of any benefit which Rosamond could have expected to obtain from the making thereof.
(iii) At the time the political donations were made Walker Corporation was seeking and was hoping to obtain substantial benefit from political consent to proposals for rezoning and development of lands in New South Wales, including lands in Balmain.
(iv) On 20 March 1995 the Minister for Planning and Minister for Housing Mr Robert Webster granted to Walker Corporation Development Consent to permit the construction of low and medium density housing at the Walker Corporation Balmain site (the “Walker Balmain Site”);
(v) On 24 March 1995 the day prior to the date of General election for the State of New South Wales the Minister for Planning and Minister for Housing gazetted a rezoning under the City of Wollongong Local Environmental Plan 1990 (“City of Wollongong LEP”) of the Lady Carrington Estates from Zone No 1 Non-Urban to mostly Zone No 7(d) Hacking River Environmental Protection (effectively precluding its development as contemplated by the HUTA) and the balance of Ensile’s land remained Zone No 7(d) Hacking River Environmental Protection.
46 . By reason of the grant of Development Consent for the Walker Balmain Site Walker Corporation and indirectly Mr Walker and Mr Dransfield obtained a significant financial benefit.
47 . The rezoning of the Ensile Land whilst it remains in force effectively prevents the fulfilment of the objectives of the joint venture as evidenced by the Heads of Agreement and the HUTA hereinbefore referred to.
Breach of agreement and covenant to provide expertise in obtaining and to secure prompt residential re-zoning of the Ensile Land
48 . In addition to and/or in furtherance of the agreement between Mr Hogarth and Mr Walker shortly prior to 22 November 1993 referred to in paragraph 26 above, Walker Consolidated covenanted with Lakatoi in clause 7.3 of the HUTA to provide its expertise at cost to promptly secure or to use its best endeavours to promptly secure rezoning of the Ensile Land and to pursue and develop the Project therein referred.
49 . (a) Mr Walker and Walker Consolidated respectively have acted in breach of each of the agreement and covenant referred to in paragraphs 26, 31A and 48 above in that each of them failed to procure the rezoning of the land promptly and/or failed to use their best endeavours to procure promptly or at all the rezoning of the Ensile Land and in particular the Lady Carrington Estate so as to enable the residential subdivision thereof as promised; and
(b) Walker Consolidated has acted in breach of the covenant referred to in paragraph 37 above and has failed to do all things necessary or desirable or ancillary to the carrying out and fulfilment of the Project as therein provided.
Particulars
(i) At a Commission of Inquiry over which Dr Mark Carleton presided which conducted hearings between 5 July 1994 to 15 November 1994, Walker Corporation or Walker Consolidated conducted the representation of Rosamond and relied almost exclusively on material originally prepared for Lady Carrington Estates Pty Limited and provided by Lakatoi to Walker Consolidated under the HUTA.
(ii) The Commission of Inquiry Report dated December 1994 recommended no change in existing City of Wollongong LEP zonings until further studies were undertaken as to the effectiveness of the water settling ponds proposed by Lady Carrington Estates Pty Limited to maintain water quality.
(iii) Since that date Walker Corporation and Walker Consolidated have done nothing to establish further studies to establish the effectiveness of water settling ponds to maintain water quality or to procure the rezoning of the Ensile Land.
50 . The breach by each of Mr Walker and Walker Consolidated has caused serious loss and damage to Mr Hogarth and Lakatoi and Ensile.
Particulars
(i) Mr Hogarth by providing the said Ensile Land to the joint venture on the faith of Mr Walker’s promise has as a result lost the opportunity to develop the said lands and committed a half interest therein to Walker Consolidated and thereby to Walker Corporation.
(ii) By reason of the said agreement and breach thereof Mr Hogarth has lost or Ensile and his other associated companies have lost the benefit of opportunities to develop the said land in other respects.
(iii) Lakatoi and indirectly Mr Hogarth has failed to gain the benefits that it or he would otherwise have obtained from the prompt securing of the rezoning of the said land and thereby the benefits of the joint venture.
(iv) Alternatively to (ii) Ensile has lost the opportunity to have the Ensile option exercised in accordance with its terms and the benefits including the sum of $20 million it would have received thereunder.
Breach of duty in failing to secure Thompson Option for Rosamond
‘ 58 . On 6 April 1994 Francis Joseph Thompson (“Mr Thompson”) was the owner of the land known as Lot 23 Deposited Plan 752033 (the “Thompson Land”) which was located in the centre of and was entirely surrounded by the Ensile Land and which is etched in green on the plan which is annexure “A” hereto and which was an indispensable constituent part of any rezoning and development of the Ensile Land.
59 . On 6 April 1994 Lady Carrington Estates Pty Limited (a company associated with Mr Hogarth) held an option granted to it by Mr Thompson to purchase the Thompson Land (the “Original Thompson Option”) which was to expire on or about 6 May 1994. The Original Thompson Option was a right which was made available by Mr Hogarth to the joint venture pursuant to the Heads of Agreement and the HUTA.
60 . Between 6 April 1994 and 6 May 1994 Mr Hogarth repeatedly asserted to Walker Consolidated the necessity of Rosamond before the expiry of the Original Thompson Option either:
(a) securing from Mr Thompson a renewal of the Original Thompson Option; or
(b) exercising the Original Thompson Option.
61 . Between 6 April 1994 and 6 May 1994 Walker Consolidated did not either secure a renewal of the Original Thompson Option in the name of Rosamond or for the benefit of the joint venture.
62 . On or about 20 June 1994 Mr Walker and/or Mr Dransfield and/or Walker Consolidated procured Mr Thompson for a consideration to grant to Walker Consolidated for its own benefit an option to purchase the Thompson Land (the “Current Thompson Option”). The actions of Mr Walker and Mr Dransfield were in breach of their respective duties as directors of Rosamond under Section 232(2) and 232(4) of the Corporations Law. The failure of Walker Consolidated to secure the Thompson Option for Rosamond was in breach of the covenant referred to in paragraph 37 and in breach of the fiduciary obligations owed to Lakatoi referred to in paragraphs 36(a) to (e) (inclusive).
63 . Walker Consolidated holds the benefit of the Current Thompson Option upon trust for Rosamond by reason of:
(i) The Original Thompson Option was an asset to be applied and utilised for the benefit of the joint venture and Walker Consolidated was able to procure the grant to it of the Current Thompson Option in its capacity as a joint venturer with Lakatoi under the HUTA.
(ii) Mr Walker and Mr Dransfield caused the amount of the option fee payable to Mr Thompson for the Current Thompson Option to be debited as an expense incurred by Rosamond.
Breach of duty in relation to Development Consent over Thompson Land
64 . On or about 10 December 1995 Mr Walker and Mr Dransfield caused Vamden to submit to the Wollongong City Council (“WCC”) a development application in respect of the Thompson Land (the “Vamden Development Application”).
Particulars
Development Application D 95/856.
65 . The Vamden Development Application comprised the following materials:
(i) Document entitled “Application for Rezoning, Lady Carrington Estate, Helensburgh” prepared by Gutteridge Haskins & Davey Pty Limited for Lady Carrington Estates Pty Limited dated March 1992.
(ii) Report prepared by Walker Corporation entitled “Statement of Environmental Effects for the Erection of a Dwelling House and Ancillary Structures on Lot 23 DP 752033 at Helensburgh” dated May 1996.
(iii) Report prepared by Treescan Urban Forest Management entitled “Effect of Effluent Disposal on Existing Vegetation” dated 10 December 1996.
66 . On 23 June 1997 the WCC granted to Vamden development consent for the construction on the Thompson Land of the structures and improvements proposed in the Vamden Development Application (“Vamden Development Consent”).
67 . It was the duty of Mr Walker and Mr Dransfield as directors of Rosamond to cause:
(a) any development application for the Thompson Land which could be beneficial to the achievement of the joint venture objectives to be lodged and pursued and, if development consent thereto be obtained, then to obtain such development consent in the name of Rosamond.
(b) any material in which property rights did or may exist which could be beneficial to the achievement of the joint venture objectives to be obtained for and be owned by Rosamond.
Particulars
The duty arose under sections 232(2) and 232(4) of the Corporations Law.
68 . In lodging the Vamden Development Application and accepting the Vamden Development Consent in the name of Vamden and for the benefit of Vamden:
(a) Mr Walker and Mr Dransfield acted in breach of the duties owed by them as directors as alleged in the preceding paragraph; and
(b) Mr Walker acted in breach of the fiduciary duty he owed to Mr Hogarth referred to in paragraph 29(a) to (e) (inclusive).
69 . The Vamden Development Consent is held by Vamden for the benefit of Rosamond and the rights in and over the materials referred to in paragraph 65 above are held by Vamden on trust for Rosamond.
Breach of duty and breach of agreement in not providing Chapman Land to the Joint Venture
70 . In or about November 1993 and on or about 6 April 1994, Mr Walker orally represented to Mr Hogarth that neither Mr Walker personally nor Walker Corporation nor any of its subsidiaries or associated companies would undertake any land development activities in and around Helensburgh except on the basis that such land would form part of the land subject to the joint venture between them.
71 . In reliance upon the representation referred to in paragraph 70 Mr Hogarth:
(a) entered into the Heads of Agreement;
(b) caused Lakatoi and Ensile to execute and become parties to the HUTA;
(c) agreed to Walker Consolidated and/or other entities associated with Mr Walker (to the exclusion of Mr Hogarth and interests associated with him) pursuing on behalf of Lakatoi and Walker Consolidated as the relevant parties to the HUTA, the achievement of the objectives of the parties to the HUTA; and
(d) did not himself or through Ensile or through other interests associated with him pursue further land acquisitions in the Helensburgh area.
72 . (a) In further reliance upon the representation made and referred to in paragraph 70 and at the insistence of Mr Walker and prior to the execution of the HUTA, Mr Hogarth and his wife Barbara Florence Hogarth (“Mrs Hogarth”) executed on 6 April 1994 a Deed of Disclosure (the “Deed of Disclosure”).
(b) The Plaintiffs will refer to the Deed of Disclosure as if the same were fully set forth herein.
(c) Annexed to the Deed of Disclosure was a copy of the Original Thompson Option.
73 . Contrary to the representations referred to in paragraph 70 Mr Walker, through a company associated with him, acquired land in Helensburgh for land development activities independently of and without the knowledge or consent of Mr Hogarth or Lakatoi and/or without treating or offering to treat the said land as land which was to be the subject of the HUTA or the joint venture formed between them.
Particulars
(i) On or about 25 February 1994 Mr Walker caused Mitsui to be incorporated and/or acquired and become a subsidiary of McRoss Developments.
(ii) Mr Walker is the dominant or sole beneficial owner of all shares in McRoss Developments and is a director of McRoss Developments.
(iii) On or about 20 October 1994 Mr Walker caused Mitsui to purchase from John Chapman and Diana Joan Chapman all the land etched in pink on the plan which is annexure “A” hereto (“the Chapman Land”).
(iv) The Chapman Land comprises 42 allotments and the titles to those allotments are set forth in the Schedule to the Summons hereto.
(v) The Chapman Land is located within an area known as the Land Pooling Area and is bounded by the roads owned by Ensile and which form part of the Ensile Land.
(vi) Mitsui acquired the Chapman Land for the purpose of land development.
74 . The actions of Mr Walker alleged in paragraph 73 above were done with the knowledge and consent of Walker Consolidated.
75 . The conduct of Mr Walker alleged in paragraph 73 was in breach of the agreement referred to in paragraph 26 and in breach of the fiduciary obligation owed by him to Mr Hogarth as alleged in paragraph 29(e) above and was in breach of Mr Walker’s duties as a director of Rosamond under Sections 232(2) and (4) of the Corporations Law.
76 . The conduct of Walker Consolidated alleged in paragraph 74 above and its failure to take steps to prevent the actions of Mr Walker referred to therein was in breach of:
(a) the covenant alleged in paragraph 37 hereof; and
(b) the fiduciary obligation it owed to Lakatoi referred to in paragraph 36(e).
Other breaches of the HUTA
77 . By the HUTA Walker Consolidated covenanted not to mortgage, charge or encumber its interest in the Helensburgh Unit Trust or any part thereof without the prior written consent of Lakatoi.
Particulars
Clause 8.3 of the HUTA.
78 . In breach of the covenant referred to in paragraph 77, Walker Consolidated mortgaged, charged or encumbered its interest in the Helensburgh Unit Trust or part thereof without the prior written consent of Lakatoi.
79 . By the HUTA Walker Consolidated covenanted not to mortgage, charge or encumber its shareholding in Rosamond or any part thereof without the prior written consent of Lakatoi
Particulars
Clause 9.1 of the HUTA.
80 . In breach of the covenant referred to in paragraph 79, Walker Consolidated mortgaged, charged or encumbered its shareholding in Rosamond or part thereof without the prior written consent of Lakatoi Universal.
81 . By the HUTA Walker Consolidated covenanted not to mortgage, charge or encumber its shareholding in Rosamond or any part thereof without procuring from the person taking the benefit of the mortgage, charge or encumbrance an agreement in writing to be bound by the provisions of the HUTA as if that person were a party to the HUTA.
Particulars
Clause 9.1 of the HUTA.
82 . In breach of the covenant referred to in paragraph 81, Walker Consolidated mortgaged, charged or encumbered its shareholding in Rosamond or part thereof without procuring from the person taking the benefit of the mortgage, charge or encumbrance an agreement in writing to be bound by the provisions of the HUTA as if that person were a party to the HUTA.
Particulars to Paragraphs 78, 80 and 82
ASC Charge No Date Created Chargee Fixed/
Floating473490 05/01/95 Esanda Finance Corporation Ltd Fixed 538661 11/04/96 Westpac Banking Corporation Both 537369 18/04/96 TMDA No. 5 Pty Ltd Fixed 537372 18/04/96 TMDA No. 5 Pty Ltd Fixed 586638 01/04/97 Australia and New Zealand Banking Group Ltd Fixed 611866 01/10/97 Commonwealth Custodial Services Ltd Both 48 Paragraphs 51 to 57 of the amended summons deal with representations as to expertise, resources and political contacts to secure prompt rezoning of Ensile land and also deal with representations as to experience. The count sounds in misleading and deceptive conduct. 49 The allegation is that Mr Walker represented to Mr Hogarth:
(collectively referred to as the “Walker Consolidated Charges”).
83 . By the HUTA Walker Consolidated covenanted to:
(a) prepare monthly budgets and cash flow projections for Rosamond.
(b) circulate such monthly budgets and cash flow projections to each member of the Rosamond Policy Committee with notice of the next Committee meeting.
(c) provide to the Helensburgh Unit Trust accounting expertise and to pay for such accounting expertise.
Particulars
Clauses 12.1 and 17.1(c) and Item 3(c) of the Schedule to the HUTA
84 . On or about 21 March 1994 Lakatoi and Walker Consolidated agreed that Walker Consolidated would:
(a) be solely responsible for the preparation of the Helensburgh Unit Trust annual accounts.
(b) have those accounts audited by KPMG Peat Marwick.
Particulars
The agreement was oral and was made by Mr Hogarth on behalf of Lakatoi and Mr Brian Weinert on behalf of Walker Consolidated.
85 . In breach of the covenant referred to in paragraph 83 and in breach of the agreement referred to in paragraph 84 Walker Consolidated failed:
(a) to prepare monthly budgets and cash flow projections for Rosamond.
(b) to circulate such monthly budgets and cash flow projections to each
member of the Rosamond Policy Committee with notice of the next Committee meeting.(c) to provide accounting expertise to the Helensburgh Unit Trust.
(d) to prepare the Helensburgh Unit Trust annual accounts.
(e) to have the Helensburgh Unit Trust annual accounts audited by KPMG Peat Marwick.
Particulars
(i) Walker Consolidated has never prepared monthly budgets and cash flow projections for Rosamond.
(ii) Walker Consolidated has never circulated such monthly budgets and cash flow projections to each member of the Rosamond Policy Committee with notice of the next Committee meeting.
(iii) Walker Consolidated has provided to Lakatoi accounts for the Helensburgh Unit Trust up to 31 March 1995 and for no subsequent period.
(iv) Walker Consolidated has not procured KPMG to audit the Helensburgh Unit Trust accounts.’
Representations as to expertise, resources and political contacts to secure prompt rezoning of Ensile land and representations as to experience
50 Particulars furnished are by reference to paragraphs 24A and 25(b). 51 Each of the representations is said to have been a material representation and made in trade or commerce. 52 The plaintiffs then assert that Mr Hogarth acted on the faith of each of the representations and took steps which enabled the Ensile land to be provided to the joint venture constituted by the Heads of Agreement and pursuant to those Heads of Agreement the Joint Venture constituted by the HUTA and took no active part in relation to the rezoning process.
(a) that he and his companies had the necessary expertise, resources and political contacts to secure promptly the rezoning of the Ensile land to permit its use for residential development; and
(b) that Walker Consolidated and/or Walker Corporation was a company experienced in developing broad acre land into residential subdivisions and obtaining all the necessary approvals and in developing residential town land into residential strata unit development.
[Contentions paragraph 51]
53 The plaintiffs further assert that but for those representations, Mr Hogarth would not have so acted and would not have taken those steps and thereby lost the benefit of up to one-half of his interests in relation to the Ensile land and lost the opportunities to procure the development otherwise of the land and the benefits which would have flowed to him therefrom.
[Contentions paragraph 53(a)]
54 The plaintiffs then allege that in reliance upon each of the representations, Mr Hogarth entered into the Heads of Agreement of 23 November 1993 and caused Lakatoi and Ensile to enter into the HUTA. 55 The plaintiffs then allege that contrary to the representations, neither Mr Walker nor his companies had the experience and expertise which Mr Walker on behalf of himself and Walker Consolidated represented that they had. 56 The allegation is that the conduct of Mr Walker and of Walker Consolidated in making the representations was misleading and deceptive, contrary to s 42 of the Fair Trading Act and that by reason of such conduct, Mr Hogarth, Ensile and Lakatoi have suffered loss and damage. 57 Paragraph 86 of the amended summons asserts that a number of facts and matters pleaded in para 41, 44, 49, 32, 64-66, 85 and 56 of the defendant’s defence whereby the defendant’s deny that the plaintiffs have standing to bring proceedings to recover damages compensation or other appropriate relief for Rosamond in respect of the facts and matters pleaded in the summons, constitute acts or omissions by or on behalf of Rosamond which were and remain oppressive and/or unfairly prejudicial to and/or unfairly discriminatory against Lakatoi as a member of Rosamond and/or contrary to the interests of the members of Rosamond as a whole within s 260 of the Corporations Law. 58 The claims to relief seek the following:
[Contentions paragraph 53(b)]
59 At the commencement of the hearing it was anticipated (in terms of case management) that Mr Walker, Mr Dransfield and Mr Weinert would be giving evidence for the defendants. Mr Shand QC boldly opened the defendants’ case making plain that these witnesses would be called and their statements read. In cross examination, a number of sections of the statements of these witnesses were put to Mr Hogarth and Mr Kidd or otherwise referred to. 60 Indeed, the judgment of 30 September 1999 dealing with motions to set aside subpoenas sought to be used by the plaintiffs to investigate issues of credit of Messrs Walker and Dransfield, was predicated on the anticipated cross examination. 61 Well into the hearing, in fact on the 32nd day, it was announced by Mr Officer QC for the defendants, that neither Mr Walker, Mr Dransfield nor Mr Weinert would give evidence. Accordingly, their statements were ultimately not before the Court. Plainly they could not be cross examined. Certain file notes and other contemporaneous documents said to have been written or received by Mr Walker, Mr Dransfield or Mr Weinert were, however, tendered during the course of the proceedings. These will be dealt with in due course in this Judgment. 62 As the result of Mr Officer’s announcement, the proceedings were considerably shortened. The only witnesses for the defendants were thus Messrs Lester, Joliffe, Cichacz and Dempsey. 63 Before turning to the detailed facts it is convenient to outline
“ Declarations that:
(a) Mr Walker and Mr Dransfield by reason of their conduct alleged in paragraphs 41 and 42 [see Judgment paragraph 39] have acted in breach of their duties as directors;
(b) Mr Walker, Mr Dransfield and Walker Consolidated by reason of their conduct alleged in paragraphs 41 and 42 have acted in breach of their fiduciary duties;
(c) Mr Walker and Mr Dransfield by reason of their conduct alleged in paragraph 43 [see Judgment paragraph 39] have acted in breach of their duties as directors;
(d) Mr Walker, Mr Dransfield and Walker Consolidated by reason of their conduct alleged in paragraph 43 have acted in breach of their fiduciary duties.
Mr Hogarth claims against Mr Walker:
(1) an order rectifying the Heads of Agreement by deleting Clauses 1 and 4 thereof and substituting the following clauses in lieu:
(1) LW to contribute $4.5 M to RMH to take up a 50% position in the Helensburgh Lands as further defined herein;
(4) The basis of a joint venture will be that RMH will provide lands as further defined herein and LW will pay $4.5 M to two instalments namely:
(a) $2.75 M forthwith;
(b) $1.75 M either on achieving rezoning or at the expiration of a reasonable time from the Completion Date whichever first occurs whether or not the Ensile Land is rezoned;
whereupon RMH and LW will each hold a 50/50 share in the joint venture.
(2) A declaration that for the purposes of the Heads of Agreement a reasonable time from the Completion Date for payment of $1.75 M by Mr Walker to Mr Hogarth has expired.
(3) A declaration that it is an implied term of the Heads of Agreement that in the event of the Ensile Land not being rezoned to permit residential development within a reasonable time of the Completion Date then Mr Walker and/or interests associated with him would forthwith at the expiration of such period pay to Mr Hogarth or interests associated with him the balance of the said sum of $4.5 M then remaining unpaid.
(4) A declaration that for the purposes of such implied term a reasonable time of the Completion Date has expired.
Lakatoi, Mr Hogarth and Ensile claim against Walker Consolidated, Mr Walker and Rosamond:
(1) an order rectifying the HUTA by:
(a) deleting from Recital H the expression ‘Walker Contribution’ and substituting the expression ‘Walker Expenses’.
(b) deleting from the definition of ‘Further Contribution’ in Clause 1.4 the words ‘within 30 days of a gazettal of a rezoning of the Land’ and substituting the expression ‘within 30 days of a gazettal of a rezoning of the Land or at the expiration of a reasonable time from the Completion Date whichever first occurs whether or not the Ensile Land was rezoned’.
(2) A declaration that for the purposes of Clause 1.4 of the HUTA a reasonable time from the Completion Date has expired.
(3) A declaration that it is an implied term of the HUTA that in the event of the Ensile Land not being rezoned to permit residential development within a reasonable time of the Completion Date then Walker Consolidated would forthwith at the expiration of such period pay to Highfield Grove the said sum of $1.7850,000 constituting the Further Contribution.
(4) A declaration that for the purposes of such implied term a reasonable time of the Completion Date has expired.
Lakatoi, Mr Hogarth and Ensile claim against Mr Walker, Mr Dransfield and Walker Consolidated:
(2) An order that Mr Walker and Mr Dransfield pay to Rosamond within 14 days of the date of the order:
(a) the total of the management fees and other moneys referred to in paragraph 41 [of the Summons].
(b) $220,000 together with interest thereon or on the respective components thereof from the date of payment to the various political parties referred to in paragraph 44 [of the Summons] until judgment at the rates from time to time payable under section 94 of the Supreme Court Act.
(c) equitable compensation for all losses sustained by Rosamond by reason of the breaches of duty by Mr Walker and Mr Dransfield hereinbefore referred to.
Lakatoi, Mr Hogarth and Ensile claim against Walker Corporation:
(3) An order that Walker Corporation indemnify Rosamond in respect of the losses suffered by Rosamond in consequence of the conduct of Walker Consolidated and/or Mr Walker and/or Mr Dransfield in respect of all losses sustained by Rosamond by reason of the breaches of duty by Mr Walker and Mr Dransfield hereinbefore referred to.
Lakatoi, Mr Hogarth and Ensile claim against Mr Walker, Mr Dransfield and Walker Consolidated:
(4) Alternatively to (2)(a), an order that the management fees and other moneys referred to in paragraph 41 [of the Summons] are not due and owing by Rosamond.
Lakatoi and Mr Hogarth claim:
(5) An order that Mr Walker pay to Mr Hogarth and Lakatoi damages.
Ensile claims:
(6) An order that Walker Corporation and/or Walker Consolidated pay to Ensile damages.
Lakatoi, Mr Hogarth and Ensile claim against Mr Walker, Mr Dransfield and Walker Consolidated:
(7) An order that Walker Consolidated pay to the third Plaintiff (“Highfield Grove”) $2.75 million within 14 days of the date of the order together with interest thereon under section 94 of the Supreme Court Act from 6 April 1994 to the date of payment.
(8) An order that Walker Consolidated transfer to the Seventh Defendant (“Rosamond”) the benefit of the Current Thomson Option.
(9) An order that Walker Consolidated (at its expense but on account of Rosamond) establish and undertake a study of the effectiveness of the water settling ponds proposed by Lady Carrington Estates to maintain water quality in the catchment of the Ensile Land.
(10) An order that Vamden transfer to Rosamond the benefit of the Vanden Development Consent and the property rights in and to the documents comprising the Vanden Development Application subject to Vamden being indemnified for any expenses incurred by Vamden in obtaining such Development Consent and acquiring such documents.
Lakatoi, Mr Hogarth and Ensile claim against the Fourth Defendant (‘Mitsui’):
(11) An order that Mitsui (at its expense but on account of Rosamond) transfer to Rosamond the benefit of the Chapman Land.
All the Plaintiffs claim:
(12) All such equitable relief (including but not limited to equitable compensation) as may be just.
(13) Costs.”
The Defendants’ Case
64 The land subject to these proceedings is conveniently referred to hereafter as the ‘Lady Carrington Estate’ (LCE). The total area of the LCE is approximately 450 hectares and is comprised of three separate areas of land as shown on the plans appended to this judgment as Appendices 3 and 4. Appendix ‘3’ is Annexure A to the Fourth Amended Summons and shows the extent of the Ensile land. Appendix ‘4’ is Figure 1 from the Commissioner’s Report which shows the area the subject of the Commission of Inquiry making clear the three parcels of land which comprise the Lady Carrington Estate. The major part of the holding, referred to as Site 1 in keeping with the terminology of the 1992 GHD application, lies to the east of the Helensburgh township near Lilydale Road and is bordered to its east by the South Coast Railway. This site occupies an area of 417 hectares. The two smaller parcels of land, one of which is the 1895 subdivision, are collectively referred to as Site 2, and are located to the north of Site 1 in the vicinity of the Helensburgh tip. 65 The LCE land is located within the catchment of the upper reaches of the Hacking River and a number of its southern tributaries. The land lies to the south-west of the Royal National Park. 66 The landform of Site 1 is composed of both plateau and valley. The proposed urban development on this site was confined to the plateau area such that it would be an extension of the existing township along a north spur and the eastern plateau area. Beyond the plateau, the valley drops steeply, with vertical escarpments in some places. In the valley, Camp Creek flows in a north-easterly direction to join the waters of the Hacking River flowing to Port Hacking in the north-east. Other tributaries to the Hacking River in the vicinity of Site 1 include Gardiners Creek and an unnamed creek. 67 Site 2 is located on the north-east part of the Helensburgh plateau at an elevation of 200m. The eastern edge of the site falls away steeply into the Hacking River valley. 68 The location and topography of the Hacking River catchment area are such that it receives the highest average rainfall of all the catchments in the Sydney region. The upper reaches of the river (above Audley weir) are classified Class P (Protected Waters) under Part 3 of the Clean Waters Act due to its sensitive relationship with the Royal National Park. The Class P status applies also to urban runoff from the proposed development. 69 LCE was the largest single landholding on the edge of Helensburgh township considered by the Helensburgh Commission of Inquiry, appointed to resolve the future zoning of the LCE and other lands. 70 At the time of the Inquiry, Site 1 was zoned predominantly Non Urban 1 with certain land in the east zoned Environmental Protection Hacking River 7(d). The 1895 subdivision lands comprising Site 2 were similarly zoned Non Urban 1 with the remaining land zoned Environmental Protection Hacking River 7(d). It was proposed both in the 1992 GHD rezoning application and in the 1994 case put by the joint venture before the Commission of Inquiry to rezone much of this land to Residential 2(a), with the 1895 subdivision land being rezoned Environmental Protection (Residential) 7(c). Integral to this proposal was the dedication of approximately 320 hectares of bushland in the eastern area of Site 1 to the State Recreation Area. This dedication of land was intended to serve as a buffer between urban development of Site 1 and the Royal National Park. 71 The development, as it was originally proposed in the 1992 GHD application and again in the June 1994 submission, was to create some 805 allotments capable of supporting 1,010 dwellings on Site 1 and some 204 allotments capable of supporting 268 dwellings on Site 2. This proposal for LCE represented approximately one third of the total allotments proposed for the medium density development of the land subject to the Inquiry.
(a) detail of the Lady Carrington Estate,
(b) the planning background of the land subject to the Commission of Inquiry,
(c) in general terms, the process of achieving a rezoning.
The Lady Carrington Estate
72 There are essentially three points in time at which it is necessary to look at the existing regulatory regime current at that time. These are, March 1992, the time the GHD application for rezoning was submitted; February 1994, the time the Commission of Inquiry was announced; and March 1995, the time at which Wollongong LEP 1994, Amendment No. 63 was gazetted as an Interim measure while studies were to be done with 40 hectares minimum per allotment subdivision area. 73 In the course of detailing the regulatory regimes that pertained at these relevant times, it will also be necessary to look to certain initiatives/proposals that were put forward from time to time.
Regulatory regime of the land subject to the Commission of Inquiry
74 The 1992 GHD rezoning application was intended to serve a dual purpose. Not only was it seeking amendment of the City of Wollongong LEP 1990 extant at that time, but it was also lodged as an objection to Council’s Draft LEP 1992 which proposed to rezone lands, including the LCE lands, to a zoning further inconsistent with urban development than already pertained.
(1) Regulatory Regime at the time of the 1992 GHD application
75 Pursuant to the City of Wollongong LEP 1990, at the time of the 1992 GHD application the land constituting Site 1 of LCE was primarily zoned 1: Non-Urban with the eastern extremities being zoned 7(d): Hacking River (Environmental Protection). The land constituting Site 2 was similarly zoned 1 and 7(d). 76 The objectives of zone 1 were to provide a rural atmosphere on the outskirts of the local government area and to act as a reservoir from which land suitable for either urban development catering for planned urban growth or environmental protection could be drawn. Only agricultural and peri-urban activities, which will not prejudice the environmental quality or development potential of the land, or lead to demand for further public services, would be allowed in the zone. 77 The objectives of zone 7(d) were to identify and protect the relatively pristine tributaries of the Hacking River catchment and to safeguard the natural qualities of these areas as a complement to the Royal National Park. Activities allowed in this zone required consent and include dwelling houses (if a dwelling right exists), leisure areas, and activities which would not prejudice the objective of protecting the Hacking River Catchment. 78 Under the Draft LEP 1992 (Certificate Plan Number 91/16), submitted by Wollongong Council under s 65 of the EPA Act 1979, the Council proposed to rezone certain land, including LCE land, from zone 1 to either zone 7(d) Hacking River Environmental Protection or zone 7(c) Environmental Protection Residential Zone. Under this proposal all the LCE lands were to be rezoned 7(d). [See the more detailed examination below].
City of Wollongong LEP 1990
79 In order to appreciate the context in which Council submitted its Draft LEP 1992, it is necessary to look to the Draft Helensburgh Plan 1990 which was the precursor to that Council initiative.
[The objectives of zone 7(c) were to cater for limited residential and village development in areas possessing special environmental qualities or which may be affected by environmental hazards and as such, to allow some diversity of activities which will not detrimentally affect environmental quality, character or amenity of the area. All permissible activities required development consent in this zone.]
80 Although titled a Draft Plan, the Draft Helensburgh Plan 1990 was a local environmental study prepared by Wollongong City Council’s Strategic Planning Section with assistance from the now Department of Planning, the Department of Housing, the then SPCC (now the EPA), the NPWS, the Water Board, the Soil Conservation Service, landowners and a number of consultants. 81 The Plan investigated the urban expansion potential of Helensburgh and surrounding areas and presents a detailed and comprehensive long-term plan for the future development, management and conservation of the area. The Plan was prepared to form the basis of a Draft LEP and a Draft Development Control Plan. 82 The land identified as being capable of urban development under the Plan was consistent with that recommended by an earlier SPCC study. 83 The 1986 SPCC study recommended that urban development could occur only in the most disturbed catchments of the Hacking River. It found that, subject to the installation of appropriate water quality controls, development in the Gills and Camp Creek catchments would not significantly reduce the quality of the waters flowing into the Hacking River. The water quality controls recommended for the catchment were based on the Best Practical Means approach, and were required to be a permanent body of water equal to one percent of the catchment. 84 A subsequent series of water quality studies undertaken by consultants investigated the location and design options for the water quality treatment ponds in the Gills and Camp Creek catchments. The suggested pond location for the Gills Creek catchment was over a significant Aboriginal site. The suggested pond location for the Camp Creek catchment was partly within the Garrawarra State Recreation Area and would have potentially destabilised the Illawarra Line embankment.
The Draft Helensburgh Plan 1990
85 Following the study, Council prepared Draft Local Environmental and Development Control Plans which were placed on exhibition from July to October 1990. Approximately 5000 submissions were received, 4850 objecting to, and 236 in support of, urban development proposed in the Plan. The issues raised in these submissions were: · the impact on the Royal National Park;
The 1990 Plan recommended that:
(a) further development in the Camp Creek catchment be deferred pending discussion between landowners and the NPWS;
(b) development of the Gills Creek catchment be allowed as it posed no significant problems other than the location of the water quality pond; and
(c) the development of the area of small rural lots of the southern end of Walker Street could proceed if a more suitable subdivision design was found and a diversion channel could be constructed to drain the area to the Gills Creek water quality control pond.
· water quality of the Hacking River system;
· the design and location of the water quality ponds;
· flooding concerns at Otford;
· destruction of significant bushland;
· questions about the need of urban growth in Helensburgh; and
· the lack of services in Helensburgh and the need for further growth to support more services. 86 Despite the positive recommendations made by Council’s officers with respect to the Draft Helensburgh Plan 1990, the Council resolved not to proceed with the plan at its Special Meeting of 29 April 1991. Instead, it resolved to encourage Helensburgh to grow by up to forty percent through urban consolidation and to rezone all the land zoned non-urban around Helensburgh to an environmental protection zone. This draft plan is referred to as the “Draft LEP 1992”.87 On 20 May 1992 a Section 65 Certificate to enable exhibition of the 1992 Draft Local Environmental Plan was issued and the plan was placed on public exhibition from 22 July to 18 December 1992. The objectives of the Plan were:
Draft LEP 1992 (draft amendment no. 63)
88 Approximately 7000 submissions were received. The issues raised in the submissions were similar to those raised in the submissions to the 1990 Plan. The major difference was that a number of the submissions were detailed development proposals generally supported by studies in water quality, bushfire risk analysis, servicing requirements and subdivision layouts. 89 One such submission was the 1992 GHD application for rezoning prepared on behalf of Lady Carrington Estate Pty Ltd. 90 On 13 April 1993 Council resolved, in part, to rezone the land as exhibited in the 1992 Draft LEP except for the Gills Creek catchment and to defer consideration of the Gills Creek catchment pending the outcome of mediation between interested groups - the mediation being subsequently abandoned. 91 Prior to this resolution being effected, and after considering the City of Wollongong LEP (draft amendment no. 63), the Minister for Planning convened a Commission of Inquiry under section 68 of the EP&A Act 1979. In establishing the Inquiry, the Minister is recorded as having taken into account the Director of Planning’s concerns expressed to Wollongong Council at the time the draft plan was placed on exhibition. The Director had noted that a number of development proposals existed and requested Council to give consideration to these proposals as part of the rezoning process [19/144].
(a) to permit development for residential purposes subject to environmental controls; and
(b) to rezone certain land to Hacking River Environmental Protection in order to restrict development and safeguard the Hacking River catchment.(2) Regulatory Regime at the time of the Inquiry
92 Despite the various Council initiatives which had been presented in the period leading to the Commission of Inquiry, the regulatory regime pertaining to the subject land at this time continued to be provided by the City of Wollongong LEP 1990. 93 Also relevant to the subject land was the Illawarra REP Plan No.1 gazetted in 1986. This plan identifies and aims to protect areas of rainforest, allowing such land to be cleared only with consent, following the advice of the NPWS. The plan also prevents land being rezoned from rural to urban without a local environmental study. If the lands subject to the Inquiry were to be rezoned for residential development, the provisions under the REP require that: · urban expansion is orderly and efficient having regard to the constraints of the natural environment, and that sufficient land is available to prevent price rises resulting from shortages of land,
· development consent should not be granted on land supporting rainforest vegetation species unless after consultation with the Director of NPWS, the consent authority is satisfied that either the development will not have a detrimental effect on the rainforest…, or any detrimental effect…can be justified by other factors,
· new residential land, or land for higher density development is only developed where there are adequate utility and community services available or where the relevant authorities or the developer is committed to provision of such services,
· residential development does not occur on hazard prone lands,
· bushfire risks to urban development are minimised, and
· where a draft local plan provides for substantial increase in the area of residentially zoned land, the consent authority must have made an assessment of land availability and take-up rates and must be satisfied that there is insufficient land in that area to cater for projected household growth for a period of 10 years. 94 Further, the REP identifies an area of land as containing escarpment lands. These lands were identified in the Department’s “Illawarra’s Coast, A Discussion Paper” as suggested extensions to the Habitat Corridor System which links the Royal National Park to the Illawarra Escarpment. The plan protects the movement of fauna along the corridor and ensures the visual qualities of the lands are protected. The suggested expansion area encroaches to a limited extent upon Site 1 of the LCE land. 95 Additionally, the subject land was also affected by the State Government’s Metropolitan Strategy for Sydney and ‘Sydney’s Future’. While Helensburgh was identified on the 1989 Metropolitan Strategy as suitable for urban expansion, it was not considered for urban expansion under the ‘Sydney’s Future’ Plan and as such was not listed on the Urban Development Program. ‘Sydney’s Future’ recommended a more compact form of growth for the Greater Metropolitan Region of Sydney, which includes Wollongong and Newcastle. It argued for a reduction in the amount of land taken up at the fringe for urban development and for the more efficient use of existing services and infrastructure.96 In March 1995 following the December 1994 recommendations of the Commissioner of Inquiry, Wollongong LEP 1994 Amendment No. 63 was gazetted. 97 Under this plan the LCE “Non-Urban” lands were zoned “Environmental Protection” 7(d) as an interim measure pending results of studies conducted with 40 hectares minimum per allotment subdivision area.
(3) Regulatory Regime as at March 1995
98 At all relevant times, the zoning of the LCE lands did not enable, without more, the redevelopment of the land for residential subdivision. 99 Accordingly, what was required was for the existing Wollongong LEP 1990 to be replaced or amended in relation the LCE land. A zoning of Residential 2(a) was required. 100 Replacement of or amendments to an LEP are achieved via the process of making an LEP set out in Part 3 of the EPA Act 1979. 101 Although strictly an LEP is made by the Minister (section 70), with the exception of matters “formal” to the process of the making of the LEP, that process is in the main as determined, and as conducted, by the Council: see sections 54, 57, 62, 66 and 68. There is no avenue of appeal (as of right) against a Council’s position with respect to the drafting of an LEP. Similarly, there is no avenue of appeal (as of right) against the Minister’s decision either to make or refuse to make the LEP. The only avenues for appeal are in terms of judicial review of the exercise of powers and procedures in the making of the LEP, and even then such review can be limited as to time following the giving of public notice of the making of the LEP (section 35). 102 Since the submission of its Draft LEP 1992, Wollongong Council had made it clear that it was opposed to the rezoning contemplated by Lady Carrington Estate, and in fact had proposed a rezoning further inconsistent with the residential subdivision. 103 It is pertinent to note in contradistinction, the process of achieving development consent once rezoning is implemented.
Process of achieving a rezoning
104 It is clear that had rezoning of the LCE lands been achieved, the joint venture would have been required to obtain development consent before effecting subdivision and development of the LCE lands. 105 The process for obtaining that consent is as prescribed in Part 4 of the EPA Act. 106 Part 4 provides for assessment of an application for development consent by reference to certain criteria including criteria and elements specified by the Act. These criteria include, for example, the requirements of the Council’s own LEP and any Development Control Plan made by the Council (and endorsed by the Minister) with respect to the carrying out of development. 107 The plaintiffs point out that unlike the process of the making of an LEP to effect a change in the zoning of land, with respect to an application for development consent the EPA Act affords a mechanism for a merits appeal (as of right) under section 97. This right of appeal exists both:
Development Consent issues
108 References to the many volumes of Exhibit PX will be shortened. Hence ‘1/181’ is a reference to Exhibit PX, volume 1 page 181. 109 By reason of the number of meetings and conversations in issue and in respect of which most participants gave detailed evidence, a folder ‘MFI 14’ was created by the defendants. The folder seeks to identify many of the contemporaneous notes and memoranda created by witnesses who attended the meetings in issue. Those notes and memoranda are already in evidence. The folder has 22 dividers. Divider 6 includes a page identifying the subject matter as ‘Meeting 6 - 10 November 1983 Meeting Hogarth, Kidd, Dransfield and Walker’. It then conveniently lists the sections of those witnesses’ statements said to deal with this meeting. Although this may not have been the sixth relevant meeting, the parties agreed as a matter of convenience only, to adopt as a common dictionary, the reference to this meeting as ‘Meeting 6’. This approach seen in the transcript, is followed in the Judgment. Hence it matters not that so-called ‘Meeting 6’ may have in fact been the fifth or eighth relevant meeting. 110 In endeavouring to outline the facts, it is not practicable to refer to every letter or document contained in the voluminous material tendered. Detail is included as necessary:
(1) as to, for example, an application for subdivision consequent upon a rezoning of the land; and(2) as to an application for the construction of trial ponds pursuant to the existing LEP (in the event that it is said that the Council would have been unlikely to have approved of such trials (see Smyth Transcript 1246).
50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS
50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors
50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED
1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED
JUDGMENT - 10 March 2000
PART 2
The Facts
111 Finally, I note that a number of obvious typographic errors appear in the transcript and were never corrected. Notwithstanding this, in citing transcript I do not correct for errors. Hence what may at first be perceived as typographic errors in the Judgment transcript excerpts are carried over from the formal record.
(a) to sketch in the protracted attempts to interest local Councils, regulatory authorities and State Government representatives in LCE’s pursuit of rezoning to permit redevelopment of the subject lands;
(b) to identify the contested versions of the principal meetings which, together with all the evidence, are duly weighed in reaching the court’s findings of fact;
(c) to identify the exposed financial position of the Hogarth interests forming the backdrop to the negotiations and agreements between the Hogarth and Walker interests.
112 Before turning to the detailed examination of the facts, it seems useful in terms of the structural chronology to shortly set out the summary of the planning history of the Helensburgh lands. This history, which was prepared by the plaintiffs in a schedule for the purpose of final address and subsequently amended by the defendants, is not in issue and is as follows: 1895 Subdivision of some of LCE South lands to promote growth of Helensburgh.
Planning History Summary
1896 “Council advises that the area subject to the rezoning application by the Helensburgh Land Pooling Group was subdivided in approximately 1896 by Metropolitan Collieries.” [COI Report PX Volume 19.092 at 0.1]
1947 “The land remained undertermined by the first planning scheme introduced in 1947, the County of Cumberland Planning Scheme.” {COI Report PX Volume 19.092 at 0.2]
1948 Cumberland County Plan. LCE lands designated as “Rural”.1950 Wollongong Draft Planning Scheme exhibited. Development controlled by the Town and Country Planning (General Interim Development) ordinance that allowed development that was consistent with the Draft Planning Scheme. (LCE land designated Non Urban).
1968 Wollongong Planning Scheme Gazetted. Development now controlled by the Planning Scheme (Map and Ordinance). (LCE land is Non Urban “A” with a 25 acre minimum per allotment subdivision area).
1960/61 Revised Wollongong Draft Planning Scheme and development administered in the same way as with 1950 Draft (LCE land is Non Urban “A”, with 5 acre minimum per allotment subdivision area).1984 Wollongong Local Environmental Plan No 38 (1984) supersedes the Planning Scheme (LCE zoned Rural “A” with 40 hectare (100 acre) minimum per allotment subdivision area).
1968 “These sites have, however, been zoned the equivalent of a Non Urban zone since 1968. In 1968 the Illawarra Planning Scheme Ordinance was adopted…” [COI Report PX Volume 19.092 at 0.2]. “In 1968 the minimum lot size was set at 5 acres (2 hectares) by the Illawarra Planning Scheme …” [COI Report PX Volume 19.092 at 0.3]
1971 “… in 1971, the Minister changed the minimum requirement to 50 acres (20 hectares). [POI Report PX Volume 19.092 at 0.4]
1980 Council resolved to prepare Draft Local Environmental Plan and Study to allow for urban expansion of Helensburgh but this did not proceed because the Urban Development Committee gave the area a low priority in terms of Sydney’s expansion.March 1994 “In 1968 the Illawarra Planning Scheme Ordinance was adopted and was in force until 1984 when the Wollongong Local Environmental Plan No. 38 was gazetted.” [COI Report PX Volume 19.092 at 0.3] “This plan renamed the Non Urban zone to Rural …” [COI Report PX Volume 19.092 at 0.5]
1985 Urban Development Committee included Helensburgh on the Illawarra Urban Development Program and asked Council to undertake the necessary studies. (See Exhibit #PX21 being 22 February 1985 Minutes of the 38th Meeting of Urban Development Committee).
1986 Interim Conservation Order under the Heritage Act to prevent premature clearing of land east of Helensburgh while studies progressed.
1986 “The Illawarra Regional Environmental Plan No. 1 was gazetted in 1986 … the plan prevents lands from being rezoned from Rural to Urban without a local environmental study. If lands subject to the enquiry were to be rezoned for esidential development, the provisons under the plan require…” [COI Report PX Volume 19.68 at 0.9]1987 Local Environmental Plan gazetted to create a 7(h) Hacking River Environmental Protection Zone over part LCE lands.
1990 Wollongong Local Environmental Plan 1990 supersedes the 1984 LEP. (LCE Lands part zoned Non Urban “1” and part zoned 7(d) with 40 hectare minimum per allotment subdivision area).21 December
1991 Council resolved to prepare a Draft Local Environmental Plan [(that ultimately became Amendment No 63-see below) to rezone all Non Urban land identified in the Helensburgh Study to 7(d) Environment Protection – Hacking River.] This included LCE land and resulted in the GHD objection/submission.
1990 “The subject lands [LCE] is covered by the planning provisions contained in the City of Wollongong Local Environmental Plan, 1990, made by the Minister for Planning, 21 December 1990.” [GHD PX Volume 4.178 at 0.9]
29 April
· rezone the land identified in the Helensburgh plan as follows:
1992 “…Council resolved at a special meeting of 29 April 1991 to:- in the ridge to 8(b)
· prepare a draft local environmental plan and draft development control plan for the Department of Housing land east of Lukan Street to rezone that land to 7(c).
- area off Sutherland Street to 2(a)
· rezone all other Non-Urban land identified in the Helensburgh study to 7(d) Environmental Protection - Hacking River …” [COI Report PX Volume 19.065 at 0.8 to PX Volume 19.066 at 0.1]
1992 GHD Objection /rezoning submission for LCE lands lodged with Council (PX4.0166; PX4.0167; PX4.0168).
20 May 1992 “The draft 1992 Local Environmental Plan was placed on public exhibition on 20 May 1992.” [Department of Planning PX Volume 10.241]“…The LEP was placed on exhibition from 22 July to 18 December 1992.” [COI Report PX Volume 19.066 at 0.5]
1990 Council resolved to proceed to complete the Draft LEP (Amendment No. 63) that rezoned the Non Urban land including LCE lands to Zone 7(d).
June 1993 “The Council referred the 1992 plan to the Deparmtnt of Planning in June 1993 under section 68 of the Environmental Planning and Assessment Act, 1979.” [Department of Planning PX Volume 10.242]113 As already pointed out, the substantial Helensburgh holdings had been acquired in the early nineteen eighties.
Feb 1994 Minister Webster appoints Commission of Inquiry to resolve Helensburgh land use issues.
Early Nineteen Eighties
Dec 1994 Commission Reports.
March 1995 Wollongong LEP 1994, Amendment No 63 gazetted (LCE “Non Urban” lands zoned Environmental Protection 7(d) as an Interim measure while studies are done with 40 hectares minimum per allotment subdivision area.
114 The Water Board constructed a sewer main through Camp Creek within the Ensile land and connected it to individual allotments within the Lady Carrington Estates.
1985
115 During the period 1985 through to 1991 various consultants were engaged and plans and applications prepared and lodged with the Wollongong City Council in an endeavour to have the Lady Carrington Estates zoned to allow residential development.
1985-1991
116 On 25 June 1985 Mitchell McCotter & Associates Pty Ltd, Planning Environmental and Engineering Consultants, wrote to the National Parks and Wildlife Service enclosing a recently completed report on lands owned by the Hogarth interests at Helensburgh. The report had been carried out in association with Mr Kevin Laws of Wollongong University and attempted to identify all areas subject to environmental constraints that would preclude residential development. The letter proposed that as a possible means of expediting a rezoning, the landowners had decided that they were willing to grant certain of their lands to the National Parks and Wildlife Service. [1/181]
25 June 1985
117 By letter dated 14 March 1986 Mr Hogarth wrote to the Premier (the Hon. Mr N K Wran) enclosing a submission together with two studies undertaken of the area. Mr Hogarth, inter alia, set out his concern that it would only be with the Premier’s support that a reasonable response in connection with water supply would be forthcoming from the Metropolitan Water Sewerage and Drainage Board [‘MWS & DB’]. [1/223]
14 March 1986
118 By letter dated 26 May 1986 Mitchell McCotter & Associates wrote to the Wollongong City Council enclosing a submission on the Helensburgh Local Environmental Study. It made plain that the submission focussed on, inter alia, water quality and was to be read in conjunction with two earlier reports which considered environmental constraints and servicing options for the company’s land. [1/224]
26 May 1986
119 Pacific East Coast Limited was registered in July 1986 and it was a company of which Mr Severino was a director through the relevant period of time from about 1986 onwards. Mr Walker was a director from 8 October 1986 to 9 May 1995. Mr Weinert was the secretary from 9 May 1995.
July 1986120 By letter dated 22 October 1986 Mr Kidd writing on behalf, inter alia of Ensile, wrote to the Minister for Environment and Planning (the Hon. R J Carr MP) confirming his interest to meet with Mr Carr at his earliest convenience to discuss a number of problems relating to the properties. Mr Kidd had met with Mr Carr in the Royal National Park some days earlier and invited Mr Carr to inspect the land in question. [1/228]
22 October 1986
121 In September 1988 Lady Carrington Estates made an application to the Wollongong City Council to have its Helensburgh land holdings rezoned to residential 2A.
September 1988
122 A note entitled ‘Briefing Data for Ministerial Visit to Helensburgh’ dated 6 March 1989, includes the following:
6 March 1989
123 A document entitled ‘Briefing Data for State and Local Government Representatives’ of 12 April 1989 sets out the zoning history as at that point in time of the subject land holding. The document includes similar material to that referred to in the 6 March 1989 briefing data for ministerial visit. The document states:
‘LCE has been instrumental in identifying a means to improve the overall pollution control in the Helensburgh area via a settling ponds scheme in Camp Creek. LCE has offered to fund 50 per cent of an expert study - and to contribute an equitable percentage of the construction of such a scheme.
12 April 1989
This offers a cure for existing runoff problems from most of the Helensburgh area via Camp Creek.’ [2/18]
124 By letter dated 24 April 1989 Mr Dransfield wrote to Mr Arkell then Lord Mayor of the City of Wollongong advising, inter alia:
‘In early 1988 the major portion of Ensile’s land was rezoned from “Rural A” to “74 Environmental Protection” and most of the area now subject to the rezoning application to “2A Residential” remained as a rural zoning with an implication by WCC that the area was considered suitable for residential development.’ [2/34]
24 April 1989
125 On 29 May 1989 Mr Kidd, writing on behalf of Lady Carrington Estates, wrote to the Hon. J P Hannaford MLC seeking his involvement in terms of a co-ordination effort suggested as needed between a number of government bodies to ensure that all merits relating to the application for re-zoning at Helensburgh were appreciated. Reference was made in this letter to the numerous separate New South Wales and Local Government departments involved including the State Pollution Control Commission, the Soil Conservation Service, the National Parks and Wildlife Service, State Recreation, State Rail Authority and various departments at Wollongong City Council. [2/46] 126 To provide some guidance as to the arguments involved Mr Kidd stated:
“Re Helensburgh - Future Residential Development
It is our understanding that a unique opportunity exists in the Helensburgh area to achieve a release of residential land into the Sydney and Wollongong markets, while at the same time achieving major contributions to a Sedimentation Containment Scheme to greatly improve the quality of the present and future discharge of water from Camp Creek into the Hacking River.
We believe that ready co-operation has been forthcoming from a potential developer - Lady Carrington Estates Pty Ltd, The Colliery - Metropolitan Collieries Pty Ltd and the Department of Housing to fund an independent study of containment/sedimentation Pond in Camp Creek under the control of the Wollongong City Council and we commend this action and the co-operation which has been demonstrated thus far.
It should however be borne in mind that the cost of proceeding further with the system to contain the existing and future discharges from Camp Creek must be borne by the local community unless commercial interests can see their way clear to contribute funds and in this case it will be greatly influenced by the extent of such development …
We are informed that meetings have recently been held with the Council’s Town Planning Department and Lady Carrington Estate’s Consultants and that further data [as requested by the Town Planning Department] will be submitted to that Department in a Report in the first week of May 1989. The Areas identified by Lady Carrington Estate Consultants are identical to that which LandCom selected in 1984 and that was supported by the previous Government.
29 May 1989
Due to the critical level of availability of suitable residential land, we ask that WCC use their best endeavours to expedite this matter as we see an opportunity to meet the needs of the New South Wales people for new land availability, the cleaning of Protected waters in Royal National Park and the well planned use of land in the Helensburgh area.”
[2/39A]
127 On 5 June 1989, Mr Kidd wrote to the Wollongong City Council outlining suggested ‘community offsets’ offered by Lady Carrington Estates and Ensile and, as part of the re-zoning, the construction of a siltation and pollution containment pondage on Camp Creek. [2/53] 128 Mr Hogarth gave the following evidence in relation to the date early June 1989:
‘(a) That the State Rail Authority has concerns about embankments in the Helensburgh area and the effect that siltation containment ponds may have on these - and indicated that LCE had offered to undertake complete geotechnical investigations and to design these ponds in a way which would provide indemnification for the State Rail Authority.
(b) That it was believed that the State Pollution Control Commission was requiring containment pond volumes to be designed in Camp Creek on the basis that the Camp Creek catchment was 100 per cent urbanised - and stating that this was not and never would be the case.
(c) That LCE had been advised that the National Parks and Wildlife Service intended to resist the construction of any dam and water containment pondage in the Camp Creek catchment due to destruction of tree cover.
[2/46]
5 June 1989
129 On 13 June 1989, Lady Carrington Estates wrote to the National Parks and Wildlife Service enclosing a draft of heads of agreement proposed to be entered into between the National Parks and Wildlife Service and Lady Carrington Estates to establish the basis on which ownership of certain lands and associated leaseback arrangements could be made and to establish the basis on which Lady Carrington Estates as part of the re-zoning proposal, would construct certain siltation and water storage pondage and dams in the Camp Creek area. The proposal was for Ensile to receive a 99 year lease back and for 10 per cent of the proceeds of sale of the rezoned land to be used for a National Parks and Wildlife Service community fund. [2/55]
‘Q. By this time the Lady Carrington Estates and Ensile were making all sorts of efforts about lands and that kind of thing?
A. Yes.
Q. You had reached the stage where things were pretty desperate in relation to persuading the necessary bodies involved, council, New South Wales Government and so forth, is that so?
A. Yes, it had been going on for four years.
[T 44/45]
13 June 1989
130 By letter dated 28 August 1989, Mr Kidd wrote to the National Parks and Wildlife Service, following a meeting with that service and advising that he believed that some problems had been experienced in the recent past with contamination of the Camp Creek and Hacking River areas by industrial waste from the Helensburgh area and drawing to the attention of the service the fact that the Lady Carrington Estates proposal would provide ‘large capacity containment pondage in accordance with SPCC design guidelines at nil cost to your service so that this problem would be circumvented in the future’. [2/66]
28 August 1989
131 By letter dated 31 October 1989, Mr Hogarth wrote to the National Parks and Wildlife Service enclosing a report giving details of the subject lands and various aspects of the proposal to transfer certain of those lands to the Service associated with the proposed support of the National Parks and Wildlife Service to the rezoning proposal. [2/70] 132 By letter dated 8 November 1989, the then Chairman of the Standing Committee on State Development (the Hon. J P Hannaford MLC), wrote to the Minister for Environment drawing to his attention to the proposal submitted to the National Parks and Wildlife Service in late October by Lady Carrington Estates and commending for serious consideration the proposals outlined in the Mitchell McCotter report of 1989. The letter advised, inter alia:
31 October 1989
133 By letter dated 10 November 1989, Mr Hannaford also wrote to the Premier (the Hon. N Greiner MP) enclosing a copy of the Mitchell McCotter report and of the correspondence from the Lady Carrington Estates ‘because of the significant public gains which are outlined in the Mitchell McCotter report for the Helensburgh area’. Mr Hannaford stated that he believed that the proposals as outlined in his letter also had the support of the member for Helensburgh, Mr Alan Andrews MP. In view of the significance of the report, the matter was brought to the Premier’s attention. [2/79]
‘We are all well aware of the pollution problems caused to the Port Hacking catchment by the existing development in Helensburgh. The proposal outlined in the Mitchell McCotter report appears to provide a satisfactory solution to these pollution problems without the capital cost being incurred by the public sector . . .
The report also appears to outline a proposal whereby a very significant area of land at Helensburgh could be added to the National Parks and State Recreation area . . .’. [2/77]
10 November 1989
134 By letter dated 15 December 1989, the Cabinet Office responded to Mr Hannaford’s letter advising, ‘your comments have been carefully noted and Mr Greiner has asked me to let you know that the matters raised are receiving close consideration’. [2/81]
15 December 1989
135 At some time during 1989, a draft Joint Venture Agreement document was apparently proposed between Taylor Woodrow (WA) Pty Limited and Ensile [2/3].
At some time during 1989
136 By letter dated 2 February 1990, Mr Hogarth wrote to the Minister for Housing, updating him as to the recent activities with regard to the land and in relation to the proposal ‘to immediately progress the development of approximately 800 building blocks if all State and Local Government initiatives could be met’, stating as follows:
2 February 1990
137 By letter dated 2 February 1990, Mr Hogarth wrote to the Minister for Local Government enclosing a copy of his recent correspondence to the Minister for Housing. [2/142]
‘We have developed a plan to design, install and partly fund a containment pond system which would not only control any resultant runoff from our new development but which would also control runoff from the existing Helensburgh township, the Helensburgh tip and future developments by the Department of Housing and thereby decrease the effect of this runoff into the Hacking River and the areas of Royal National Park downstream. ’ [2/139]
138 It appears that on 6 March 1990, a letter was written by Mr Dransfield as Director of Housing, on Department of Housing letterhead, to Mrs Kibble of the Department of Planning [PX 2/230]. The letter advises that the Department of Housing had recently received representations from companies seeking assistance in having three areas of land included in the Urban Development Programme for early development. The land in question is said to include land at Helensburgh. Mr Dransfield proposes in the letter that all three areas be considered by the Urban Development Finance Committee at its next meeting and by the Cabinet Committee on Urban Development on 21 March 1990. 139 The letter includes the following:
6 March 1990
140 Mr Dransfield then sets out his view that proposals of the nature referred to in the letter which have a potential to bring substantial areas of land into development, should be afforded early and urgent consideration ‘by our Departments’, and the Urban Development Committee, to determine whether and when release of the land should be effected. Mr Dransfield further proposes that there be discussed the planning and servicing implications of the development in the three areas at the next meeting of the Urban Development Committee. 141 The letter proves that Mr Dransfield was well aware by early 1990 of the Helensburgh lands. It is common ground that Mr Dransfield was in fact Director of the Department of Housing for four years and that he visited the land in March 1990.
‘In relation to Helensburgh, I have recently received a copy of a submission to the National Parks and Wildlife Service, prepared for Lady Carrington Estates, proposing rezoning of land at East Helensburgh and transfer of land to the Service. As you are aware, development in the Helensburgh area has been considered by the Cabinet Committee on a number of occasions and was the subject of a site visit by Committee Ministers. In the absence of direct correspondence from Lady Carrington Estates, I enclose a copy of the summary pages of the submission for your information.’
142 By letter dated 12 March 1990, Mr Hogarth wrote to the Minister for the Environment referring to his submission of October 1989 to the National Parks and Wildlife Service and to the proposals which had been put up by lady Carrington Estates, stating that he had not yet received a formal response to the proposal and seeking such a response. [2/148] 143 Also by letter dated 12 March 1990, Mr Hogarth wrote to the Minister for Local Government seeking his advice regarding the processing of a local environmental plan for the rezoning of part of the lands at East Helensburgh. [2/146]
12 March 1990
144 By letter dated 16 March 1990 the Department of Planning wrote to Mr Hogarth, advising that the Wollongong City Council had completed a local environmental study and draft local environmental plan for urban expansion at Helensburgh and advising that the Director of Planning had issued a certificate under s 65 of the Environmental Planning and Assessment Act 1979 to enable the public exhibition of the study and draft plan. The letter advised:
16 March 1990
145 By letter dated 24 April 1990, the State Pollution Control Commission wrote to the Wollongong City Council and stated, inter alia:
‘I have noted your concerns and suggested solution for controlling runoff in the Camp Creek catchment. The Department informs me that the exhibition of the study will facilitate discussion of the issues you have raised with a view to finding a suitable solution for drainage to Camp Creek. You may care to make your concerns and suggested runoff design known to the Wollongong Council which is the authority responsible for preparing and exhibiting the study and draft plan.’ [2/153]
24 April 1990
146 By letter dated 8 May 1990 Mr Hogarth wrote to the Minister for the Environment, advising that Lady Carrington Estates now sought to submit a modified proposal to incorporate a number of changes. The letter advised, inter alia:
‘The Commission has stated consistently that the guidelines in the Hacking River TCM and the SPCC Urban Stormwater Manual should be adhered to. Where these requirements cannot be complied with, the Commission’s view has been, and still is, that development should not proceed. While the Commission has no objection to the development in principle the above matters should be fully addressed and implemented.’
8 May 1990
147 The 30 page enclosed submission is to be located at PX 2/156. Paragraph 4.2 stated, inter alia:
‘. . . we request your written confirmation of the support of the Minister, his officers and the National Parks and Wildlife Service to enable us to both progress this matter further in full co-operate [sic] so that confusion will be eliminated in the minds of Wollongong City Council officers and other relevant departments concerned with the successful consideration and implementation of the Helensburgh plan.’
[2/191]148 By letter dated 8 May 1990, Mr Hogarth wrote to Mr Hannaford in his capacity as Chairman of the Standing Committee on State Development referring to the recently expanded and modified proposal of Lady Carrington Estates and announcing that it was hoped that the omission of a previous need for a ‘leaseback’ provision should make the matter more acceptable to the national Parks and Wildlife Service’. [2/155] 149 On the same day, letters in similar terms were written by Mr Hogarth to Minister Hay and to Minister Schipp. [2/189; 2/194]
‘4.2 WATER POLLUTION CONTROL
4.2.1 Proposed Controls
The need to institute water quality controls on runoff into the Hacking River has been expressed in a number of reports, particularly those the NPWS (1985), the State Pollution Control Commission (1986) and Sinclair Knight (1989a) the most recent study of Sinclair Knight (ibid) established the desirability of constructing a detention basin in the area’s most heavily urbanised catchment, Camp Creek and identified an appropriate location for such a structure just above the confluence with the Hacking River in Garrawarra SRA.
A wet detention basin of the type proposed would significantly improve downstream water quality by trapping sediment and associated nutrient rich detritus. Taking into account future residential development it has been estimated that a detention basin on Camp Creek would decrease pollutants by between 50% and 90% as shown in Table 1.
An alternative exists to locate some smaller containment ponds on various tributaries on the Hacking River. Independent consultants have identified the lower section of Camp Creek as the optimum location to maximise cleanup of runoff from the area. . . .
The proposed detention basin on Camp Creek would cover an area of approx 0.85 hectares within Garrawarra SRA. Growth of appropriate Macrophyte endemic to the area, would be encouraged.
A tentative location for the proposed basin is shown in Figure 3. It can be seen that there would be some adverse impacts associated with this development, including loss of existing vegetation and visual intrusion. A preliminary field survey has shown that the site in question contains some rainforest species but that these are well represented in the surrounding area. Furthermore, the basin would develop its own ecology, attracting birds and other wildlife. It would have significant water quality benefits and could be used as a source of water for fire fighting.
As a part of its proposal, the Company is prepared to finance the design and construction of the basin(s). The aspect of the proposal does, however, raise three issues which are discussed subsequently.
4.2.2 Appropriateness of Basins
The basin would be located within Garrawarra SRA and may not be considered appropriate within this context. Nevertheless, the more restrictive provisions applicable to national parks, historic sites and nature reserves, regarding leases and licences contained in Section 151 of the National Parks and Wildlife Act, 1974 would not be applicable. In the case of an SRA the relevant provisions are Section 153 and Schedule 90A Clause 19 where there are no restrictions as to the purpose for leases or licences. Nonetheless, the proposed detention basin on Camp Creek in Garrawarra SRA has, in addition to reducing the impacts of moderate urban expansion at Helensburgh, a real nexus with the existing SRA in that they would significantly reduce existing levels of pollution in the Hacking River which in turn adversely affects Garrawarra SRA and Royal National Park. Thus the detention basis would be directly relevant to the management of the existing SRA and National Park. The need to improve water quality in the Hacking River is reinforced by the importance of water based recreation in Royal National Park at Audley.
4.2.3 Environmental Assessment
As has been discussed previously the proposed detention basin would be likely to have overall positive impacts. Despite this there would still be some possibility of some adverse environmental effects and an assessment would be necessary. Following agreement in principle to the proposal by the NPWS the Company would review environmental factors in accordance with the NPWS’s requirements.
4.2.4 Construction and Management
The Company would construct, at its own cost, the detention basin in accordance with any conditions applied by NPWS following the environmental assessment . . .
Although the proposal to construct a detention basin with existing SRA is not a normally preferred activity, it is considered that the proposal should be favourably considered by NPWS based upon the following:
* the proposed site of the basin within the SRA is the optimum location for improving water quality;
* the basin would significantly improve existing water quality in the Hacking River and thereby contribute to better natural resource management in Garrawarra SRA and Royal National Park; and
* there is a strong nexus between the basin and the management of the SRA by virtue of its potential construction to improving existing water quality.
150 By letter dated 16 May 1990, the Minister for Environment, Mr Moore, wrote to Mr Hogarth asking for clarification of a number of aspects of the 8 May proposal. [2/195]
16 May 1990
151 By letter dated 21 May 1990, Mr Hogarth wrote to the Minister for the Environment, the Hon. T Moore MP, providing further data in answer to questions raised with Mr Hogarth and stating inter alia, ‘we envisage that the transfer will proceed along appropriate lines, largely governed by the rezoning and legal requirements for our proposal to be implemented’. [2/196]
21 May 1990
152 By letter dated 29 May 1990, Mr Hogarth wrote to the Minister for the Environment effectively making plain that the National Parks and Wildlife Service would only receive a transfer of the land once the rezoning would have occurred. [2/203]
29 May 1990
153 On 31 May 1990, a valuation was carried out by Jones Lang Wootten under instructions from AGC of the then landholdings of 286.95 hectares. The valuation notes that the main detrimental factor for the proposed subdivisions was the high development costs, particularly in reference to the construction of necessary wet detention basins for water pollution control. The report identified the anticipated costs for development at $54,100 per lot. The valuation assumed that the land would be rezoned residential 2(a) but utilised a discount rate of 15 per cent as suitable bearing in mind the doubts that the land would be rezoned. Assuming that 600 lots could be developed at a development cost of $55,000 per lot, the valuation gave a figure of approximately $13,300,000. Three scenarios were in fact furnished by the valuation setting a range between $13,300,000 and $16,000,000. [2/209]
31 May 1990
154 Mr Hogarth’s evidence was that in about late 1989 and 1990 Mr Walker, Mr Severino and himself met on a number of occasions to discuss the possibility of a joint venture between Mr Hogarth and his companies on the one hand and Mr Walker and his companies on the other for the purpose of residential development of that part of the Ensile land then known as the ‘Boral land’.
Late 1989 into 1990
155 In his statement, Mr Hogarth’s evidence was that in about May 1990 he was approached by Mr Walker who said that he was looking at the possibility of being involved in the Hogarth land at Helensburgh and asked how Mr Hogarth was progressing with that. Mr Hogarth said that he had been working away at the matter but the real problem was that he had a problem with the motel at Cronulla with AGC. On Mr Hogarth’s evidence Mr Walker said that he might be able to help Mr Hogarth with that as he knew a lot of people in Westpac and had a good relationship with Westpac and as the Walker Group generally banked with Westpac. Mr Hogarth stated, on his evidence, that the problem stemmed from an overseas loan which Westpac had organised through their Singapore branch in Swiss currency and that in addition to the mortgage over the motel, AGC had insisted on taking a mortgage over the land purchased from Boral. On Mr Hogarth’s evidence, he also informed Mr Walker of the history of his dealings and joint ventures with AGC. Mr Walker said that this would mean that Westpac would be running the account. [Hogarth para 14]
May 1990
156 On Mr Hogarth’s evidence, between May 1990 and August 1990, he and Mr Walker had a discussion in the presence of Mr Severino to the following effect:
Between May 1990 and August 1990
157 By letter dated 21 June 1990, the Minister for Local Government replied to Mr Hogarth’s recent correspondence concerning urban development proposals at Helensburgh. The letter advised that as Mr Hogarth was aware, urban development proposals in Helensburgh within the Camp Creek catchment were constrained by the inability to locate a suitable site for a stormwater pollution control pond outside the Garawarra State Recreation Area. The Minister assured Mr Hogarth that his proposal was being given close consideration. [2/232]
‘Mr Walker: It looks as if you are going to get rezoning Bob. All the indications seem to be there, particularly from our contacts, including the pollies.
Mr Hogarth: Yes, Lang. If it wasn’t for the Rex Jackson problem we would be building houses by now.’
[Hogarth’s statement, para 15]
21 June 1990
158 By letter dated 6 July 1990 Mr Hogarth wrote to the Minister for Local Government, pointing out that the current Helensburgh plan had been developed over the past five to six years and that he was concerned hint in the Minister’s letter that an additional local environmental plan may be initiated after a further lengthy period of discussion on the matter. He suggested a meeting with the Minister if possible. [2/235]
6 July 1990
159 By letter dated 2 August 1990, the Minister for Local Government and Planning wrote to Mr Hogarth repeating that as Mr Hogarth was aware, development in the Camp Creek catchment area was dependent upon a suitable site being found for a stormwater pollution control pond. He noted Mr Hogarth’s initiative to commission Unisearch to prepare a detailed study to potential sites for a stormwater pollution control pond outside the Garawarra State Recreation Area on Hogarth land and suggested that such study be submitted to the Council in the first instance. [2/248]
2 August 1990
160 By letter dated 20 August 1990, Mr Kidd sent to Mr Alan Andrews MP a draft of a letter which might be sent by Mr Andrews to Mr Hannaford [2/249]. That proposed letter [2/250] set out key points of Lady Carrington Estates’ then proposal. One suggested key point read:
20 August 1990
161 By letter dated 30 August 1990 Mr Severino wrote to Mr Hogarth stating inter alia:
‘If the offer from Lady Carrington Estates is not accepted it is likely that the local community will ultimately be required to fund a containment pond and water clean up mechanism in Camp Creek from its own funds.’
30 August 1990
162 The notes which were attached to this letter referred to the “Lang subdivision” and stated, inter alia:
“After you have read through my notes, please contact me and we can meet with Lang and start putting some detail together. If there is anything in the notes that you think is drastically wrong, let me know and I will make the necessary changes before next we get together.
I have also sent a copy of this to Lang.”
[3/8]163 On the plaintiff’s case towards the end of July 1990 or early August 1990 an early note in Mr Walker’s handwriting [2/247] uses the letters “JV”. It reads, inter alia:
“(1) Walker and Hogarth form a joint venture entity with Walker holding 52 per cent and Hogarth 48 per cent - A Limited. Walker holds effective control.
(2) A limited takes an option to purchase all land held by Ensile Pty Ltd at a price to be determined by the following formula [a formula is then set out].
(3) The effect of the 100 per cent is to put a “bonus” capital profit into Ensile Pty Ltd and thus would be tax free …
(5) Walker would contract with A Limited to provide all civil engineering earth works, design and project management at cost plus an agreed margin.
(6) The above option would be triggered by:
(a) approval for lots being granted to a total in excess of 700 from the main area, Walker Street and north area . . . .
(7) Hogarth’s equity in A Limited would be assured by the contribution of land at the value as calculated above.”
[3/10]164 In October 1990, Kevin Mills & Associates, Ecological and Environmental Consultants, prepared an environmental impact report assessing the environmental impact of the proposed urban development at Lady Carrington Estates. The report includes a detailed examination of aspects of the problem of water quality and the ways in which these problems might be able to be overcome. It discusses a ‘multiple ponds strategy’. It discusses the intention to construct a series of detention ponds to control the quality of the runoff from the development area. It discusses the impact of constructing retention basins. [3/14]
“AGC/Walker joint venture or … .
October 1990
It uses the words “re-zone” and “scale in relation to number of blocks”.
165 By letter dated 23 October 1990, AGC wrote to Genepa Pty Ltd, Attention Mr Hogarth, referring to AGC’s approval for an increase in loan for $8,186,000 and stating, inter alia:
23 October 1990
166 On 7 November 1990, the National Parks and Wildlife Service wrote to the Wollongong City Council in relation to the draft Helensburgh Plan no. 89/13. The letter dealt in detail with the Services’ review of the draft plan. The Service expressed the view that if the proposed and possible developments outlined in the draft plan were approved, considerable impacts would occur to the natural cultural and recreational heritage values of the area. The letter included:
‘We wish to specifically clarify paragraph 5 in relation to the review on 31 December 1990 for the development approval on the Alison and Clyde Road, Cronulla project and Helensburgh rezoning. Our review will require that we have in place all security noted in the development approval and more particularly the land described in the area known as “the road closure” and that a current development approval as contemplated by the valuation be in place and that the Helensburgh rezoning is granted .’
[3/38] [emphasis added]
7 November 1990
167 The trade-off referred to was set out in the following paragraph:
‘This trade-off is based on the assumption that further development can occur with a minimum of impact on the area’s natural value. Any development should be restricted as much as possible to the existing township of Helensburgh.’
168 The letter generally supported the draft Helensburgh Plan in principle, provided a number of the National Parks and Wildlife Service’s recommendations were adopted. It was considered that some limited development could occur in new areas around Helensburgh, subject to a number of water quality caveats which would require further investigation. [3/52] 169 On the same date, the National Parks and Wildlife Service wrote to Lady Carrington Estates [Mr Hogarth] enclosing the submission. The National Parks and Wildlife Service were ready to discuss the land swap more fully but considered any further discussions should be held jointly with Wollongong City Council as those issues were so closely tied to the draft plan. [3/51]
‘The dilemma facing the Service and the wider community is therefore, whether to object to any further development in the Helensburgh area because of its environmental impact and thereby retaining the present situation with its problems of poor water quality and uncontrolled degradation of the area’s natural values or, to permit new areas to be developed in an environmentally acceptable manner in less sensitive areas whilst retaining permanently the land of high conservation value as a trade-off.’
170 On the plaintiff’s case at a meeting towards the end of 1990 Mr Walker suggested to Mr Hogarth that he would approach AGC with a view to seeing if he could strike a deal with AGC and Westpac. It was plainly important if it was to become part of any arrangement for a joint venture, that Mr Hogarth be freed from any liability to Westpac or AGC. As part of this Mr Walker asked for a letter of authority from Mr Hogarth which he could use with Westpac/AGC. Such letter of authority dated 6 December 1990 [3/70] was in due course provided. [See also 3/71 letter in Mr Hogarth’s handwriting]
Late in 1990
171 On 20 November 1990 the State Manager of New South Wales for AGC, wrote an internal memorandum [3/66] stating:
20 November 1990
172 A note of Mr Walker’s appears at 6/165 and is in handwriting. The date ’28 October 1993’ is not in Mr Walker’s handwriting but was written by Mr Hogarth on a later occasion on to Mr Walker’s note. This matter is dealt with below. Mr Walker’s own note reads as follows:
“This morning I met with Messrs Lang Walker and John Hughes of the Walker Group to discuss the affairs of Genepa at the specific request of Bob Hogarth.
Walker is looking to acquire the Helensburgh land for $5M as is today, with settlement on rezoning and development approval. In Walker’s view (and so he says Hogarth’s) the earliest this would be expected would be November 1992. Walker is prepared to pay for all of the professional and statutory costs which he believes would amount to about $.700M. AGC would defer all interest pending settlement. They are prepared, however, to negotiate a profit sharing facility in the event approval is forthcoming …
Walker is meeting with Hogarth some time this week and if all parties are interested in progressing, a further meeting would be held week commencing 3/12/90”.
[3/66]173 It seems likely, although the matter is not clear, that this note related to discussions held at about late 1990.
‘‘1. Walker purchase RMH companies which hold the Allison Road and Helensburgh properties 100 per cent.
2. Purchase price $2million cash.
3. Walker and RMH enter 50/50 JV to develop Allison Road and rezone Helensburgh. Allison Road Deed to be used for finance.
4. Walker to hold management control.
5. Rezone to take place within 2 years on Helensburgh.
6. If rezoned Walker will provide all development finance to develop land. Deed required.’
[6/165]
174 On 6 December 1990, Genepa (Mr Hogarth) sent a facsimile to Mr Walker advising:
6 December 1990
175 In 1991 Mr Dransfield resigned his position with the New South Wales Government and returned to Walkers.
‘As discussed per phone this date we confirm our understanding of your preliminary discussions with AGC concerning their funding of the Cronulla Beach Resort and the lands at Helensburgh.
This communication will confirm our permission for AGC and yourself to discuss these referred to matters and that you will keep this information confidential.’
[3/70]
1991
176 Lady Carrington Estates [Mr Kidd], in letters to the Wollongong City Council and to the Minister for Environment, stated that Wollongong City Council was holding a special meeting on 18 April to determine the draft Helensburgh plan. Mr Kidd stated, inter alia, a concern that a number of issues still required investigation. Mr Kidd stated a concern that the Council appears to be moving at a rapid pace to finalise the Helensburgh Plan and that Lady Carrington Estates was ‘genuinely concerned that if this plan as it affects our land is determined at this stage it could severely jeopardise our negotiations with the Service’. In these letters, Mr Kidd advised that Gutteridge Haskins and Davey [GHD] had made an initial assessment and identified a number of areas, including water quality for further consideration work that would be undertaken over the next three to four months. A request was made that Council defer consideration of the land controlled by Lady Carrington Estates as part of the Helensburgh draft plan, pending GHD work and completion of the negotiations with the National Parks and Wildlife Service. [3/125]
5 April 1991
177 On 8 April 1991, Deloitte Ross Tohmatsu, acting on behalf of Genepa and the Hogarth interests, made formal application to AGC for additional funding to enable the Group to proceed with the rezoning of the Helensburgh land. The application was for the facility to extend to 31 October 1992 and identified what was referred to as a critical timetable to be adhered to, namely: · Rezoning application to be completed and lodged by 31 October 1991. · Rezoning to be approved and gazetted by 30 April 1992. 178 The penultimate paragraph of Deloitte’s letter was in the following terms:
8 April 1991
179 By letter dated 10 April 1991, Lady Carrington Estates [Mr Kidd], wrote to Mr Hay, the Minister for Local Government and Planning, attaching copies of the correspondence of 5 April to the Wollongong Council and to the Hon T J Moore. [DX 4/258]
‘We recognise that to achieve finality within the desired time frame it will be necessary to ensure that all reports are promptly produced and discussions and negotiations with appropriate authorities undertaken without delay. To this end we are pleased to report that GHD have already met with officers of the Department of Housing and Wollongong Council.’
[3/127]
10 April 1991
180 On 16 April 1991, a meeting took place between Mr Hogarth, representatives of the National Parks and Wildlife Service, a representative of Wollongong Council and Mr Dwyer of GHD. [3/130]
16 April 1991
181 By letter dated 22 April 1991, AGC wrote to Deloittes, responding to Deloittes’ letter of 8 April 1991 and confirming that AGC’s requirement included the following:
22 April 1991
182 The letter also advised that AGC’s requirements were not negotiable. [3/151]
Lady Carrington Estates to pledge the residual 320 hectares to support the rezoning and to allow AGC to take a registered first mortgage over same should at October 31 1991 in AGC’s opinion the rezoning not occur by April 30 1992.’
183 On 24 April 1991, Mr Kidd sent a facsimile to Mr Hogarth generally discussing the proposed strategy for the forthcoming meeting which had been fixed with Wollongong City Council, following discussions between Mr Kidd and GHD. [3/159]
24 April 1991
184 By letter dated 29 April 1991 or approximately 29 April 1991, the Minister for Local Government and Planning wrote to Lady Carrington Estates, attention Mr Kidd, in the following terms:
29 April 1991 - The Minister for Local Government and Planning notifies Lady Carrington Estates that the Wollongong City Council has resolved not to proceed with the Helensburgh Urban Expansion Proposals’
185 By letter dated 27 June 1991, AGC wrote to Mr Hogarth referring to his attendance at AGC’s office of 28 June 1991 and stating, inter alia:
‘I refer to your recent letter keeping me informed of progress concerning your company’s urban development proposals at Helensburgh.
After assessing the large number of submissions received as a result of the public exhibition of the local environmental study and draft local environmental plan, the Wollongong City Council resolved on 29 April 1991 not to proceed with the Helensburgh Urban Expansion proposals.
27 June 1991
I trust that this information clarifies the current situation for you.’
[DX 4/259]
186 On 10 July 1991 Mr Kidd wrote to Genepa, referring to discussions with AGC and AGC’s nomination of GHD as consultants for the rezoning work and Lady Carrington Estates’ acceptance of GHD. The letter advised inter alia:
‘We consider that the meeting was successful and we are encouraged by your acceptance of our appointment of Cooper & Lybrand to independently review your financial position and that of your associated companies. . . . We also wish to confirm our mutual agreement to retain [GHD] . . . as consultants to further investigate the feasibility and viability of the Helensburgh project.
Upon receipt of the review by Coopers & Lybrand and feasibility by [GHD] we will be able to propose a course of action which should be mutually satisfactory.’
[3/164]
10 July 1991
187 By letter dated 25 July 1991, the Minister for the Environment (Mr Moore), wrote to Mr Kidd of Lady Carrington Estates thanking him for his letter of 5 April regarding his company’s proposal for transfer of land as an addition to the Garawarra State Recreation area. 188 The letter further referred to a meeting between National Parks and Wildlife and Mr Hogarth of 16 April 1991 and to Council having been told that the National Parks and Wildlife Service was willing to accept land for addition to the state recreation area, provided that acceptable environmental controls were put in place and an appropriate management strategy for the developed areas was prepared. 189 The letter advised, inter alia:
‘It is our understanding that payment for this work should be routed through [Lady Carrington Estates] and we must therefore request that this cost be guaranteed to [Lady Carrington Estates] by Genepa . . .
We also understand that AGC has agreed to guarantee final payment to GHD in the event that Genepa should be unable to pay this cost.’
[3/169]
25 July 1991
190 On 13 August 1991, a meeting took place between Mr Hogarth and Mr Kidd, AGC, Coopers & Lybrand and Deloittes. Mr Guy was also present. 191 Mr Hedge of Coopers & Lybrand indicated that AGC had three areas of concern, these being the need for AGC to fix its security position up, for AGC to ascertain the amount owed to it and for AGC to ascertain where the future funding was to come from. Such future funding being referred to as the moneys required to get the DA through at Helensburgh and ongoing funding to keep the Hogarth Group operating and particularly Ensile. 192 Mr Guy’s file note of the meeting includes, inter alia, as follows:
‘In the event, of course, Council resolved not to proceed with the draft Helensburgh Local Environmental Plan in its present form. Given that your company now intends to revise its development proposals, the Service will await the outcome of the further studies that you have commissioned, and I have agreed that it should assist in providing resource information where available. Any future participation by the Service in negotiations with Lady Carrington Estates will naturally depend on resolution of the general planning issues for Helensburgh.
I anticipate a further report from the Service when the proposed studies are complete.’
[3/170]
13 August 1991
193 By facsimile dated 15 August 1991, Mr Kidd forwarded to Mr Hogarth five pages of Mr Kidd’s notes of the AGC/Coopers & Lybrand meeting of 13 August 1991. Those notes include the words:
‘4. A discussion then ensued about the question about what was the debt owing. AGC believes that it is approximately $10 million. Further discussion then ensued as to how could this be calculated and AG went through the history of the transaction and asked how could a loss of approximately $3 million in 1982 be $18 million in 1991.
Hedge indicated that according to the accounts of Genepa for the 30th June 1990, the onshore component of $3.3 million was listed at $9.5 million. The offshore component of $2.7 million was brought back onshore by AGC on 19 September 1990 and is now $5.3 million . . .
6. AG indicated that in his opinion there was a question mark on the justification for all or any of the valuations that had been carried out over the years as they had all been done on a hypothetical basis . . .
11. In conclusion the parameters for the immediate future are:
A. That a full accounting is to be supplied by AGC to Genepa.
B. That there must be agreement reached between AGC and the Hogarth Camp.
The Westpac Board are becoming very anxious because nothing has happened in this matter for in excess of 12 months and HG referred to the exchange of correspondence commencing in July 1990.
C. Once agreement had been reached, then he would make a recommendation to the Westpac Board and felt confident that provided that recommendation was reasonable and supported by him then it would be supported by the Board.’
[3/171]
15 August 1991
194 The notes also include the words:
‘AG - 460 notices - why not withdraw. Only when borrower commercially sensible.’
195 On 20 August 1991, Mr Guy forwarded a memorandum to Mr Hogarth, setting out a proposal which he saw as possibly acceptable to all parties in an endeavour to resolve the many outstanding issues. The proposal included, inter alia, the following:
‘All good words spoken - loan in non-performing category. Bank provision of loss of [$10million].’
[3/176 and following]
20 August 1991
196 A handwritten note in relation to the above described sentence dealing with the mortgages uses the words ‘guarantees of RM and BF Hogarth’. 197 The reference in handwriting to guarantees were as securing the borrowings for the building of the motel. 198 Mr Guy’s note also included as part of the suggested solution by Hogarth’s family/AGC, a proposal that:
‘A. Issues
1. Doubts about the consent of the Genepa Trust to the 1984 borrowings.
2. Faults in AGC documentation.
3. Possible problems for AGC in not securing best sale price on the realisation of both the motel and the Helensburgh land.
4. AGC’s negligence in respect of the mismanagement of the offshore loan coupled with the unilateral bringing back of the offshore loan moneys by a Westpac onshore . . .
10. The lack of security over the [balance of Ensile] land. [Words in parentheses in handwriting.]
B. AGC’s Strengths
1. Monetary defaults.
2. Mortgages over units in motel and Helensburgh land.’
199 Mr Guy’s notes as to Hogarth’s family’s proposal were in the following terms:
‘AGC should:
A. Fund the acquisition by Genepa of Highfield Groves land.
B. Permit Ensile to give Lady Carrington Estates control of the Helensburgh and Otford land. The intervention of Lady Carrington Estates would ensure that capital gains tax considerations are not a responsibility in the future of either Ensile or Lady Carrington Estates. . . .’
200 The document also provided an examination of the perceived advantages to AGC, including that AGC would not be involved in any litigation with the Hogarth family. [3/182 and following]
‘1. To dispose of all property in a reasonable manner and specifically -
(a) To get the motel ready for sale with the appropriate Westpac guarantee arrangements to be concluded in conjunction with AGC and the selling agents.
(b) Obtain a DA on the Allison Road sites . . .
(c) Look at various alternatives to realise 7 and 9 Gerrale Street, Cronulla.
(d) Obtain a development approval on the Helensburgh land.
(e) Assist in the development of the Walker Street, Helensburgh properties.
2. The net return both income and capital on disposal of all property to be divided on a 50/50 basis.’
201 On 29 August 1991, the National Parks and Wildlife Service wrote to Mr Hogarth to clarify the Service’s position with respect to future proposals for urban development at Helensburgh made by Lady Carrington Estates. The letter advised, inter alia:
29 August 1991
202 By letter dated 29 August 1991, GHD wrote to Mr Hogarth seeking to place on record GHD’s advice to Mr Hogarth ‘about the sensitive state of the negotiations with the relevant authorities with whom we are dealing in our effort to obtain the desired rezoning of the Lady Carrington Estate’. 203 The letter advised, inter alia:
‘As indicated in the Service’s submission on the draft Helensburgh plan to Wollongong City Council the Service considers that the construction of a basin within Garawarra State Recreation Area may improve existing water quality in the Hacking River but no firm evidence has been provided to substantiate this claim. In the absence of scientific data and different standards for the control of pollutants in urban run-off, it is difficult to support the construction of such a structure in the State Recreation Area, particularly where there is potential for further pollution of the river.
In consideration of this and the fact that Garawarra State Recreation Area was gazetted primarily to protect its natural values, I am not in a position to agree to structures for treating run-off from existing or proposed residential developments being placed in the State Recreational Area.
I am happy for Service officers to continue to negotiate with your company over other matters such as the addition of lands to the State Recreation Area.
I understand that one of the difficulties facing your company in its proposal to offer land to the Service for addition to the State Recreation Area is a block of about 40 hectares owned by Mr Thompson in the middle of your company’s holdings. In the event that Council approves your development and some of your company’s land is added to the State Recreation Area, this block would present unacceptable problems to the Service for adequately managing the bushland in the upper catchment of the State Recreation Area. Consequently I will be in a much better position to consider your company’s development and the proposed additions to Garawarra State Recreation Area if Lady Carrington Estates is able to successfully negotiate acquisition of this land with the owner . . .’
[3/185]
29 August 1991
204 By letter dated 29 August 1991, Deloittes wrote to AGC setting out a summary of the manner in which Mr Hogarth believed an amicable settlement to the benefit of both parties could be reached. This included the disposal of all property in a reasonable manner and specifically the obtaining of a development approval on the Helensburgh land. It also included the net return, both income and capital, on disposal of all property to be divided on a 50/50 basis. [3/190]
‘In our discussions with the many officers of these authorities, we have gained the impression that there is a strong degree of support for the expansion of the town of Helensburgh, provided that environmental, national parks and infrastructure issues can be resolved. Studies relating to all of these matters are well advanced, and we will shortly be in a position to confer with the appropriate people in the Government and Local Government Authorities.
Recently, I had the opportunity of talking with Mr Joe Schipp, Minister for Housing and the Water Board specifically about your project. He was most interested to hear that you had received the letter from Mr Tim Moore and stated that he was very pleased to know that Mr Moore was taking a positive attitude towards the expansion of the National Park, together with the urban expansion of Helensburgh.
He made reference to the fact that an attitude had prevailed for a time in some areas where it was considered that if no Government action were taken, the land would become rezoned as an environmental protection area. This would result in the land being sterilised and virtually becoming a ‘pseudo’ national park. Mr Schipp stated that he was opposed to this view and supported a negotiated arrangement.
It is apparent, however, that this could be the attitude that would apply if we cannot demonstrate that we are seriously endeavouring to solve the various issues that have been identified.
It is therefore essential that the highest level of professional skill be applied to the job, and every effort made to display our dedication to, and confidence in, the project.
Because of the need to make the above commitment, it is essential that no hint of any commercial problem be raised at this stage, for it is likely that if it were perceived that the project could not proceed for financial reasons, we would lose the support currently being displayed. There is also the very real risk that DOP would allow the section 65 Certificate to issue, thus permitting Wollongong City Council to almost immediately seek the environmental rezoning for your lands . . .’
[3/188]
29 August 1991
205 A detailed memorandum from Mr Hogarth of 13 September 1991 addressed to AGC, set out the Hogarth Group’s draft proposal.
13 September 1991
206 What appears to have been a final form of the Hogarth Group’s proposal to AGC was dated 18 September 1991. This is to be found at 3/197. Under the subheading ‘Releases’ the memorandum, proposed that the Hogarth interests would jointly and severally release AGC and Westpac in respect of :
18 September 1991
207 Under cross-examination, Mr Hogarth accepted that this proposal included a thinly veiled threat.
(i) Any claim under the profit share arrangement of 1982.
(ii) Damages in respect of the off-shore loan transaction of 1984.
(iii) Damages in respect of AGC’s unilateral rescission of the agreement to finance and purchases from LCE of the Helensburgh blocks in October 1985.
(iv) Damages in respect of Westpac unilaterally bringing the offshore loan onshore on 19 September 1990.
(v) Any claim which Genepa has in respect of the guarantee fees paid to AGC at the insistence of Westpac in respect of the offshore loan.
208 By letter dated 10 October 1991, AGC wrote to Mr Hogarth advising that his proposal whilst recognised as a most genuine offer to assist the situation, was not considered totally acceptable. This AGC letter suggested a somewhat alternative proposal in detail and advised that this alternative was put forward following preliminary and cursory comment from AGC’s administration which had indicated an unwillingness to commit the company to a five year association and that of a joint venture flavour. [3/205]
10 October 1991
209 On 15 October 1991 Mr Hogarth forwarded a memorandum to AGC, again setting out a detail of the proposed agreement, moving towards documenting the concept developed between AGC and Mr Hogarth’s interests in previous discussions. In so far as the proposed arrangement was to deal with consultants, the following appears in this document:
15 October 1991
210 An internal Wollongong Council Manager of Operations Report of 4 [or 9] December 1991 dealt with the Helensburgh Waste Disposal Depot. It treated with a question without notice which had sought information with respect to that depot as to what type of rubbish was deposited and how much coal waste, as to the likely life of the depot, as to leachate problems and as to a likely site for a new tip when the present one was completed. It stated, inter alia:
‘21. The arrangement continue to employ the consultants [GHD] in respect of the Helensburgh land.
I understand their fees to be approximately $850,000 and this has to be paid as to an initial amount of $70,000 immediately and thereafter progressively over the next four to six months to $350,000 with the balance over 18 months after rezoning.
22. GHD should be retained at a cost of approximately $95,000 to obtain a development approval in respect of the Alison Road site from SSC . . .’
[3/207]
9 December 1991
211 By letter dated 30 January 1992, Messrs Gye Perkes & Stone wrote to AGC, advising that they had been contacted by Mr Hogarth and on behalf of Genepa, Ensile, Lady Carrington Estates and Mr and Mrs Hogarth had been asked to express their collective concern at the extraordinary delay that appeared to be occurring in AGC’s reaching a final decision and future arrangement in relation to conduct of the accounts. 212 The letter complained of the delays in reaching a satisfactory resolution with AGC. The letter included:
‘It is acknowledged that leachate has escaped from the depot on occasions after heavy rain over the past two or three years as the existing leachate control system was overloaded. However, additional works to install new leachate collection lines, pumps in stormwater sedimentation ponds are now complete and these should overcome these past problems. However it must be recognised that additional leachate collection works will be required before filling can commence on the site of the old Sanitary Depot. . .’
[3/214]
30 January 1992
213 Also on 30 January 1992 GHD wrote to AGC, pointing out that all the appropriate planning work and environmental studies had been completed and that GHD was ready to implement the next stage of the project which was to make the formal submission to Wollongong City Council and to those Government Departments and instrumentalities which would be involved in the total scheme. 214 GHD pointed out that the proposal which had been prepared involved the future development for the whole of Helensburgh and that for this reason it was of significant interest to the Minister of Planning and his department. They pointed out that the proposal would also impact upon other areas of Government and that the Ministers for Environment, National Parks and Wildlife, Local Government and the Water Board, would all have an involvement with the project. They continued:
‘The delays which are now continuing in the failure to resolve this matter consequent upon the failure to satisfactorily resolve this matter . . . has caused and is now causing considerable difficulty and embarrassment to the client and more particularly the consultants which were engaged on this project at your suggestion, Messrs [GHD]. Indeed it is relevant to remind you that you directly approached GHD to assist in determining the status of the Helensburgh property. Some six months work has been carried out in preparing for presentation to Wollongong City Council a rezoning application in respect of Ensile’s land at Helensburgh. GHD made representations to the Director of Planning in October 1991 on behalf of the client and yourselves and indicated that it would expect to be in a position to lodge a complete rezoning proposal by the end of January 1992. To this end and we might add, with your concurrence, many consultants have been engaged by GHD to carry out exhaustive planning investigations and reports and associated documentation for the presentation. These reports have substantially been completed but the various consultants, we are now informed by GHD, have indicated that they do not propose to release these final reports to GHD unless some satisfactory arrangements have been made regarding payment of their respective fees. GHD, we are now informed, are acutely embarrassed by this situation and have very recently been again contacted by the Director of Planning who is asking that these documents be filed with Council immediately as both the Director of Planning and the Minister are anxiously awaiting the lodgment so that the appropriate section of the Planning Act can be invoked to permit the planning process to continue . . .
The writer had a meeting with Mr Dwyer and two of his assistants from GHD yesterday and it is very clear that GHD is becoming acutely embarrassed by the many difficulties that the lack of resolution of this matter is causing . It has been suggested to us by both the client and GHD that if there are other parties within Westpac and/or AGC that need to view the presentation, then such a presentation should be arranged (and in this respect GHD would make all efforts to be available on very short notice) forthwith. GHD had very clearly indicated to the writer that time is of the essence in lodgment of the rezoning application . . .
The client and GHD wish to make it clear that this is not a situation where you have the opportunity of delaying the making of any decisions until rezoning of the Helensburgh land has occurred and a decision in support of the arrangement is required immediately . . .’
[4/158]215 By letter dated 14 February 1992, AGC wrote to Westpac confirming that arrangements had been made with Mr Ross of Westpac for AGC to hand deliver all correspondence files for the subject accounts. By this time it appears that Westpac had taken over conduct of the accounts. [4/164]
‘To date, we have had support from all of these areas of Government which, to a large degree, has been based upon GHD’s credibility.
Because of the size of the proposal, the approval process through Local and State Government will involve many groups all of whom will wish to know that the project is capable of implementation before they expend time on its examination.
For this reason, it would not be prudent to make the formal submission to the authorities until the funding of the project is arranged. In fact, GHD would not be prepared to actively promote the project until we could state with some authority that the development was capable of implementation by the applicant, and that all costs associated with the development could [indecipherable] . . .
Your recent advice that the funding arrangements may now be controlled by Westpac Group Loans Management instead of AGC Loans Management could result in further delays while the Westpac officers gain some understanding of the scale of the project.
As the timing for proceeding with the project is becoming critical , could I suggest that arrangements be made immediately to enable the GHD group to brief the people charged with the responsibility of considering the funding arrangements so that they will be acquainted with the significance of the project . . .’
[4/162]
14 February 1992
216 In April 1991 Lady Carrington Estate Pty Ltd had commissioned Gutteridge Haskins & Davey Pty Ltd (GHD) to conduct comprehensive engineering, environmental and planning studies in respect of the Lady Carrington Estate holdings. 217 Subsequent to the preparation of these studies, GHD lodged a formal application dated 17 March 1992 with Wollongong City Council, seeking rezoning of part of the Lady Carrington Estate land to permit urban development in the form of some 1200 dwelling units. The lodgement of the application also served as an objection to Council’s Draft LEP 1992 which had proposed to rezone those lands to a zoning further inconsistent with the joint venture’s objective of subdivision. 218 The application is divided into two volumes. The first volume is entitled ‘Summary Document’ and is organised into the following sections:
17 March 1992 - The GHD 1992 application for rezoning [4/168]
1. Introduction
5. Land Use Principles/Concepts Urban Design Criteria
2. General Site Information
3. Zoning History
4. Helensburgh Strategic Plan - Opportunities/Constraints
6. Stormwater Strategy and Water Quality
7. Vegetation Assessment
8. Fauna Assessment
9. Visual Analysis
10. Landscape
11. Heritage/Archaeology
12. Services
13. Bushfire Assessment/Strategy
14. Land Management
15. Social and Community Needs Study
16. Traffic/Transportation
17. Consultation - Statutory Authorities
18. Conclusions/Recommendations 219 The strategy adopted by GHD in making the application on behalf of Lady Carrington Estate is well shown by the following [4/185]:220 The second volume is entitled ‘Working Papers’ and includes a number of specific studies including flora, fauna and archaeological surveys, visual analysis, fire management guidelines and socio-economic analysis. Of particular relevance to the issues now in dispute is the Helensburgh Stormwater Management Strategy undertaken by GHD and dated 12 March 1992. 221 By way of background information, the application at 4/175 summarises the zoning history of the land up to that point in time. In particular, the application had reference to Council’s early strategic plan for the future of the Helensburgh area, as outlined in the Draft Helensburgh Plan 1990. It was stated in the application as follows:
‘Studies undertaken as part of this application, together with information already collected for the Helensburgh area, demonstrate that urban development of some lands can take place subject to appropriate design measures , without compromising the environmental integrity of adjoining lands which have significant conservation value. In fact, the largely uncontrolled nature of existing development, both urban and rural, is already responsible for adverse environmental impacts on surrounding and downstream lands. The development of Lady Carrington Estate, and possibly other suitable lands, will enable a number of these existing adverse impacts (such as water quality) to be rectified at no cost to the community, thereby providing a net benefit to the environment .’
[emphasis added]
222 The application then has reference to the conclusion of the Council officers’ report to Wollongong City Council of 18 April 1991 which had made the point that the southern Sydney/northern Wollongong area was facing a shortage of residential land to cope with the demands of growing population and that Helensburgh had the potential to accommodate a limited amount of urban development which would alleviate some of this demand. The conclusion had, however, recognised that Helensburgh was located in a very environmentally sensitive area and that development should only be permitted if it could be undertaken in an environmentally acceptable manner [4/177]. 223 In the introduction to the Helensburgh Stormwater Management Strategy the stormwater issue is clearly flagged:
‘CAMP CREEK CATCHMENT: while the Helensburgh Plan went into considerable detail about the development potential of land within the Camp Creek Catchment, a number of issues remained unresolved at the time the plan was placed on exhibition. These unresolved issues related primarily to the treatment of stormwater with water quality control ponds….concerns about the location of ponds… The Draft Helensburgh Plan therefore did not recommend any rezoning within Camp Creek catchment other than a small area of Department of Housing land where onsite controls could be used and servicing capacity already exists for land previously having development entitlement being given over to State Recreation Area. Rather, the plan identified possible rezoning of the areas of land should water quality measures be resolved.’
[4/176-177]
224 It claimed that the strategy had ‘two separate components that address quantity and quality issues’. The strategy goals are stated as being ‘to ensure that the urban development of the Lady Carrington Estate: · does not increase flood flows in the Hacking River above those currently existing;
‘As the site is situated within the catchment of the Hacking River (Class P, Protected Water under the Clean Waters Act, 1970), and upstream of the Royal National Park, the issue of stormwater quality from any such development is critical. ’
[4/167.9 - emphasis added]
· does not cause further degradation of the integrity of the Hacking River’s aquatic ecosystem and strives to achieve a net improvement in water quality wherever practical’ 225 It was noted that urbanisation of a rural catchment would, without further intervention, significantly increase the volume of stormwater runoff (approximately 35%) and reduce catchment storage. This is due principally to the introduction of large areas of impervious surface such as bitumen sealed roads, concrete pathways, driveways and house roofing. 226 The strategy noted that of the potential impacts of stormwater pollution, sediment and nutrients are the most pertinent in respect of the LCE proposal [4/203]: ‘Sediment contained in a water body can increase turbidity, consequently decreasing light penetration. This can impact on the number and variability of fish, micro-organisms and benthic organisms. It also has the potential for the silting up of a water body when sediment settles out of the water column. Excessive levels of nutrients, primarily nitrogen and phosphorous can result in the eutrophication of a water body..’ [4/167.13]. The low absorption capacity of the Helensburgh soils is noted as being ‘likely to increase the proportion of dissolved nutrients’, most notably phosphorous, entering the Hacking River system [4/167.34]. 227 Section 6.3 of Volume 1 of the application noted that ‘a large number of studies had been produced on the issue of stormwater management in the Helensburgh area.’ It continued as follows:228 Chapter 4 of the Stormwater Management Strategy briefly detailed the aforementioned studies, previously undertaken to address the issue of stormwater management in the Helensburgh area. These studies included: · Investigation into the Impact of Urban Development at Helensburgh on Water Quality of the Hacking River (SPCC 1986);
‘Much of this work has relied upon the “best practical means” approach which depends upon the use of water quality controls elsewhere, most significantly in Canberra. While such an approach is fully supported, GHD considered that an assessment of local conditions was essential to determine whether adjustments needed to be made to the treatment measures in order to ensure they functioned, as designed, under local conditions….
A water quality monitoring programme was undertaken which tested a range of items at twelve different monitoring sites in the locality to provide an indication of the water quality characteristics at various points in the catchment….
In addition to the monitoring programme, site testing showed that the local soil characteristics created an appreciable difference in water chemistry between Helensburgh and the Canberra region.’
[4/204]
· Hacking River - Total Catchment Management (SPCC 1989);
· Helensburgh Water Quality Management Study Stages 2 and 3 (SKP 1990a)
· Helensburgh: Camp Creek Water Quality Management Study (SKP 1990b)
· Helensburgh Water Quality Management Strategies: Camp Creek and Associated Catchments (Chowdhury 1990);
· Function and Mechanism of Water Pollution Control Ponds in Urban Release at Helensburgh (Ellis 1990);
· Critique of Urban Stormwater Runoff Control Measures Proposed in the Draft Helensburgh Plan (Short, Nichols and Flentje 1990). 229 While the first 6 studies listed generally bode well in terms of potential for urban development in the Camp Creek catchment, the latter was more critical and emphasised the need for local data, especially during storm events. 230 To achieve the application’s previously stated goals, the management strategy to be implemented was as follows: · Construct wet/dry retention basin(s) as close to the potential pollutant source as practical. These basins (individual or cascading multiple basins depending upon topographic constraints), would serve the dual purposes of flood retardation and sedimentation. The [stormwater treatment measures (STM)] would reduce coarse sediment, metal, hydrocarbon and pesticide loads. The location close to the pollution source minimises the length of aquatic environment affected by urban runoff and maximises STM efficiency. · Construct artificial wetlands… The function of these wetlands is of high importance given the low expectation of nutrient absorption to settleable particulates and hence a higher dissolved nutrient fraction. The upstream basin will slightly reduce the pulse load to the wetland during storm events and reduce coarse sediment input. Fine sediment and nutrients would be trapped by this STM. · Ensure appropriate erosion and sediment control techniques are undertaken during the construction phase of the Lady Carrington Estate development. · Introduce management an maintenance controls as outlined in Section 14 [Land Management] when the estate is established. · Design stormwater and interallotment drainage lines to ensure runoff passes through the STMs before leaving the urban development area of Lady Carrington Estate. 231 In the strategy it was stated that the two major stormwater treatment measures utilised to ameliorate pollution of receiving water were sedimentation (settling) basins and wetlands. Their detail and uses were described as follows: · Sedimentation basins are designed on the basis that by reducing the velocity of stormwater entering the basin, particulate matter and importantly, phosphorous and other pollutants which may be attached, is given the opportunity to settle out of the water column. The efficiency of such basins depends on the average time water spends in the basin. Placement of crushed limestone and bauxite residue in the base of a basin in sandy soils may increase efficiency in phosphorous absorption. · Wetlands utilised can either be naturally occurring or artificially created. A constructed wetland typically consists of a trench or basin with an impermeable substrate to prevent seepage. The substrate must also contain a medium that can support the growth of macrophytes (reeds). The macrophyte system in the wetlands acts to remove pollutants from the incoming run-off using a complex combination of biological, physical and chemical processes. 232 In the GHD application, the strategy adopted in relation to placement of stormwater treatment measures was an “on-line” approach [4/167.27]. 233 On the evidence given by Mr Lester, “on-line” refers to the placement of stormwater treatment measures ‘in the creek bed’ as opposed to “off-line” where placement is ‘in plateau’ [view T8]. During cross examination Mr Rowbottom gave the following explanations of the concepts:234 In the summary and conclusions of the stormwater management strategy, it was stated that:
‘HIS HONOUR: Q. … Are they the concepts, on-line and off-line?
A. Off-line, being something where the water is actually collected from almost a natural drainage path and moved somewhere else so that the major flows do not pass directly through the particular pond. So all water that fell on the Chippendale site would essentially end up in that pond and, therefore, is on-line. If it was off-line, only a part of the water would go to the pond and the rest would bypass the pond.
[T928]
[While I do not intend to detail Mr Rowbottom’s critique of the strategy at this point, it is relevant to an understanding of the proposed strategy to note Mr Rowbottom’s point that the 1992 GHD proposal required that the wetlands and sediment basins be constructed on existing watercourses within the proposed development. He criticises this approach, his evidence being that ‘if you move to an off-line situation, you have more control over where you could locate the wetlands and sediment basins’: T942-3]
235 The evidence is that as at 1992, the GHD application for rezoning utilised the best stormwater management technology available at that time (1992). This point was made by Mr Lester in his submissions to the Commission of Inquiry in 1994 [13/168] and is not controverted by Mr Rowbottom, whose evidence was that while it is difficult to evaluate a particular strategy without computer models or data, ‘if I look at the state of the art in …1991/92, the strategy that GHD developed is probably at that time best management, in 1991/92. So I would conclude it was probably a reasonable strategy…’ [T895].
‘. . . the implementation of this Stormwater Management Strategy can permit development of the [LCE], without degrading (and likely to actually improve) the integrity of the Hacking River’s aquatic ecosystem.’
[4/167.34]
Response to the 1992 GHD application
236 When questioned on the SCE 1992 review during cross examination, Mr Rowbottom commented that he found it ‘very difficult to understand how the three gentlemen from the Wollongong university can say that the [1992 GHD] model is sound when there was no data provided in the particular reports…’ [T894].
SCE 1992 Review
The stormwater treatment model proposed by GHD was assessed in detail by Sivakumar, Chowdhury & Ellis of the University of Wollongong in their review: ‘Stormwater Management for Helensburgh with particular reference to Feasibility of Multiple Retention Basin Strategy’ (SCE, 1992).
In the review, it was found that the ‘GHD study goes somewhat further than the best practical method’ in considering predictive measures and in the provision of multiple retention ponds [5/006]. The review considered all practical issues dealing with stormwater management including the first flush phenomenon (during storm events), sediment and nutrient removal, and the impact of major storm events. It concluded that while the stormwater problems at Helensburgh were significant at that time, the existing pollution sources could be managed through the stormwater treatment methods proposed in the 1992 GHD application [5/006-7; 5/017].
It is pertinent to note the following statements which were made in summary in the SCE 1992 review - the particular relevance of the underlined statements will be dealt with below:
‘ The management of stormwater and enhancement of water quality are key issues for urban consolidation and further urban development consistent with the high standards of stormwater quality management required. The present stormwater problems at Helensburgh are significant and there is now a mechanism treating some diffuse pollution sources as well as some notable point sources of nutrients identified in the GHD survey….
With the feasibility of a reliable multiple retention basin strategy now established, it is necessary to emphasise the needs for continued development of the environmental data base. Moreover, monitoring must be planned and carried out and an observational approach to design development and review carried out .’
[5/007 - emphasis added]
237 By letter dated 19 May 1992, Genepa [signed by Mr Hogarth] wrote to Westpac pointing out that Genepa believed that the rezoning of the Helensburgh land by Lady Carrington Estates could be achieved without the need for additional advances from AGC. The letter continued:
19 May 1992
238 Mr Hogarth’s cross-examination on this letter at pages 202 and following of the transcript, suggests to me that the letter does not reflect well upon his credit. He agreed that certain sections of the letter were deceptive. The only persons whom Mr Hogarth had been talking to at this time was Walkers and yet in this letter he used the plural ‘contacts with possible lender/joint venture partners’. He agreed in evidence that he had been ‘trying to play AGC along a bit’. [T 204] 239 Mr Hogarth was closely cross-examined upon the statement made in this letter ‘as we firmly believe that the progress made over the last 12 months towards rezoning has been significant’. [T 209] To my mind, that statement is shown to have been a gross over exaggeration to say the least. On the evidence, no such progress and certainly no such significant progress had been made.
‘Nonetheless, we acknowledge that the previous extension of our facility has expired and that our former proposal for an alternative basis of settlement has been rejected, even though after protracted negotiations we had been verbally advised that it was acceptable by senior AGC management.
Accordingly, we now make formal application to AGC for a further extension of our facility to 31 June 1993. We believe that such an extension will provide sufficient time to obtain rezoning of the Helensburgh land and this view is supported by the consultants [GHD] . . .
If however rezoning is granted earlier than present expectations, we suggest that the facility should expire three months after formal rezoning is achieved rather than 30 June 1993 . . . With regard to possible funding arrangements we confirm that we have initiated contacts with possible lender/joint venture partners. However, whilst we have indications of interest there have not yet been any formal exchanges of documents discussed nor placed before third parties. As we progress in formulating such proposals we would naturally wish to keep AGC informed.
We trust the foregoing enables you to consider and approve a further extension of our facility as we firmly believe that the progress made over the last twelve months towards rezoning has been significant and on the advice of GHD we are extremely confident that our objectives will be met in the near future . . .’
[5/24]240 By letter dated 29 June 1992, GHD wrote to Westpac summarising earlier meetings and setting out approximately 13 occasions between November 1990 and November 1991 when GHD had met with AGC/Westpac and with the Hogarth interests in relation to the rezoning of the land. GHD stated, inter alia:
29 June 1992
241 Part of Exhibit ‘PX’ comprises a facsimile cover sheet dated 3 September 1992 from Mr Severino to Mr Hogarth to which, as part of the exhibit, there are stapled two pages. The cover sheet, however, states that there are two pages including the cover sheet. The two pages which follow the cover sheet as part of Exhibit ‘PX’ and are to be found at 5/44 and 5/45, are respectively appended to this Judgment as ‘Appendix 5’. An issue arose as to when the two documents now stapled to the cover sheet, had come into existence and first been received by Mr Hogarth.
‘This company is firmly of the opinion that these studies and reports were initially commissioned by AGC and reconfirmed at a later date by Loan Management NSW . . .’
[5/28]
3 September 1992
242 In Mr Hogarth’s first statement, he gave evidence that on 7 October 1992, he met with Mr Severino and Mr Walker and at that time handed to Mr Walker a folder of documents entitled ‘Table of Contents’ which he had prepared. His evidence was that he had a conversation with Mr Walker to the following effect:
7 October 1992 - Meeting 1
243 Mr Hogarth’s case is that in about October 1992 he furnished to Mr Walker a set of documents to be found at [4/3 and following]. The documents were highly confidential and include a detailed examination of the possible revenue which the subject lands might provide by way of residential development.
‘Mr Hogarth: Westpac have provided finance for Lady Carrington to finalise its briefing of GHD to provide reports related to town planning matters. The people at Westpac understand that rezoning at Helensburgh will increase their return upon the sale of our lands and thus the amount left over for my company. Lang, what do you think of this deal? Do you think this is the best way to solve my problems with Westpac?
Mr Walker: I’m not convinced that it would work and as you know Bob, I’ve had a lot of experience in these sort of developments. From my enquiries with my contacts, it seems that if you continue on with your current approach to obtain rezoning, you will not achieve that for at least three years if at all. You’ll really need to change your current tack before you’ll be in with a chance. You probably need some assistance from someone who knows about rezoning matters and has the right political contacts to protect your position rather than just relying upon Westpac to do the right thing by you.
Mr Hogarth: AGC are confident that briefing technical people like GHD will assist in our getting the land rezoned.
Mr Walker: It’s no use just going down the traditional path of the rezoning application process like you are with GHD because you need to make sure that the pollies are willing to support the development proposal every step of the way and for that to happen you need political clout behind you. I know because I have developed contacts with people who count and, as you know, that includes Greiner, Max Willis and Webster and from the other side Della Bosca and others that I won’t name. That can mean my proposals are looked at more favourably by the authorities. That having been said I’d be interested in being kept informed on how this project progresses .’
[Hogarth’s statement paragraph 22]244 By letter dated 8 October 1992 Mr Hogarth wrote to Mr Walker thanking him for his interest in Mr Hogarth’s affairs and problems and for Mr Walker’s offer of a solution. The letter stated inter alia:
8 October 1992
245 On 13 November 1992, Westpac wrote to GHD confirming earlier advices that documentation of the arrangements between Hogarth Group and Lady Carrington Estates had taken longer than anticipated earlier - not because of any procrastination or unwillingness by the parties to bring the matter to conclusion but because of legal issues said to have arisen during preparation of documentation which had to be resolved. 246 Westpac stated that as Mr Ross had undertaken previously, Westpac would advise GHD when documentation was completed and payment of GHD’s agreed past fees could occur. 247 In the same letter, Westpac advised:
“I am somewhat disturbed by the information your inquiries into our rezoning proposals reveal that it will be three years if at all for our rezoning to be successful.”
[5/48-49]
13 November 1992
248 A seminar was convened by the Helensburgh Citizens Committee entitled ‘Seminar on Helensburgh’. That committee had been formed in September 1992. The objective of the seminar was to provide a neutral forum to discuss the proposed development. The keynote address was given by Mr Dwyer of GHD. Mr Kidd was on a commentary panel. Representatives of the Environment Protection Authority and of the Department of Conservation and land Management were to speak on management and control of stormwater pollution and total catchment management. Dr Ellis of Wollongong University was to speak on stormwater management at Helensburgh and circumstances in which the University of Wollongong had examined various proposals for stormwater management at Helensburgh over a number of years and had recently completed a detailed review of the latest strategies for stormwater treatment at Helensburgh. Dr Ellis was to address the seminar on the conclusions reached from this previous work. [See the agenda at 5/67]
‘Meantime to allow you to proceed with the requirements of the proposed seminar at Helensburgh we confirm that AGC . . . will hold GHD covered for the fees referred to in your letter dated 12 November . Payment is to be sought in the normal way - i.e. account to Lady Carrington Estates who will request AGC to pay.’
[5/63]
27 November 1992
249 By memorandum dated 30 November 1992, Mr Gye set out for Mr Hogarth’s purposes, a summary of the history, objectives’, present position and new proposal with respect to dealings with AGC. Under the heading ‘Present Position’, Mr Gye referred, inter alia, to the following:
30 November 1992
250 By letter dated 7 December 1992, the National Parks and Wildlife Service wrote to Wollongong City Council in relation to the draft Local Environmental Plan (Certificate Plan No. 91/16) at Helensburgh. The letter pointed out that all the lands in question in the draft plan fell within the upper catchment of the Hacking River and contained valuable plant and animal communities which were not adequately conserved in the Royal National Park or in the Garawarra State Recreation Area. 251 The letter advised, inter alia:
‘GHD have not been paid. Westpac has given a commitment for current work (only)’.
[5/73]
7 December 1992
252 The letter continued, inter alia:
‘The Service has always held the view that any development of the Helensburgh area should be restricted as much as possible to the existing township, including infill of existing areas and urban consolidation. Development in new areas should be minimised and strictly controlled to minimise any environmental impact on the natural values and water quality of the Upper Hacking Catchment.’
253 Mr Hogarth’s evidence in relation to this letter included the following:
‘The Service . . . strongly supports the current draft LEP 91/16 as the land identified for rezoning to 7(c) Environmental Protection - Residential is considered to be a consolidation of the existing urban area of Helensburgh and is not on lands identified as having significant conversation attributes on figure 12 of the Service Report.
Lands identified to be rezoned 7(d) Environmental Protection - Hacking River have been identified in figure 12 as having significant conservation attributes. The conservation of these lands is vital. The Service has been seeking to add these lands (and others as identified in the report) to the Service’s reserve system. However, acquisition of all of the lands identified is not possible in the foreseeable future due to the Service’s budget constraints and priority for land acquisitions across the State.
The next best option for the protection of these lands is adopting a strict control on allowable development. It is considered that the 7(d) zoning sets adequate guidelines aimed at the long term protection of the heritage values of the Upper Hacking Catchment for the land in question.’
[6/71]254 On this date, the Helensburgh Citizens Committee sent an open letter to ratepayers and residents in Helensburgh. The letter summarised what was said to have occurred at the seminar at Wollongong City Council’s chambers on 27 November 1992. It stated that all evidence indicated that the proposed residential development of Helensburgh would protect the valuable Port Hacking water catchment through the provision of stormwater treatment ponds and at no cost to the existing community or Council. [6/76]
‘Q. Have you read that second paragraph?
A. Yes.
Q. That was a view, if taken seriously, which endangered the prospects of rezoning from your point of view, didn’t it?
A. Yes.’
[T 217]
26 January 1993
255 On the 2 March 1993, Dr Iradj Yassini, Environmental Scientist and Council officer of Wollongong City Council, wrote to Ms Cheryl Lappin of Wollongong Council in relation to water quality and the Helensburgh LEP. In the letter, Dr Yassini reviewed the 1992 GHD application after making the following points in introduction:
Dr Yassini’s Review
2 March 1993
256 Specifically in relation to the 1992 GHD application [and the Land Pooling and Department of Housing Estate applications], Dr Yassini made the following criticisms:
Australian experience in stormwater treatment, design and use of artificial wetland is limited. Except for the Australian Capital Territory, where the stormwater practice is a decade old. In most other cities the urban stormwater treatment is still at a juvenile stage. In the absence of solid local evidence on efficiency of artificial wetland and related management issues, the decision making criteria in stormwater quality planning is mostly limited to literature data and environmental consultant designs.
The designs proposed by the consultants are often an extrapolation of the models developed in USA or Canberra without reliable local data. Even the limited amount of local data used in the design are not reflecting the fluctuation which may occur over a lengthier period.
[6/080]
257 Dr Yassini also noted that the subdivision of the LCE lands proposed to construct 45 retention basins and 76 wetland cells. However, he points out that no details on the size of each subcatchment, assumed flow rate and residence time were produced in the application. Accordingly, he stated at that ‘no rational evaluation about the pollutant removal capability of the proposed systems could be done’ [6/080]. Further, Dr Yassini stated at page 3 that efficiency and capability of both wet retention basins and wetland filters will diminish with time. He suggests that the servicing and maintenance costs of the basins and wetland cells, including the cost of regular sediment dredging and plant removal, will be a huge financial burden to Wollongong City Council. He also draws attention to the safety issues associated with the proposed basins having a depth of 5 metres and the potential for offensive odour and mosquito problems arising if the water bodies become stagnant. 258 While the particular implications of Dr Yassini’s report to the plaintiffs’ best endeavours case will be dealt with below, it is relevant to note at this point that Mr Lester, in the period in which he was preparing for the Commission of Inquiry, was unaware of Dr Yassini’s report on the 1992 GHD application and that he thought he would have seen it as part of the data lodged with the Commission of Inquiry although he was not certain [T1454; 1481]. 259 The 1992 GHD application was never publicly exhibited or formally considered by Council. 260 On the evidence of Mr Lester, it was Walkers’ view that as at December 1993 neither Wollongong Council or the Department of Planning had seriously considered the 1992 GHD application [T1453]. This view is evidenced in his file note of the 3 December 1993 meeting with Mr Woodward of DOP Wollongong as follows:
The basic water quality parameters used for the design of the retention basins and wetland filters in all the proposed rezoning estates were collected over a three month period at eleven locations from different subcatchments of the city. Some of the water quality values reported in these applications seem to be incorrect….
Some statements in GHD’s applications regarding the use of coarse substrate in the wetland filter to prevent development of the root systems [of aquatic plant species] are contrary to the mechanism of wetland process.
261 The evidence is that at this time Council was opposed to urban development on the LCE lands [Draft LEP 1992 which proposed rezoning of the LCE land to 7(d) Hacking River Environmental Protection]. It was for this reason that obtaining a Commission of Inquiry to make recommendations as to the zoning issue was seen as important.
‘A Section 65 Certificate was sought from the DOP by Council and a number of submissions, in some cases quite detailed (eg. Hogarth), were received. Despite the detail that had been prepared by Hogarth’s consultants and by the Land pool Group, neither of these two were assessed in any detail. RW believes that the Council officers had tested the political position and did not appear to want to put considerable planning effort into a review that would not, under any circumstances, be approved or supported by Council.’
[7/61]
262 The Illawarra Mercury in an article headed ‘Minister Stays out of Burgh Dispute’ of this date stated, inter alia:
8 April 1993
263 The same article included the following:
‘State Planning Minister Robert Webster confirmed yesterday he would not intervene if Wollongong City Council voted for an anti-development rezoning plan for Helensburgh next week.
The Minister said he had discussed the matter with his department but believed the issues was a “local planning matter to be decided by Wollongong City Council”.’
[6/96]264 The article concluded by asserting that Mr Hogarth had said that he was seeking legal advice on what steps could be taken next and that all he wanted was a fair go. The final two paragraphs read:
‘Mr Hogarth said yesterday it was “unjust” that after more than 8 years, his and other proposals still had not been publicly exhibited even though agreements had been reached with the National Parks and Wildlife Service, Environmental Protection Authority and other bodies.
“This decision is very selective. It is unfair to us and to the other landowners, including the land pooling group which was even helped by Council officers”
he said.’
265 By letter dated 4 May 1993, Mr Hogarth drafted a letter addressed to Premier Fahey and to Minister Webster, defending himself against what he suggested had been recent attacks under cover of State Parliament. The letter denied accusations made recently against Mr Hogarth in State Parliament to the effect that he had manipulated a file of the National Parks and Wildlife Service and called on Premier John Fahey and Minister Webster to institute a public inquiry into all aspects of what was said to be ‘the injustices, politicisation and lack of professional appraisal’ of the Hogarth interest plans for Helensburgh. [6/103] 266 The above draft letter was forwarded to the Premier by Mr Hogarth under cover of his letter of 7 May 1993 which stated:
‘[Mr Hogarth] said aldermen, when considering the Helensburgh draft plan during the past few years, had ignored informed recommendations of Council officers and experts.
The debate had become blatantly political because the ALP wanted to take the seat of Sutherland from the Liberals, Mr Hogarth claimed.’
[6/96]
4 May 1993
267 In this letter, Mr Hogarth asked for the matter to be allowed ‘to be debated away from the heat of the Labor Party Local Government Politics’. 268 Mr Hogarth’s letter to the Premier was a strongly worded letter seeking a public inquiry into the matter and stating that the Labor Party had attempted to hijack the debate in State Parliament and that Mr Hogarth had been advised that Mr Carr had interfered in the Local Government process on the matter. [6/105]
‘As a matter of courtesy we attach the original text of a letter which will be inserted tomorrow in a privately funded half page advertisement in the Sydney Morning Herald. This text is subject to review by the paper’s legal advisers.’
269 By letter dated 12 May 1993, the Minister for Planning and Minister for Housing wrote to Gutteridge Haskins and Davey noting that company’s request for a Commission of Inquiry under the Environmental Planning and Assessment Act to be held in relation to the development proposals. The letter advised that the Department of Planning had advised that the Director of Planning issued a certificate under section 65 of the Environmental Planning and Assessment Act to enable the draft plan to be exhibited and urged the Council to give full and proper consideration to development proposals in the Helensburgh area. The letter pointed out that the Director had suggested that it may be appropriate following exhibition of the draft plan to consider the merits of holding a Commission of Inquiry to assist in resolving environmental and planning issues arising during the exhibition. 270 The Minister noted the concerns expressed by Gutteridge Haskins and Davey in their recent letter and added ‘I . . . can assure you that all the relevant planning and environmental issues will be carefully considered before any decisions are made on the draft plan. The Act enables me to direct a Commission of Inquiry into any matter relating to the administration or implementation of the Act. Any decision to hold such an inquiry will await my consideration of the Department’s assessment of the Council’s submission on the draft plan.’ [6/109]
12 May 1993
271 In June 1993 AGC commenced proceedings against the Genepa Trust claiming $22M. Ultimately Ensile and Mr and Mrs Hogarth became parties. During the same month AGC exercised its power of sale over property owned by Genepa. The proceedings were settled on 3 June 1994. 272 By letter dated 15 June 1993, Mr Webster, the Minister for Planning and Housing, wrote to Mr Hogarth referring to Mr Hogarth’s recent letters to the Premier and to the former Minister for Local Government and Minister for Cooperatives concerning the Helensburgh Urban Development proposals. The letter advised, inter alia:
June 1993
273 In July 1993 Lakatoi was appointed trustee of the Genepa Trust. Hence during discussions in an around mid-1993 Genepa Trust had as its trustee Lakatoi which ultimately became one of the joint venturers under the HUTA and it did so as the trustee of the Genepa Trust. At about this time the Genepa Trust had tax losses of some $10M-$12M available to it. One of the proposals which was ultimately adopted was to make the Walker interests beneficiaries of the Genepa Trust and a trust called Fanso and one of the Walker companies, namely the fifth defendant, was the other nominated beneficiary.
‘The Department of Planning has advised that the submission by the Wollongong City Council under Section 68 of the Environmental Planning and Assessment Act 1979 has recently been received with a request that I make the plan under Section 70 of the Act. The Department is currently examining the draft plan and is preparing a report for my consideration.
. . . You may be assured that all relevant planning and environmental issues will be carefully considered before any decisions are made on the draft plan.’
[6/111]
July 1993
274 By letter dated 5 August 1993, Mr Hogarth wrote to Mr Webster stating inter alia, that given the controversy ‘we commend our studies and engineering solutions to you as a potential “model development” which can cure the problems in Helensburgh and in other future housing areas elsewhere in the State’. [6/120]
5 August 1993
275 By this time the Hogarth interests were seriously under attack by AGC as Mr Walker well knew. As already indicated, since the early 1990’s discussions and inter changes of documents had taken place between Messrs Hogarth, Walker and Severino about the potential for developing the Helensburgh land in joint venture and about Mr Hogarth’s financial position.
October 1993
276 On Mr Hogarth’s evidence [paragraph 24 of his first statement - corrected in his 3 October 1999 statement as to date], he had a discussion in October/November 1993 with Mr Walker to the following effect:
October/November 1993
277 A meeting took place on 28 October 1993 attended by Mr Severino, Mr Hogarth and Mr Walker.
‘Mr Hogarth: The information I’m giving you is sensitive to us and must be kept confidential. I’m giving it to you to further any negotiations we may have that may result in resolution of the AGC matter and possibly a joint venture arrangement between us. Lang, as you know, I value your opinion and I hope this information I’m giving you will allow you to tell me how best to resolve this issue.
Mr Walker: Yes I understand that Bob. I understand the sensitivity of the information and I’ve no problem with keeping it confidential.’
28 October 1993 - Meeting 2
278 Mr Hogarth’s version of the conversation runs for 17 pages in his first statement. All of these pages are in the first person. This version of that conversation is in the following terms:
Mr Hogarth’s Evidence
‘27. . . . Mr Severino: “Lang, I’ve brought Bob along because I’ve been telling you about where things are at with AGC and with the land at Helensburgh and I think that there’s an opportunity for you two to get together to do some joint development of that land”.
Mr Walker: “I’ve had previous discussions with Bob on an informal basis but we’ve never really been able to sit down and talk about the terms of any joint venture although we were talking several years ago but he seemed to have thought to have had his problems with AGC covered at that time”.
Mr Hogarth: “As you know, I’ve had ongoing discussions with AGC but the present position is that they’ve now been taken over by Westpac who seem to be running the deal and they’ve now brought in the toe cutters. I’m now in a position where I have to look for an alternative to do any further arrangements in respect of the land at Helensburgh and also in respect of the properties at Cronulla. Lang, just to bring you up to date, we’ve had GHD involved since about 1991 and they prepared and lodged a rezoning application with Wollongong Council and all the other authorities in March or April 1992. We’ve had them monitoring the matter since then and they’ve been responsible for lobbying the various politicians and government departments and they have been reporting both to me and also to AGC as to the progress of the matter. The Council would not consider the rezoning application and have tended to want to put the local plan on exhibition. The present position is that AGC now don’t want to spend any more money with GHD but we’ve come to an arrangement with them where we’re continuing to pay them and they’re still running on the project”.
Mr Walker: “And where do you think you’re up to with this?”
Mr Hogarth: “I think that we’re pushing along but we still don’t seem to be able to get the right support that seems to be needed to get the rezoning in place. They’ve had meetings with various people including Webster (Mr Robert Webster, Minister for Planning) and he has indicated to them that at some stage he’s going to think about requisitioning a Commission of Inquiry which would be his way of taking this matter outside the hands of the Council so that he could make the final determination. GHD tell me that if there was an appropriate Commission of Inquiry then its recommendations would enable Webster to be justified in signing a rezoning gazettal for the land”.
Mr Walker: “And where do you think that’s up to?”
Mr Hogarth: “Well the land was picked out in the strategy plan some years ago by the Department of Planning and it should be pushed along but I just don’t feel that it’s moving at the pace that I was expecting it to move at”.
Mr Walker: “My understanding is that you’ve been too aggressive and trodden on a lot of toes with the people that matter at Council (Wollongong City Council). From my recollection of looking at the property and from what I’ve heard around, that land should have been rezoned some time ago. The land up the top is certainly suitable for a large residential development and you’ve told me previously about the sewer and the water position. I know that there’s some suggestion that you’d have to contribute to the augmenting of the water supply to Helensburgh but that all could be factored in. I believe the land is prime for redevelopment and it is just the political motives that are going to delay this. My understand is that Carr (now Premier Carr) is very much against this rezoning and has spoken directly to the Labor Councillors in Wollongong Council and wants to ensure that they don’t allow this to be rezoned because he thinks there are some environmental issues but more relevantly, large scale housing development on this land would swing this electorate from what has currently been a Labor electorate”.
Mr Hogarth: “Well you seem to have an insight into the political side of things. Is there anything else you need to know about the land?”
Mr Walker: “Where does your land extend to, Bob?”
Mr Hogarth: “We’ve got approximately 1,100 acres which extends up behind the Helensburgh tip to the north and down to Otford Road in the south. It follows the South Coast Railway line on the east and pretty well extends to all of the land abutting the township of Helensburgh. We also have some blocks to the south of Otford Road in the land pooling area and we have the roads in the land pooling area which surrounds nearly all that land. We obtained a Supreme Court Order granting us title to the residue of the old Metropolitan 1895 titles to a number of roads throughout the township which includes the roads behind the shopping centre and in the area where they’re proposing to put a shopping centre.”
Mr Walker: “We’d certainly be interested in doing something with you in Helensburgh.”
Mr Hogarth: “Well I think that that makes sense because we’ve now been there since 1979 and have got to know a lot about the area. As you know, we’ve spent a lot of money on consultants and we believe that we have a fair grip on all of the developments that are happening at Helensburgh. As Peter (Dransfield) will tell you LandCom have been active in the area and I would like to think that if we’re going to enter into an arrangement together, that we do everything in Helensburgh together .”
Mr Walker: “I agree, we have no experience in that area and it does not make sense for us to be involved separately given your history in the region.”
Mr Hogarth: “ So in the proposal that we’re talking about, I’d put up all my land and thereafter everything we do in Helensburgh we’ll do together .”
Mr Walker: “ Yes I agree with that Bob .”
Mr Walker: “Bob, as you know, Peter Dransfield has been very actively involved in investigating the land at Helensburgh over a number of years and you know his history with the Housing Department and the knowledge that he’s derived from that period. Peter will be responsible for assisting me with the rezoning of the Ensile Land”.
Mr Hogarth: “That’s fine with me. I realise that he’s got considerable knowledge in this matter”.
Mr Severino: “Well how do you propose to deal with it, Lang?”
Mr Walker: “If we could reach the basis of an agreement then I would propose that we would take over the day to day running. Once we’d reached that position I would use my political connections of which I’m quite confident and I’m sure that the way to get the land rezoned quickly would be for you not to take any further active part in the process and indeed if we’re going to become involved, we would insist that you take a back seat in the whole thing ”.
Mr Hogarth: “Well I suppose I can accept that if you think that you’ve got the expertise and the connections to do it”.
Mr Walker: “I think you’ve seen what we’ve done at Menai and we’ve got plenty of projects on the go at the moment, so I think you know that we have the ability to manage a development like this. We also have the civil engineering section and that’s been doing a lot of the work in the city and elsewhere and if need be we have the support of that expertise to either do the work or certainly direct the various contractors who would do the work. I think with our political connections which we have on both sides of Parliament we’d be able to ensure that we can either get a Commission of Inquiry or we can put some more pressure on the government to see if they can get this land rezoned because there’s clearly a case to be made for further housing blocks to be released as there now seems to be a desperate need for relatively cheap housing blocks within the outer Sydney region and your land is suitable because from what I’ve been told you’ve got the sewer and the water either in the property or close by and the government spent all that money on the electrification of the railway to Wollongong”.
Mr Hogarth: “I understand that you are interested in developing our Cronulla and Helensburgh properties, what are you proposing?”
Mr Walker: “ I propose that we enter into a 50/50 joint venture on all of your properties where we would maintain management control over each project ”.
Mr Hogarth: “Why is that?”
Mr Walker: “ Well we’re confident we can get rezoning within two years at Helensburgh but only if we are the managers of the project and that includes the rezoning process which you would have to keep out of ”.
Mr Hogarth: “Lang, I would be prepared to hand over the running of the rezoning to you if you have the people and capabilities to achieve rezoning”.
Mr Walker: “Well I’ve done this sort of thing before at Menai so I know what’s involved in these broadacre developments”.
Mr Hogarth: “Well what about the pollies. As you know we’ve been having difficulties with Wollongong Council”.
Mr Walker: “ Don’t worry about the political side, I’ve got both sides covered ”.
Mr Hogarth: “And what about Cronulla?”
Mr Walker: “ We would get DA’s and BA’s for the properties. We have plenty of experience in the Sutherland Shire ”.
Mr Hogarth: “Well I guess that I can see that we could reach an agreement about that but we need to sit down and work out what the terms of the agreement would be”.
28. A conversation to the following effect then ensued about the valuation of the land.
Mr Walker: “What do you say is the value of the land, Bob?”
Mr Hogarth: “Lang, AGC had the land they have a mortgage over – which we call the Boral Land – valued in 1990. This is the most current valuation that I’ve had on the property and in the current zoning of Rural A, it was valued at $7 million”.
Mr Walker: “Why should I place reliance on that?”
Mr Hogarth: “Because they were valuing the property for mortgagee purposes and you know that they tend to put a low valuation for those purposes but nevertheless that’s the valuation that they obtained”.
Mr Walker: “Well, what are you saying the place is worth?”
Mr Hogarth: “If we are talking about all of the land I would say $11 million and if the tax losses can be used I think this would be a bonus for you. You recall that I’ve given you copies of the valuations that have been conducted on the property by AGC. We’ve had a lot of valuations on the property and I still think that it can value up as high as $16 million. I agree that there’s probably some component in there for rezoning potential but in its natural state it’s probably worth about $11 million”.
Mr Walker: “I think that that’s all a bit much, Bob. I think that the property’s probably worth less than that in its present condition which is what we’re talking about. I don’t really want to get into a long argument about it because if we’re going to be in joint venture together then it probably doesn’t matter much because the profit’s going to be in the development and you and I will be sharing those profits”.
Mr Hogarth: “Well then what do you think is a reasonable figure for the purpose of resolving this?”
Mr Walker: “ I think we settle at $9 million as the value for the land ”.
Mr Hogarth: “Yes I think that’s probably okay by me but I wouldn’t accept anything less than $9 million, that would be it”.
Mr Walker: “That’s all right, Bob. We don’t need to get into an argument about that. What else would you bring with the joint venture?”
Mr Severino: “Lang, I think you’re aware that we’ve been talking about the tax losses and Bob’s position with Capital Gains Tax”.
Mr Walker: “Yes, I’ve been speaking to Alan about that. I don’t fully understand it but I understand that you’ve got these losses in your Trust which has been operating the motel”.
Mr Hogarth: “Yes I think that we’ve got losses of between $10-12 million in the Trust. I don’t know if those losses would be available to the joint venture. Alan has spoken to me briefly about it but as a sweetener to the deal I’m prepared to put in those tax losses to the joint venture if my accountants tell me that they’re available to you”.
Mr Walker: “Alan thinks that he can use that position for our benefit”.
Mr Severino: “The capital gains tax is a major issue”.
Mr Hogarth: “We’ve owned the land since 1979 and we bought some more land in 1980 and 1982 and it’s all free of capital gains tax. I’m happy to go along with whatever he thinks is okay provided that what you may propose does not cancel our current position with regard to capital gains tax”.
Mr Walker: “I need to talk to Brian (Weinert) about some of these things and he and Alan can sit down and see where they get to on the matter”.
Mr Hogarth: “That’s fine”.
Mr Walker: “And what else do you think is going to be involved in this?”
Mr Hogarth: “Well, we’ve spent between $500,000 and $1 million over the last ten years or so trying to get the property rezoned and obviously we’ve got intellectual property in the rezoning application and all of the reports and work that’s been done by all the experts and the consultants that we’ve engaged. Obviously we’d be putting the benefit of all of that into the joint venture”.
Mr Walker: “ That seems fair enough. What do you want out of it? ”
Mr Hogarth: “I’d expect you to get the land rezoned quite quickly and in the meantime, receive $4.5 million ”.
Mr Walker: “What will you do with the $4.5 million ?”
Mr Hogarth: “I have to sit down and work out what our present commitments are and obviously a lot of this depends on the position with AGC, but if we’re able to resolve that satisfactorily then I don’t need much money upfront from you apart from the AGC money and some small spending money. I think that we can settle the AGC matter with Westpac for $2.5 million. We haven’t got down to final figures but I’ve got Jim Grant (Mr Grant of Deloitte Touche Tohmatsu) seeing what he can do with AGC and he’s had a few meetings with them but I’m not really up to date with where that currently is. The other problem is that Barbara (Mrs Hogarth) and myself are guarantors and we need to ensure that we get released from those personal guarantees”.
Mr Walker: “Why don’t you have a think about that and we’ll talk about it later”.
279 Mr Hogarth’s evidence was that at the conclusion of the meeting he returned home and reduced the contents of the meeting to writing as best he could. His handwritten notes of the meeting overwritten in sections by Mr Kidd are to be found at 6/166-6/170. The note is referred to below. 280 Mr Hogarth’s evidence was that his handwritten notes represent notes which were added to through several meetings, the same pages being taken along and added to - transcript 303. In short, the notes were built up over quite a period of time and in the form which they now bear, probably took six months to be built up. This evidence, given in cross-examination, to my mind departs from the evidence given in paragraph 29 of Mr Hogarth’s first statement where he had simply said:
Mr Hogarth: “I’ll look at it and talk to the family”.
Mr Walker: “Bob, we would expect that you would have the land unencumbered before we go into the joint venture. How do you see all that working out?”
Mr Hogarth: “Well I don’t think that that can actually be achieved. My thoughts are that we can transfer the AGC mortgage to Highfield Grove. I’ve had a talk to Geoff Coleman (Mr Coleman, Accountant for Lakatoi) who thinks that I’m silly trying to achieve that but I’ve spoken to Mr Grant and he thinks that we may be able to achieve that transfer. He agrees with me that to ensure protection of the losses we should keep that mortgage current and Highfield Grove is a company that I was proposing to wind up and he thinks that that’s the company that should acquire the mortgage”.
Mr Walker: “It is important that you keep those losses because we would consider them to be a bonus to the joint venture and if we can get access to those we don’t want to lose that opportunity. And how do you see the joint venture working?”
Mr Hogarth: “I would think that there would be a joint venture company and it would take 100% interest in the land that’s needed to be subdivided”.
Mr Walker: “And how do you see that working out?”
Mr Hogarth: “Well based on the rezoning application that we’ve lodged with Council there’s an area of about 300 acres that’s to be rezoned and subdivided and they think that they can get about 1,200 lots. In addition there’s the land pooling area which I’m sure Alan has brought you up to date with and if we’re successful there then we would expect to get another 80 to 100 allotments”.
Mr Walker: “And what do you expect to do with the rest of the land?”
Mr Hogarth: “Obviously we’d prefer to stay on the homestead block and we would retain any of the land that’s not needed for rezoning. As you know from the documents which I’ve given to you previously, and I don’t know whether you’ve had a chance to fully digest all that, but it is proposed that the land below Lady Carrington Estate in some part would be given to the National Park as an extension of the Royal National Park. They want the land but don’t want the responsibility of looking after it so I don’t know where that’s going to end up but I think that we’re at a point where it’s going to be necessary to give that land to them. We’ve pledged that to the National Parks and we’ve told the government that we’ll do that and we also in that arrangement have to acquire Thompson’s land which is known as the hole in the doughnut to our land”.
Mr Walker: “Tell me more about Thompson’s land”.
Mr Hogarth: “He’s a chap who works for South Coast Equipment. There’s an area of 100 acres in the middle of my land and it’s down in the valley but it’s the most environmentally sensitive of all the area. You probably recall he got this land from his mother’s estate and I think he came to some arrangement with the family to get ownership of the land. You and Brian Weinert came down some time ago and looked at an alternative access to the property and you gave us some advice at that stage”.
Mr Walker: “Yes I remember all that. Does that mean you’ve got to acquire that?”
Mr Hogarth: “Yes I finally was able to negotiate an option with him a few years ago and I’ve extended that option each year and have to keep paying option fees and he keeps putting the price up. He becomes more and more confident about his position so keeps putting the price up and I really think that we’re going to have to budget to acquire that during the currency of the option that we have”.
Mr Walker: “Okay I understand all that. So you’re saying that you think that the National Park may want an area and you’d be left with some area”.
Mr Hogarth: “Yes, we’d be left with any of the area that National Parks didn’t want and that would include the homestead block and the equestrian centre. I’m not sure whether or not we would have to close the equestrian centre but that may be an issue that gets fought out with the National Park after they indicate their preference on that matter. In any event we’d be prepared to give it all up if that is a condition of rezoning”.
Mr Walker: “And what happens if there was any problem with the rezoning, Bob?”
Mr Hogarth: “Then we’d have to consider what, if anything, we want to do at the end of the five years but I think that we’d have to agree on that. Do you think five years is a reasonable time, Lang?”
Mr Walker: “ Yes, that’s more than reasonable, Bob. I’m sure that we can get this rezoned quite quickly ”.
Mr Hogarth: “If we decided that we had to do something at the end of five years, then how would you see it going?”
Mr Walker: “Well I think there would just be a 50/50 split. At that stage we’ve bought half the land under the joint venture so we just split the proceeds 50/50”.
Mr Hogarth: “I think if that were an eventuality I think I would still want to retain the homestead block”.
Mr Walker: “How do you expect to achieve that?”
Mr Hogarth: “I think that I’d have to be charged $1 million say for the block and that would be offset against the loan accounts and that way I could retain that block and the present accesses that we use and the rest of the land can be sold if that’s what we finally decide”.
Mr Walker: “I’m sure there’s no problem with any of that and anyway I don’t think that we’re going to get to that position. What can we do about the properties at Cronulla?”
Mr Hogarth: “Well I’ve got the two properties in Gerrale Street and I think that they’re worth $2 million but I would be prepared to put it in the joint venture for $1.5 million ”.
Mr Walker: “What do you propose with that?”
Mr Hogarth: “Are you going to be in a position to buy those outright or what would you want to do?”
Mr Walker: “No, what I propose is that the joint venture gets an option over that property and also the Allison Road property and that during the time of that option the joint venture spends the money on getting development approvals from Sutherland Council”.
Mr Hogarth: “We’ve done some work on Gerrale Street with the prospect of getting a DA and obviously I’ll put that work and all the consultants’ reports into the joint venture as a further part of our contribution”.
Mr Walker: “Yes that’s fine. What do you think Allison Road is worth?”
Mr Hogarth: “Well there’s a lot of property at Allison Road and I’ve been doing a lot of work on Allison Road. We’ve got 1-7 Allison Road and we’ve got the property which runs along the back of those properties (16 Clyde Avenue) so it’s quite a big block in itself and separately I bought the property across Clyde Avenue (9 Allison Road). I’ve been having discussions with Sutherland Council and I’ve done some work on the history of the area and have found that Sutherland Council resumed an area which previously was allotments and made them into Clyde Avenue and it’s suggested to me by Sutherland Council that if we make an application to close Clyde Avenue and turn it into a cul-de-sac that they’d be sympathetic to that type of approach”.
Mr Walker: “Well I’ll have to get our people to look into it, but what do you think it’s worth, Bob?”
Mr Hogarth: “I think it’s worth $3.5 million and that’s what I’m prepared to give the option to the joint venture for”.
Mr Walker: “I think that’s fine. I’ve obviously got to go and talk to the others about the prices of all these properties because they’ve done a lot more work on the them than I have but let’s proceed along that basis”.
Mr Hogarth: “How long do you want these options for?”
Mr Walker: “I think we’d need them for three years”.
Mr Hogarth: “No I think that’s too long. We can’t have the properties tied up for that long. I’m not prepared to keep the properties for that long without any income”.
Mr Walker: “Well how long do you suggest, Bob?”
Mr Hogarth: “I think about 18 months would be sufficient”.
Mr Walker: “Yes all right, I guess if we can’t do something in 18 months then there’s no point persevering with it”.
Mr Hogarth: “Lang, if we go into a joint venture together then I would expect the joint venture to pick up all of the running expenses at the farm from now on”.
Mr Walker: “Yes that’s fine. What do you think is involved in that, Bob?”
Mr Hogarth: “Well there’s obviously whatever’s required to fund the rezoning of the land and then you’ve got to get a development approval of the land at Helensburgh. You’ve also got to get development approvals and I suppose building approvals for the properties at Cronulla and then there’s the ongoing running expenses down at Helensburgh”.
Mr Walker: “I agree with the rezoning and development application expenses. What do you think is involved with the running of the farm?”
Mr Hogarth: “Well, there’s a fair bit of maintenance that goes on around the property. As you know, it’s constantly being monitored by all the various government departments and green groups. We have to keep the property in relatively pristine condition. There is the riding school aspect and it pretty well runs itself but Ensile draws on a number of those staff from time to time to do general maintenance work and in addition, there’s a number of other contractors that come onto the property. We also get heavy rain down there which can cause a lot of storm damage and that has to be fixed up from time to time and all of the services have to be maintained. We bring water from Otford over the hill and down through the property and similarly we bring power up from the railway line and we need backup services for telephone and for power and all those things need to be maintained. The fences have to be maintained. We’ve got about 35 km of roads and trails and they have to be preserved. We’ve got about 6 km of post and rail fencing. There’s all the perimeter fencing, all that’s got to be maintained, and we’ve got to ensure that all this looks like it’s being kept up to a proper level because this in turn has an effect on would-be trespassers that come in and dump cars and disfigure the place and cause fires. That all in turn has an impact on the value of the property”.
Mr Walker: “And when do you expect us to pay that, Bob?”
Mr Hogarth: “ Well if we get the $4.5 million I guess that we’ll be right for a while . I’d be happy for an amount to be credited to the loan accounts and those accounts can be balanced off each quarter and then on the end inequalities interest would be charged. I would think that that’s the best way of doing it. I’ve done this a few times before. It saves anyone paying tax on any income which they don’t get and that’s the problem with putting interest on both sides of the loan accounts and I’d propose that we just do that at the National Bank’s business base rate”.
Mr Walker: “Yes, I’m happy about all of that. All right, well all that sounds pretty good. What do you have to do, Bob?”
Mr Hogarth: “Well obviously I’ve got to sit down and work out for you what land we’ve got and how we describe it”.
Mr Walker: “And how are you going to put all the land together, Bob?”
Mr Hogarth: “The land’s quite complex and I think we need to simplify it. We own approximately 1,100 acres, as you know, but we did run a court action and we have the residual right to the roads in the town”.
Mr Walker: “Yes I think I’ve heard something about that. That’s how you get to a lot of the land in the land pooling area”.
Mr Hogarth: “Yes that’s right. But it’s also important because some of these roads stretch right up into the centre of town and could be integral in any further development there. I think you know that they’re already talking about putting a shopping centre beside Short Lane and I think that we would be ideally positioned to be involved in that development”.
Mr Walker: “ Well if these are the terms of what we’re working on and you’re going to put all those extra things in then I guess we should be involved in all of these things together ”.
Mr Hogarth: “ I would expect that if I’m going to put everything up in Helensburgh and into this joint venture, then it makes sense that anything that’s done in Helensburgh, we should both be involved in ”.
Mr Walker: “Yes I’m happy to do that. I wouldn’t be doing anything in Helensburgh without you being involved in it. You obviously have so much local knowledge of the area and it seems to follow logically and equitably that that’s how we’d do it”.
Mr Hogarth: “The other area that we haven’t really talked about is the land pooling area”.
Mr Walker: “On the same basis as we’ve just talked about, I would think that that would have to be put in as part of the joint venture”.
Mr Hogarth: “Yes I think that’s probably right. I suppose in the land pooling area I’ve got an interest in Helensburgh Land Pooling Incorporated (HLPI) . I’ve put in about $80,000 into that and I’ve given them a lot of other help and I’ve also got our consultants to give them some help”.
Mr Walker: “Where precisely does that land begin and end?”
Mr Hogarth: “I own the road that’s adjacent to Walker Street and it goes from the Housing Commission area in Walker Street down to about where the bus depot is. It’s actually bounded by Blackwell’s property so there’s about 4 or 5 sections of land that go down there that make it up, then it forms a triangle bounded by Otford Road. It’s all the rest of the land in that old subdivision and I’ve separately got about 30 blocks in that area”.
Mr Walker: “Do you propose that we do anything further in that area?”
Mr Hogarth: “No, most of the land is owned by a whole heap of locals and they’ve been attending the meetings and I’m sure Alan has brought you up to date with what a farce they’ve been. The only problem is that there are blokes called Fellows, Chapman and Cullen that own a big swag of land and probably the most valuable land because it’s next to the Housing Commission development, and they just don’t seem to want to cooperate”.
Mr Walker: “What’s their problem?”
Mr Hogarth: “Well they own the key land which means that we need their land to successfully develop this area. We’ve done a lot of work on this and Alan’s been involved in it but they refuse to contribute any money and have given us trouble in securing title to the roads. We had to take them along to the Land Titles Office with us a couple years ago and we agreed with the Land Titles Office to secure for them the add medium filum provision”.
Mr Walker: “I don’t know what any of that’s about”.
Mr Hogarth: “That gives them the right to access because one of the issues is that all these blocks are landlocked and that’s the reason why Alan’s been involved in trying to re-subdivide the whole area as part of the application to Council”.
Mr Walker: “But all that’s being done by Helensburgh Land Pooling Incorporated (HLPI) through GHD”.
Mr Hogarth: “Yes that’s right. They’ve virtually used all of our research and background. They’re using all of our consultants and I think that I’m being charged for most of their work but I think in the long run it probably helps our development though I would propose that we put that in to be run separately in the agreement just so that we don’t get caught up in some massive property dispute between the 150 land owners and the arrangements that Alan’s trying to achieve. This might trip us up in our big application but I’m happy to involve everything that we’ve done in it. I see it actually as a benefit to the development but your people may want to run independently of it”.’
[emphasis added]
281 Mr Hogarth accepted under cross-examination that the way in which paragraph 29 of his statement had been written meant to him ‘that the whole of [6/166] was written out by [him] when [he] returned home after the conclusion of the meeting of 28 October 1993’. [T 304]. Mr Hogarth then gave evidence at transcript 304 as I understand that evidence, that part of his said notes had been prepared before the meeting in the sense that they had been composed before the meeting. His then evidence at transcript 305 was that he used the notes as a guide to what his interests would be prepared to accept as a basis for the joint venture. Hence, his evidence becomes one in which at transcript 305 he appears to be saying that parts of his notes existed before 28 October but the notes were put together as a complete document after he returned home ‘as applied to the meeting’ which he had with Mr Walker and Mr Severino and as representing what had been said at that meeting. All of this, even though on his evidence parts of the document had been put together with other parts of the document relating to incidents that had occurred prior to 28 October [T 305]. 282 In the result, it becomes very difficult to rely upon Mr Hogarth’s handwritten document at 6/166 [excluding for the moment the extra comments inserted by Mr Kidd] as the precise genealogy of Mr Hogarth’s handwritten notes is difficult to follow in the extreme. The evidence is perhaps summarised at transcript 308, line 10, as follows:
“At the conclusion of that meeting I returned home and reduced the contents of that meeting as best I could recall to writing [6/166] . . . “.
283 Then after further cross-examination on Mr Hogarth’s handwritten note 6/166 in terms of the detail upon them, he gave the following evidence:
‘Q. And are you telling us, therefore, that in the case of those documents upon which the notes had been made before 28 October, they were transmitted to this document so as to provide a sort of combined account of what had been said in the course of a number of meetings, including 28 October?
A. Yes, what we were prepared to accept.’284 Mr Hogarth’s statement in reply, paragraphs 28 to 46 then gave further detail of his recollections. 285 In the result the document at 6/166 is very carefully scrutinised against all of the evidence including contemporaneous documents. It is clearly self serving in many respects. Mr Hogarth’s evidence is assessed in this light - but even if, as appears to be the case, the document represents a compilation of recollections as to a number of conversations, the Court is able to hold by reason of probabilities gleaned from the whole of the voluminous evidence in the case, that certain conversations took place in the course of which particular representations were made. Here again, the failure of the defendants to enter the witness box to contradict or challenge the evidence, is a factor to be weighed in balance. 286 As earlier stated, the handwritten document at 6/166 and following is in Mr Hogarth’s handwriting in the main but is overwritten in certain sections and there are further notes on the document made by Mr Kidd. The document is an important document and was closely cross-examined on. Mr Kidd’s evidence was that he first saw it in late October 1993 and before the 1st of November 1993 on which occasion, as I understood his evidence, only Mr Hogarth’s handwriting was on the document. 287 In terms of the chronology, Mr Kidd’s evidence was that this was the document which he used in his endeavours to assist Mr Hogarth by in turn producing the first version of the document which became entitled ‘Basis for Agreement between LW and RMH Companies’. That first version of the basis of agreement document is to be found at 6/197. In its form as appearing at that place in the evidence, the document has a number of handwritten changes to the typed script. In some sections, one is unable to read below the handwriting to discern what the original typewriting had recorded. The document in its original typed form was the first form of document prepared by Mr Kidd, whose evidence was that he used the handwritten document at 6/166 to assist in preparing this first form of the Basis for Agreement. Mr Kidd was closely cross-examined on the document at 6/197 as to its original form and as to the later handwritten amendments to it. A re-engrossed version of the document now incorporating the handwritten amendments appears at 6/201. That version appears again at 6/205 but now with Mr Walker’s handwritten comments.
‘Q. Wouldn’t this indicate to you that almost every part of this document . . . certainly on the first two pages, was a record of what you claim was actually said at the meeting of 28 October?
A. Yes.
Q. Not something that came into the document, not things that came into the document from pieces of paper that were written out on previous dates before 28 October; not that at all. Is that what you now say?
A. No.
Q. You don’t say it?
A. No.
Q. You still say that quite a few of these items came from pieces of paper written out on previous days, do you . . .?
A. Some of them, yes.
Q. Which ones?
A. I can’t identify them but it forms a basis for a joint venture that we had discussed with other people previously.
Q. You can’t tell us now any of them which came from pieces of paper written out on previous days. Is that so?
A. Yes.’
[T 316-317]
288 A Minute Paper from Mr Peter Olive, the Divisional Manager, State and Regional Planning of the Department of Planning to Mr Ken Sullivan of the Wollongong Office of the Department of Planning was in the following terms:
28 October 1993 - Department of Planning Minute Paper advising that the decision to hold a Commission of Inquiry was to be put into effect
289 The Minute Paper is an important document, bearing in mind its date. A strong inference is available on the evidence that this reference to a Commission of Inquiry is likely to have followed some communication between the Walker Interests and the Minister in relation to the subject. The Minute Paper strongly suggests that Mr Walker, by the time of the 28 October 1993 meeting with the Hogarth Interests, already had reason to believe that there was an excellent prospect that a Commission would be appointed. Whether the Walker Interests received such information informally and following the many earlier approaches by the Hogarth Interests to Mr Webster and others, or alternatively, as appears far more likely, from the Walker Group’s interest in the subject, is not to the point. The crucial question is whether the Court may infer that as at the 28th October 1993 meeting, Mr Walker is likely to have had reason to believe that a Commission of Inquiry would be appointed. The Department of Planning Minute Paper of that precise date supports the inference which I draw that Mr Walker would have so believed. This inference is critical as it generally supports the evidence given by Mr Hogarth as to what was said at the meeting and in particular the references to Mr Walker’s statements that he thought that, with the Walker Group’s political connections on both sides of Parliament, they would be able to ensure that they could either get a Commission of Inquiry or put some pressure on the Government to get the land rezoned. It tends also to suggest that a Commission of Inquiry was mentioned at the later meeting attended by Mr Lester of 18 November 1993, which as will be seen from what follows below, was the evidence given by Mr Hogarth and Mr Kidd as to that meeting.
‘Neville Apitz and I have discussed this matter with the Director.
While the issue of the EPA requirements was noted, as was the constraints on the Minister under the EPA Act to change the plan as submitted by the Council, the decision to hold a Commission of Inquiry is to be put into effect . What will be required is a formal recommendation to the Minister to do this, plus the terms of reference for such an inquiry.
One such result from an Inquiry could be that the land in totality should be protected from development and that an environmental protection zone is appropriate. This would provide a basis for the Minister’s decision on the draft plan submitted by the Council. Another outcome might be that not all of the land affected by the proposed LEP warrants environmental protection. This eventuality from a Commission of Inquiry could form the basis of a Minister’s decision to return the plan to the Council for further consideration. Since the Minister has apparently decided that a Commission of Inquiry is the most appropriate way to deal with the present uncertainty surrounding the Council’s draft LEP, action to set up an inquiry should be taken promptly.
Please discuss with me or Neville Apitz as necessary.’
[6/171]
290 Mr Hogarth’s diary note for 3 November 1993, includes the following reference:
3 November 1993
291 In the course of the view on 14 October 1999, Mr Hogarth at transcript 21, gave evidence that having had some difficulties with fires being lit in a particular area, he had caused the area to be fenced and that the owners of the subject land complained to the Council. The evidence was that the Wollongong Council’s Town Planner, Mr David Winterbottom, rang Mr Hogarth and said “Bob, if you shift the fence we will get you a Commission of Inquiry” and that Mr Hogarth said “okay David it will be pulled down tomorrow”, which they then did.
‘David Winterbottom rang re fence if we would pull down he will get Commission of Inquiry.’
292 In Mr Hogarth’s statement, he gave evidence in paragraph 30 of a meeting which he had with Mr Weinert a few days after the 28 October 1993 meeting to the following effect:
Mr Hogarth’s Evidence
Early November 1993 or thereabouts - Meeting 3
293 In early November 1993, a meeting took place attended by Mr Hogarth, Mr Walker, Mr Dransfield and Mr Kidd.
30. . . . Mr Weinert: “Lang tells me that we’ve got to give you $4,500,000 under the proposed deal that you spoke to Lang about. Why do you need all that money?”
Mr Hogarth: “Well we’ve got to have at least $2,750,000, $2,000,000 to pay out AGC that Lang knows about, and the other $750,000 will pay off the mortgages for the Cronulla properties that we’ve agreed we’re going to develop together”.
Mr Weinert: “We have to deal with the position with your titles, Bob. It is not possible for Walkers to become involved with you at Helensburgh or Cronulla unless your company’s titles to those properties are clear and unencumbered.”
Mr Hogarth: “The only way to do that is to complete the settlement arrangements with AGC.”
Mr Weinert: “How about we pay you $2,750,000 upfront and as Lang tells me that we’ll get the Helensburgh land rezoned pretty quickly we’ll pay you the balance of the money then. The reason for this is that Lang would like to reserve our cash funds for other projects we have in the pipeline. We still agree that we have to pay you the balance of $1,750,000 and as rezoning is close we can use that as the trigger for that payment. We are confident that Walkers have spoken to enough people and have enough expertise to get this area rezoned, so the timing of the second payment shouldn’t be a problem for you”.
Mr Hogarth: “This is different to the deal agreed to with Lang and Alan but I will go along with the $1.75 million being paid within a reasonable time and if the rezoning is close then we use that as the trigger for that payment. But I do stress, Brian, I only agree to this arrangement because of the pressure that I’m under with AGC and I don’t want to do anything that could threaten my settlement of that matter. I also want to stress, Brian, that this should in no way change your obligation to pay the entire sum of $4.5 million”.
Mr Weinert: “No Bob. This deferred payment won’t change any of that. We’ll pay $2 million to AGC now and then the balance in the near future when we achieve rezoning. You should then arrange for Paul Stone . . . to have AGC transfer its mortgage to Highfield Grove”.
Mr Hogarth: “Yes I think that’s fine. The reason why I was going to transfer the Cronulla properties to Lakatoi Universal was to help with preservation of the tax losses”.
Mr Weinert: “Okay, then you should put all this in your agreement with Lang”.
Early November 1993 - Meeting 4
294 Mr Hogarth’s evidence in relation to this meeting is set out in paragraphs 31 to 36 inclusive of his statement, in the following terms:
Mr Hogarth’s Evidence
‘31. In early November 1993 I attended a meeting at Walker Corporation’s Caringbah office at which Mr Walker, Mr Dransfield and Mr Kidd were present. I introduced Mr Kidd to Mr Walker and Mr Dransfield and Mr Walker handed to Mr Kidd a brochure and then set about explaining to him some of the history of Walker Corporation and their expertise.
295 Mr Kidd’s evidence in relation to meeting 4 is set out in paragraphs 12 to 20 of his statement and is in the following terms:
32. Considerable discussion took place between Mr Walker, Mr Dransfield, Mr Kidd and myself. All parties were in possession of a copy of the Basis for Agreement (Exhibit “6/0205”).
33. With respect to the Basis for Agreement, I would comment as follows:
(a) At the time of preparation of the first draft the amount required to settle the Westpac/AGC Proceedings was believed to be $2.5 million. This figure was negotiated down to $2 million prior to the Heads of Agreement being finalised by Mr Kidd.
(b) The responsibility for dealing with AGC was to be my responsibility. Mr Walker said words to the following effect:
Mr Walker: “Bob, I know you’re worried about the AGC proceedings and we realise that this money is required to settle those proceedings.
Mr Hogarth: “Since I’ve spoken to Brian (Weinert) and following further negotiations with Westpac I believe that they will settle the matter if I can pay them $2 million outright”.
(c) The amendment to clause 3 occurred in consequence of a discussion to the following effect:
Mr Walker: “ [ Bob, I’ve looked at clause 3 of the draft. I agree that we’ve settled the discussion about the value of the land being worth $9 million and that we have to pay you $4.5 million as our right to play. You’ve spoken to Brian and you have jointly come up with the figure of $2.75 million as the amount that we have to pay now. We agree that we will pay the remaining $1.75 million when we achieve rezoning and we believe that this can be achieved in the near future. However, we have to have a 50/50 position in the say of what happens from day one” .
Mr Hogarth: “ Yes I understand that, as long as you’re clear that you have to pay the $1.75 million ”. ( )
Mr Kidd: “ So, let me make this clear: the $2.75 million is merely the initial ( contribution of ) the $4.5 million which we have agreed is necessary to be paid for you to take up a 50% interest in the land. As Bob has said to you earlier in this meeting today, you will have to pay the full $4.5 million to get that 50% interest based on our jointly agreed valuation of the land being $9 million .”
Mr Walker: “ Yes, that’s right Geoff. We have already agreed earlier in this meeting that we would pay you $4.5 million in consideration of us obtaining a 50% interest in Helensburgh Land. That will be set out in the Heads of Agreement between us ”. ]
[I interpolate to note the sections marked in the bold square bracketed parenthesis are virtually word perfect in both Mr Hogarth’s and Mr Kidd’s statements. Where a few words are changed this is reflected by the use of round brackets. As the close to word perfect duplication is also to be found in other sections of Mr Hogarth’s and Mr Kidd’s statements, the same procedure is used later in the Judgment to identify these sections.]
Mr Kidd: “ Yes, that is how I have drafted it ”.
Mr Dransfield: “ Yes, Lang and I have already said that rezoning of the Helensburgh land is imminent. We don’t see that as a problem. So none of what we’ve said here about our paying this as an initial and a further contribution changes our agreement that we will be entitled to hold a 50% share in the land by paying $4.5 million. ”
34. The conversation then turned to the value of the land at Helensburgh. A conversation ensued to the following effect:
Mr Walker: “Bob, I know we’ve discussed this previously but tell me again what you think the land is worth”.
Mr Hogarth: “As I’ve told you before, we’ve had a lot of valuations on the property and I think that it can value up as high as $16 million. I agree that there’s probably some component in there for rezoning potential but in its natural state it’s probably worth about $11 million”.
Mr Walker: “What do you think it’s worth, Peter (Dransfield)?”
Mr Dransfield: “I think it’s worth about $7.5 million ”.
Mr Walker: “ And Peter how confident are you of that figure? ”
Mr Dransfield: “I know the land and I’ve looked at it again when I knew that we were going to have this meeting. I don’t have a firm valuation but I feel that around $7.5 million would pull it up and that on any basis, you’d get that for the land today” .
Mr Hogarth: “ Well then the bottom line as far as we are concerned is that the land has a value of $9 million and that for you to take up a 50% shareholding you will need to pay us $4.5 million. ”
Thereafter Mr Dransfield and Mr Walker left the room to discuss our proposal and upon their return Mr Walker said words to the following effect:
Mr Walker: “ Bob, we agree to those terms and price but stress again Bob that you must stay out of the process completely as we know that with our political connections we will get the land rezoned quickly with the use of the GHD Reports and your keeping a low profile. ”
Mr Hogarth: “ So you agree that the land’s value is at least $9 million ”.
Mr Walker: “ Well, you know we just want to do the deal. I don’t think there’s much point in us arguing much about the value because we’re going to share everything 50/50. Why don’t we just agree that the value of the land is $9 million and we have to pay $4.5 million and you’ll get free carried for $4.5 million and that gives us a half interest in the land ”.
Mr Hogarth: “That seems all right to me. I agree there’s not much point in arguing about the value of the land but as long as we agree that it’s worth $9 million and you have to pay $4.5 million”.
Mr Walker: “Yes, there’s no doubt about that”.
Mr Hogarth: “We agree and are prepared to enter into contracts on that basis.”
35. The conversation with Messrs Walker and Dransfield then turned to tax losses and was to the following effect:
Mr Hogarth: “The Genepa Investment Trust runs the motel and it has accrued significant losses because of the interest payments to AGC.”
Mr Walker: “Do you propose to make these available to the joint venture?”
Mr Hogarth: “I’m prepared to share them with the joint venture, yes.”
Mr Walker: “How are we going to use them?”
Mr Hogarth: “I don’t know but your people can work it out. I’m just saying that they’re available provided any action you propose does not adversely affect the losses and that our consultant accountants, Pannell Kerr Foster, agree with whatever scheme might be worked out.”
36. The conversation then turned to the subject of the Thompson Land. The conversation was to the following effect:
Mr Hogarth: “Lang, for the past several years I have secured an option over 100 acres of land in the middle of our property which is owned by a chap named Frank Thompson. I have had a lot of difficulty with Frank Thompson in the past because he attempted to apply, through the Land Board, for an access road other than the one available to him, and he put a road across my existing exit from my home. I opposed this as it cut into our privacy and affected the free range of our stock and I fought his action through the Land Board. You and Brian are aware of this because you came down a couple of years ago to give me some advice about alternative access. The National Parks and Wildlife Service has supported us in our action and Thompson has been denied alternative access at this time, but he could continue the action as the matter was not finally resolved. I secured an option to purchase the Thompson Land and I have renewed and paid option fees for those options for a number of years. The option expires next year and I think the Joint Venture should buy the Thompson Land. The consultants have advised us that it is imperative that this land be secured to negotiate its purchase by National Parks and Wildlife Service for inclusion in the Royal National Park and if we’re not to purchase the land then we must renew the option current for the Joint Venture until we get rezoning.”
Mr Walker: “How does this affect the development?”
Mr Dransfield: “Bob why is the land so important?”
Mr Hogarth: “The option over the Thompson Land can only be exercised in favour of the State Government and as can be seen from our rezoning proposal prepared by GHD this is the “hole in the doughnut” as the National Parks and Wildlife Service termed the Thompson Land, and is additional to the 600 acres that we agreed to transfer to the National Park in exchange for rezoning of the land at the top of the escarpment. It is probably the most environmentally sensitive part of the whole place. You have been given copies of GHD’s document entitled ‘Application for Rezoning’ that has been lodged with Wollongong City Council and in this document are maps and text setting out the importance of the Thompson Land. I will send you a copy of the letter from the National Parks and Wildlife Service that confirms their attitude as to the importance of the Thompson Land.”’
[emphasis added]
Mr Kidd’s Evidence
296 Mr Kidd’s evidence was that the Basis for Agreement document was on the table at the meeting and that it would have been unusual for him not to have made notes on his copy. No such notes can now be located. [T730]
[I interpolate to note that in the subject brochure which became Exhibit PX2 and is also to be found within PX6 at 214 and following, a number of representations of a general nature were made. These included:
‘12. I attended my first meeting at Walker Corporation’s Caringbah office Board Room during the negotiations for the proposed joint venture. This was the first occasion when I met Mr Walker and Mr Dransfield.
On this occasion Mr Walker introduced himself to me and handed to me a brochure entitled “Men at Work” (“the Walker Brochure”) and said words to the following effect:
Mr Walker: “Geoff, this is a brochure we recently prepared about how we operate. It also sets out the way we go about our business and what our clients and joint venture partners can expect. It sets out some of the things that we’ve been involved with in recent times. I think you’ll find after you’ve read it that it sets out what we’re about, why we have been so successful and gives you an indication as to why we will be able to perform at Helensburgh”.
Exhibited and marked “PAB48” is a copy of the Walker Brochure.
“Naturally like most companies, profitability is directly linked to performance and our history of stable and positive growth underlines our performance record …
The ability to perform is directly linked to the calibre of Walker’s management team and staff and its success is built upon the experience and dedication of the team”.
[PX 6/216]
“Our bellief in long-term associations rather than just short-term profits …”
[PX 6/217]
“Detail at Walkers means every element from the literal details in the initial document to the finishing touches on every project. We feel planning is the first home for quality and ensure equality is present in every detail.
From initial concept through to completion, during critical path and peripheral stages, we’re constantly reviewing and improving our approach - reviews that can save days and dollars especially after a project begins”.
[PX 6/218]
“Walkers brings a wealth of experience in property development, engineering, building, financial structuring - and more - to joint ventures. Combined with an extraordinary understanding of its markets and the initiative to try for outstanding results it has helped bring capital, jobs and above-average returns for its business partners …
It’s an attitude that partnerships and friendships are built on, and built to last”.
[PX 6/224]
“Successful syndication demands planning and timing. Walkers makes the time and has the expertise to succeed …
For many of Australia’s professional groups, Walkers provides the skills and the vision to put investment on an understandable, profitable footing without inflating costs. We don’t see property syndication as dividing an asset, but rather as providing the most appropriate ownership for a certain property”.
[PX 6/231] ]13. The conversation continued to the following effect:
Mr Walker: “Bob, AGC have taken the Motel and I understand that Westpac are running AGC’s activities to move further against your Group. It is our information that they want this matter wrapped up and they intend to move further against you. How is that going?”
Mr Hogarth: “That’s right but we have commenced an action against them in the Supreme Court and I believe that we could settle the matter with AGC for a cash payment of about $2-3 million, if we had that sort of money available”.
Mr Walker: “Well if we are to become involved in the area we certainly want them out of it. Do you have any way of raising that money?”
Mr Hogarth: “I know that because we have discussed it a number of times between Peter, you and me in the recent past. After we last met I have made some enquiries within AGC/Westpac and it is my belief that the matter could be settled for $2-3 million. If we had that money readily available at the moment we wouldn’t be here talking to you”.
14. A conversation occurred to the following effect:
Mr Kidd: “Lang, do you believe you’ve got the expertise in your organisation to develop the land at Helensburgh? I’m aware that you’ve got a civil engineering department but do you have the expertise to do all of the other things that are necessary for this type of development?”
Mr Walker: “Yes, we’ve had many years of experience in taking broad acres and developing them to a point where they have been successfully developed. Menai is a prime example of a similar successful and profitable development which also proves the success of the joint venture mechanism that we are proposing. Our joint venture partner there is a major Japanese concern and they are very happy with how the Menai joint venture is being administered. We operate a separate company with them and we hold monthly meetings to update them on the progress of development and give them cash flows, budgets, accounts and the like. You can see other examples of what we have done in the brochure that I handed you (the Walker Brochure)”.
Mr Dransfield: “We’ve got the people here that can do all of the development and that’s one of our real strengths”.
Mr Kidd: “How do you think you’re going to control the political situation?”
Mr Walker: “You don’t need to worry about that. We have that all wrapped up. We can organise rezoning of this promptly. I’ve made enquiries and the information I’m getting is that there’s a distinct dislike of Bob in Wollongong Council by the Labor contingent and they have their mind set on doing everything to frustrate him. We’re liked by the Labor Party and we can overcome all of that. We are connected at the highest levels”.
Mr Kidd: “How in fact do you propose to go about handling the politics?”
Mr Dransfield: “As soon as we finalise our deal with you we will manage and coordinate overtures to the various authorities, to the relevant Ministers and at the same time at all other political levels to ensure that we have the support of both the Ministerial Departments and also Wollongong Council. We can get this through and overcome the position that Bob has got himself in - but you will both need to stay right out of it”.
Mr Kidd: “That sounds okay. What do you think Bob?”
Mr Hogarth: “Well Lang’s been telling me for a while that he’s got this expertise and all of these political contacts, so I suppose we should give it a go if we can agree on everything else”.
Mr Dransfield: “Geoff, that brochure outlines many of our successful projects and briefs you on our people, our management skills, our professional approach to the jobs that we do, the work that we have done and the satisfied clients that we have. It describes the type of relationship and the way we will work with you and manage the joint venture. You can rely on us”.
Mr Kidd: “Okay Peter, I’ll have a look at it and get back to you if necessary. It certainly looks impressive from a first flick through it”.
15. Mr Hogarth then had a discussion with Mr Walker and Mr Dransfield in my presence to the following effect:
Mr Hogarth: “Lang, part of our holdings in Helensburgh is that for the past several years I have secured an option over 100 acres of land in the middle of our property which is owned by Frank Thompson. I have had a lot of difficulty with him in the past because he attempted to apply through the Land Board for an access road and put a road across our existing exit. I opposed this through the Land Board. The National Parks and Wildlife Service has supported us on this and Thompson has been denied alternative access but he could continue the action as the matter was not finally resolved. I secured an option to purchase the Thompson Land and I have renewed and paid option fees for those options for a number of years. The option expires next year and I think any Joint Venture between us should buy the Thompson Land. The consultants have advised us that it is imperative that this land be secured to negotiate the rezoning of Lady Carrington Estates with the agreement of National Parks and Wildlife Service for inclusion in the Royal National Park and if we’re not to purchase the land then we must keep the option current for the Joint Venture until we get rezoning.”
Mr Walker: “Are you sure that this area has an effect on the potential development?”
Mr Dransfield: “Bob, please explain why you think that this land is so important?”
Mr Hogarth: “As can be seen from our rezoning proposal prepared by GHD (Gutteridge, Haskins & Davey) the Thompson Land is the “hole in the doughnut” as the National Parks and Wildlife Service termed it. The Thompson Land is part of the 600 acres that we agreed to transfer to the National Park in exchange for rezoning of the land near the town. It is probably the most environmentally sensitive part of the entire place. You have been given copies of GHD’s document entitled ‘Application for Rezoning’ that has been lodged with Wollongong City Council and in this document are maps and text setting out the importance of the Thompson Land. I will send you a copy of the letter from the National Parks and Wildlife Service that confirms their attitude as to the importance of the Thompson Land. The option we have over the Thompson Land can only be exercised in favour of the State Government”.
Mr Walker: “I agree that we need to keep control of that land.”
16. I then turned to Mr Hogarth and said words to the following effect:
Mr Kidd: “Bob, you told me that you had a conversation with Brian Weinert about funding”.
Mr Hogarth: “Yes, Brian said to me the other day “what money do you need out of this arrangement to cover your existing commitments” and I said to him that I clearly am going into this arrangement because of the pressure that I’m under with AGC. Brian had asked me what other commitments I had and when I sat down and worked them out with him it transpired that to clear the titles on the properties at Allison Road, Clyde Avenue and Gerrale Street, Cronulla it would need approximately $750,000 and I believed as does Geoff (Kidd)that we can settle the matter with AGC if we could promise that we could pay them $2 million as a lump sum payment immediately”.
Mr Walker: “Yes I’ve spoken to Brian and he’s explained to me how that conversation went. We obviously have cash flow considerations. We’re in the throes of trying to float Walker Corporation and after the float we will have significant moneys available to us but until we get the float up we really want to hang on to as much of the cash flow as we’ve got for other purposes”.
Mr Hogarth: “Well I don’t mind that if we’re in partnership together down at Helensburgh provided I get the moneys that I absolutely need in the short term”.
Mr Walker: “So if we paid you $2.75 million, that would cover everything in the short term. You won’t have any expenses apart from your living expenses because we’ll be paying all of your major expenses”.
Mr Hogarth: “Yes I think that’s all right”.
Mr Walker: “It would help us Bob, if you can allow us a little leeway on the balance of the 50% payment for a short time and what I would propose is that we pay the balance of the money when we get the rezoning and we’ll get that rezoning promptly. With us on the job we would get that achieved in the very near future. I’ve checked it all out and I’m very confident of that, and it will help us a lot if we pay that money then because at that stage the project will be totally financeable and we won’t have to go into our cash flow requirements for those moneys nor for the development moneys”.
Mr Hogarth: “That sounds okay to me. As you know, my immediate requirement is to pay out Westpac. How soon do you think you’ll get this done?”
Mr Walker: “Bob, I think from my initial inquiries that we could get this rezoned in the next few months”.
Mr Hogarth: “So that’s when you envisage paying the rest of the money”.
Mr Walker: “Yes of course, there’ll be no problems paying the money then and in any event, once we get the float up we’ll have plenty of money to pay that”.
Mr Walker: “Bob, I know you’re worried about the AGC actions and we realise that this money is required to settle those proceedings but we cannot get involved in that matter. You will have to be sure that you can secure a proper settlement that gives you the releases of your personal guarantees and your land”.
Mr Hogarth: “I agree that we’ve got to accept that responsibility. Since I’ve spoken to Brian and following further negotiations with Westpac (who were handling the negotiations for AGC) I believe that they will settle the matter if I can pay them $2 million outright”.
[ Mr Walker: “Bob, I’ve looked at clause 3 of the draft [6.0205]. I agree that we’ve settled the discussion about the value of the land being worth $9 million and that we have to pay you $4.5 million as our right to play. You’ve spoken to Brian and you have jointly come up with the figure of $2.75 million as the amount that we have to pay now. We agree that we will pay the remaining $1.75 million when we achieve rezoning and we believe that this can be achieved in the near future. However, we have to have a 50/50 position in the say of what happens from day one”.
Mr Hogarth: “Yes I understand that, as long as you’re clear that you have to pay the extra $1.75 million to earn a 50% position”.
Mr Kidd: “So, let me make this clear: the $2.75 million is merely the initial payment towards the $4.5 million which we have agreed is necessary to be paid for you to take up a 50% interest in the land. As Bob has said to you earlier in this meeting today, you will have to pay the full $4.5 million to get that 50% interest based on our jointly agreed valuation of our land being $9 million.”
Mr Walker: “Yes, that’s right Geoff. We have already agreed earlier in this meeting that we would pay you $4.5 million in consideration of us obtaining a 50% interest in the Helensburgh Land. That will be set out in the Heads of Agreement between us”. ]
Mr Dransfield: “Yes, Lang and I have already said that with us involved, the rezoning of the Helensburgh land is imminent. We don’t see that as a problem. So none of what we’ve said here about our paying this as an initial and a further contribution changes our agreement that we will be entitled to hold a 50% share in the land by paying $4.5 million.”
A further conversation ensued between Mr Dransfield and Mr Hogarth to the following effect:
Mr Dransfield: “Now let me turn to the Allison Road site. We’ve had a good look at it and we do not accept that it has a value of $3.5 million as you have proposed. I know the area well and the most I could agree to is $3 million”.
Mr Hogarth: I don’t agree, Peter. As you know, I spent a lot of effort in putting this site together and I believe that if we had time we could sell it for $3.5 million”.
Mr Dransfield: “You may think that Bob but time is not available if we are to get this deal done”.
Mr Walker: “I agree with Peter’s assessment of the value and I propose that we include an option on Allison Road at $3 million. In that way you can get on with settling things with AGC and progress things at Helensburgh and Cronulla. In the long run this offers major advantages to you”.
Mr Hogarth: “Okay, let’s move forward on that basis”.
17. A further conversation to the following effect took place:
Mr Kidd: “Peter, you have been involved in looking at this Helensburgh land for the past half dozen years with the Department of Housing. What are your thoughts about what is appropriate, given that you have now had the opportunity of reviewing the rezoning application which Lady Carrington lodged with Wollongong Council and the various other authorities?”
Mr Dransfield: “You are right, Geoff, I have been conversant with this land for a long time. I have had meetings with Bob previously when I was at the Department and I have been looking at this for Lang since I rejoined Walkers. I believe that it is suitable. It’s previously been earmarked as land to be released and I think that GHD have identified the area at the top (the area shaded pink in the zoning principles plan) as suitable. We think that we can get somewhere between 1,000 and 1,300 residences on the property. There will be some avenue for villa type closed community units in some of the property and this will mean both a greater number of residences in the area and separately a lot more open space area can be freed up within the development. I have looked at GHD’s plan which sets out the concept of what they propose. That has some medium density housing allowed for and it may be that the mix of that housing can be increased at a later date. I also note that they separately deal with the area behind the tip and I have not taken that into account in our current estimate of figures”.
18. Mr Walker then commenced to give a verbal presentation to Mr Hogarth and myself on the activities of Walker Corporation.
Mr Walker went on to discuss the position at Helensburgh and Walkers’ potential involvement in words to the following effect:
Mr Walker: “As you know, Geoff, we have been in discussions with Bob on a number of occasions and we have had a good look at all of the issues which have an influence on the Project at present and how they can all be addressed and solved. Peter has had a long association with this land from back through the Department of Housing and all of that data is available to us. One of the reasons for Walker Corporation’s success has come from my personal political connections and these extend to both sides of politics. We have been getting our projects through with this Coalition Government but we also have people in the highest level of the Labor Party and I have researched the matter fully at State and Local Government level in preparation for these discussions”.
Mr Kidd: “And what have you found out?”
Mr Walker: “We are fully aware of most of your activities and all of your problems so far which have culminated in your lack of success with the latest application for a rezoning. We also know that we have all of the right connections that can solve all of these issues”.
Mr Hogarth: “Are you sure about that because it has been pretty difficult so far and you don’t know all of the difficulties because you don’t live among the residents of the area. I can assure you Lang that this isn’t a simple matter. It will be bloody hard to get a rezoning through now that the Council has committed themselves not to go ahead with our application”.
Mr Walker: “I agree that you will have a problem in taking this any further on your own. Your only hope is to come in with us and we can bring all of our influence, pressure and contacts to the party”.
Mr Kidd: “How can you be so sure?”
I vividly remember what happened next because Mr Walker rose to his feet, leaned partly over the table and he looked myself, then Mr Hogarth, directly in the eye to say words to the following effect in a tone which was changed from the previously relaxed meeting :
Mr Walker: “Look, let me make it quite clear that from all of our research, you blokes have both [stuffed] up the politics and the details of your recent rezoning application. You have got the Council offside and the State Government will not support what you are trying to do. Bob has created such a high profile that he is now disliked by the Regulatory Authorities, the Councillors, the relevant Ministers and the Greenies. You have a group in Wollongong Council which is voting against you as a block as you saw with your rezoning application and there is no way that you blokes, alone, can redress that position. The only chance that you have to get this land rezoned is to get involved with us. We can solve all of this. I agree with you that it won’t be easy. We have looked at it and we know all of the facts. I tell you that we have all of the contacts and experience to get the land rezoned. We wouldn’t want to get involved with you unless we were assured of success . We think you have put together an interesting parcel of land at Helensburgh and we are the only hope that you have to break the impasse that you have created for yourselves ”.
Mr Kidd: “We know things are a bit difficult with the Council but there is a possibility of a Public Inquiry that can solve this for us”.
Mr Walker: “That’s right but the difference with us involved is that we can control the Public Inquiry. I have influence with the Minister and we can control when it is called and who is appointed as the Commissioner. With us in the project, the result of the Commission of Inquiry will be assured ”.
[I interpolate to note that in Mr Kidd’s statement in reply of 27 October 1999, he altered this important paragraph to read:
‘That’s right. The difference is that with us involved we can bring all our influence to bear ’. [emphasis added]
Mr Kidd: “Are you certain of that?”Mr Walker: “Yes, we are. We wouldn’t want to get involved if we can’t get it solved and moreover , we propose that none of this will be painful for you in any way. You will bring the land to the joint venture and we will bring our financial strength plus the ability to get that land rezoned promptly . We propose to set up a 50/50 joint venture with you where we will pay you 50% of the value of the land which you bring to the joint venture and you don’t have to do any more until we get it rezoned”.
19. Following the above discussion, words were said to the following effect:
Mr Kidd: “I am concerned at our giving up control of the Helensburgh land. As you know, we have control and most of it is unencumbered with Bob living down there. I’m not sure that a joint venture will be the best way to go. Can you point to anywhere where such a structure has worked well?”
Mr Walker: “Well, first let me say that I’m not sure that you have too much choice. From our discussions with Westpac and AGC it is clear that they may soon move against you. You will certainly find our proposal a better alternative than the position that they will take. Now, we are about to complete a joint venture with a Japanese Group where we have undertaken the development of residential land at Menai. That land is very similar to Helensburgh and all runoff goes into the Georges River. At Menai we have successfully addressed all of the issues that will come up at Helensburgh and both joint venturers have made a lot of money. We can get Helensburgh rezoned promptly and we will pay you 50% of the base present land value which we both agree on. Now isn’t that a much better position that the alternative of trying to deal with Westpac?”
Mr Hogarth: “Westpac aren’t the only alternative, Lang. We have other companies interested in doing a deal with us”.
Mr Walker: “Well none of them will have done the research that we have and I will guarantee that none of them will have the contacts to solve the political issues which we know are the barriers here. With us you get the 50% value of the land and no more worries because we will pick up all of the activities. You can sit back and wait for the Residential Zoning. In fact, we will require that you take a back seat on all issues unless we specifically require that you do a defined task. Wouldn’t that be better than what you have been going through? Bob knows both Peter and I and he knows that you can trust us. Read the brochure again that we have given you and you will see the advantages of going into a joint venture with us”.
20. During and after that meeting I read part and later re-read the whole of the Walker Brochure. I finished reading the Walker Brochure that evening. I was significantly influenced by contents in the Walker Brochure.’
[emphasis added]
297 Mr Kidd gave evidence in reply to the statement of Mr Dransfield dated 29 July 1999. As mentioned previously, Mr Dransfield’s statement was not ultimately read in court. Mr Kidd’s statement in reply dated 8 October 1999 was, however, admissible. 298 Mr Kidd also in his statement in reply in paragraphs 14-20 gave further evidence in relation to the detail of the subject meeting. 299 Mr Kidd also in paragraph 20 of his statement of reply, gave evidence that Mr Walker and Mr Dransfield throughout the meeting appeared to him to be very specific as if they felt a need to convince Mr Kidd as the independent party, to recommend to the Hogarth family, the desirability of entering into a joint venture with Walker Corporation. His evidence was that this was particularly so when issues such as their experience, expertise and political connections were raised. 300 Mr Dransfield’s handwritten notes made of this meeting are to be found at 6/246. Mr Kidd’s evidence was that he had these notes to assist him when preparing his statement but then believed the notes to be in Mr Walker’s handwriting. [T 793-794] 301 Importantly Mr Dransfield’s notes include the following:
Mr Kidd’s Evidence in Reply
302 By letter dated 4 November 1993, Mr Hogarth wrote to Mr Walker referring to the recent meeting and enclosing what he said he believed to be ‘the key points relevant to this land and to the establishment of a successful association between us’. [7/63]
‘ - Walker manage the rezoning
- Walker pay a further $1.75m upon rezoning
- Hogarth has an option to purchase the house block for $1m in the event that the rezoning fails’ .
[6/246] [emphasis added]
4 November 1993
303 Mr Hogarth’s evidence in his first statement was as follows:
Mr Hogarth’s Evidence
10 November 1993 - Meeting 5
304 On 10 November 1993, Mr Kidd and Mr Hogarth had a further meeting with Mr Walker and Mr Dransfield.
‘37. Prior to 10 November 1993 I had a discussion with Mr Weinert to the following effect:
Mr Weinert: “I’ve been thinking about how we can make this tax effective and my initial thoughts are that Walkers would put $3.75 million and that may come down to $2.75 million to Lakatoi Universal and all this will depend on finalising the arrangement with AGC and then we’ll have a new company that’s owned 50/50 with Lakatoi Universal. That means that Walkers will own 50% of Lakatoi Universal. How I’d envisage it is when Walkers have paid the rest of the moneys up to the $4.5 million then they will own 50% of Lakatoi Universal. We need to avoid stamp duty with all of these transactions and what I think is that if Lakatoi Universal gets control of the land and Walker has half of Lakatoi Universal before it gets that control then Walkers will not need to sell the land and we’ll just have an operating company that would run the arrangement under Lakatoi Universal. You can give an option to Lady Carrington Estate and then it can assign its option rights to Lakatoi Universal”.
Mr Hogarth: “Yes, that sounds fine”.
Mr Weinert: “One other issue is that we need some security for the moneys that we have to pay and clearly we need to have some security for the initial payment which is the $2.75 million. What I propose is that you’ll clear the title to all of the land under the settlement with AGC and then you should sign a mortgage which we’ll keep in the bottom drawer in respect of the $2.75 million”.
Mr Hogarth: “So how do you think that’s going to work?”
Mr Weinert: “Well I don’t propose that we’d register it. I just have to have a document so I can say if anyone asks me yes we’ve got some security for the $2.75 million and then we’ll have to vary that when we pay the other $1.75 million”.
Mr Hogarth: “Okay”.
38. An issue then arose regarding tax losses and other matters associated with the proposed transaction and I had a further conversation with Mr Weinert to the following effect:
Mr Weinert: “Bob, we need to preserve the tax losses in the Genepa Trust. You’ve told me some things about it and I need to look at it much more closely and I plan to work on it with Alan Severino and we’ll also talk to Geoff Coleman and Pannell Kerr Foster who I understand are your tax consultants”.
Mr Hogarth: “Yes we have tax losses of $9 million, maybe $10-12 million in the Genepa Investment Trust and I’ve previously indicated to Lang (Walker) and also to Alan (Severino) that I thought those could be available for the benefit of the joint venture provided Michael Grant (Pannell Kerr Foster) agrees that your action does not adversely affect the losses”.
Mr Weinert: “I don’t know what to do about them at this time but certainly we will arrange something for them. We’ll need to look at that and your idea about the mortgage being transferred and we’ll need to look at the stamp duty situation as well”.
Mr Hogarth: “What do you think about that?”
Mr Weinert: “I’m not sure at this stage but we need to look at the possibility of whether or not Ensile would be able to sell the blocks off and at the same time maintain its capital gains tax status”.
10 November 1993 - Meeting 6
305 Mr Hogarth’s version of this meeting is in the following terms:
Mr Hogarth’s Evidence
306 Mr Kidd’s version of Meeting 6 is set out from paragraphs 22 through to 29 of his statement. I have already indicated that paragraph 22 of his statement is almost word for word identical to paragraph 39 of Mr Hogarth’s statement. Paragraph 24 of Mr Kidd’s statement is then also almost identical to paragraph 40 of Mr Hogarth’s statement. In between the two paragraphs in Mr Kidd’s statement, he includes evidence that the following discussion regarding the acquisition of land at Helensburgh took place:
‘39. . . . During this meeting I had a conversation with Mr Walker and Mr Dransfield to the following effect in the presence of Mr Kidd:
Mr Walker: “Bob, we have all the political connections and access to the right people to have your land at Helensburgh rezoned to residential promptly. As you know, we have the experience in broadacre development as we have shown at Menai, for instance. As you would also know from the various meetings that you have attended together with me, we have the contacts and influence with certain pollies, such as Max Willis, Nick Greiner, John Hannaford and many others and other people with political influence. A condition of our involvement would be that you agree for us to have full control of the rezoning process with our consultant Alf Lester & Associates utilising, if necessary, any of the consultant documents you have commissioned and used in the past. I want you to keep away from any further public involvement in any of the rezoning process because our sources tell us that it is a personality problem that is stopping that land being rezoned and that is why the Labor Party through Wollongong City Council haven’t rezoned your land. We would be the ones dealing with all public authorities and obtaining approvals from them such as the D.A. and the B.A. for the land”.
[ Mr Hogarth: “Do you think that you can get the rezoning through quickly?”
Mr Walker: “We are very confident we can get it through in the next couple of months. We only enter into arrangements such as this after we have done our homework and there is a very high level of confidence that a re-zoning will [ ] be granted”.
Mr Dransfield: “We have spoken to our contacts in the Government and in the Labor Party and we are sure that, once we get the listing out of the way (stock exchange listing of Walker Corporation), that we will be able to ensure the rezoning takes place immediately.
Mr Hogarth: “Are you confident Lang that you can get the land at Helensburgh re-zoned?”
Mr Walker: “I can fix it. ( Just ) leave it to me. All I ask is that you take a back seat and say or do nothing unless we give you a specific task”.
Mr Hogarth: “That sounds pretty good to me. As you know, I’ve been working hard on this and worrying about it a lot!”
Mr Walker: “You know that we want all the land at Helensburgh that you own”.
Mr Hogarth: “Yes, that’s agreed. You know that we’ve got the roads and other parcels of land in and around Helensburgh”.
Mr Walker: “Yes I’ve heard that, that’s why I’m concerned because I don’t know that we know the limits or extent of the land that you’ve got”.
Mr Hogarth: “I want to be sure that everything that we do in Helensburgh we do together”.
Mr Walker: “Certainly Bob, that’s the intention. That’s why I want to be sure that I’ve got all your land”.
Mr Hogarth: “It would be pretty silly to be trying to do anything without us because of the various interests that we’ve got in the area”.
Mr Walker: “I ( ) want you to clearly set that out for us at some stage”.
Mr Hogarth: “That’s fine, as long as we understand each other”.
[Although Mr Kidd’s statement is close to identical to Mr Hogarth’s statement up to this point, Mr Kidd’s statement then includes a further section [paragraph 43] but then picks up, again verbatim or close to such, in terms of repeating Mr Hogarth’s statement paragraph 40].
40. Discussion continued regarding other aspects of the joint venture. Further discussion took place regarding the AGC position as follows:
Mr Walker: “As you know Bob, we want the land unencumbered. How do you think you stand with AGC and what’s the latest on that?”
Mr Hogarth: “We’ve had a number of discussions. The situation is pretty delicate but we feel confident that if we had $2 million to pay to them immediately that we could do a deal with AGC. They are seeking a lot of money and they have been more conciliatory in recent times because they were talking about doing a joint venture with us on Cronulla. However, subsequently when Westpac moved in we get mixed messages because as you know they took the Cronulla Beach Resort and we feel that Westpac are driving this and are just looking for dollars to wrap up the whole transaction”.
Mr Walker: “ ( If we gave you ) $2 million ( ) would you be able to get it settled because that’s obviously going to be pivotal to the whole transaction”.
Mr Hogarth: “Yes, I think that that’s the case”.
Mr Kidd: “So that means that we get the payment that’s needed to clear these transactions now and we’ll get the balance of the money later”.
Mr Walker: “Yes that’s how we would envisage it happening and we’ve already explained how we would expect to be funding that”.
41. A discussion then ensued regarding the tax effectiveness and other aspects of the transaction as follows:
Mr Walker: “I’ve spoken to Brian (Weinert) who tells me that he thinks you’ve got a good chance of Ensile having the profits free of capital gains tax”.
Mr Hogarth: “Yes I had a long conversation with Brian about this and he thinks that on balance that should be the position. Ensile’s been the land owner of some of the land since 1979 and of the balance of the land since 1982 and we think that that’s a reasonable position. The property has been used for primary production purposes and in addition the principal activity was and still is the riding school”.
Mr Walker: “Brian thinks that he can do something with the profits via Ensile”. ( )
Mr Hogarth: “Yes he has spoken to me about that. I think that all we can do at this stage is say that ( ) we’ll jointly share the benefit of any capital gains tax entitlement that may be due to Ensile. Brian says he’s very busy and preoccupied with trying to arrange the float and doesn’t expect to be able to look at this matter for some time”.
Mr Walker: “Yes, that’s right. Bob, the other matter that he’s talked about is the tax losses which Genepa has”.
Mr Hogarth: “Yes the Genepa Investment Trust has run the motel and it has accumulated losses of $10-12 million mainly (because of the Swiss franc loan business”).
Mr Walker: “Well obviously we’re very interested in those. How do you think we can deal with that?”
Mr Hogarth: “Well Brian wants to explore that further with Alan Severino and says that they will come up with some formula of how the whole deal should be structured but again, he doesn’t have the time to look at that at this time. We spoke to Alan recently and he says that he will be working with Brian on this”.
Mr Kidd: “So I’ll just put general clauses in the agreement that both of these items, that is, capital gains tax and the tax losses, will be for the benefit of the joint venture, if possible”.
Mr Walker: “Yes, that will be fine, Geoff. That also will apply to the structure of the joint venture and I think we’ve explained to you previously how we want to do that”.]
42. The conversation then moved to the topic of rezoning to the following effect:
Mr Walker: “Bob, we’ve had contact with Robert Webster’s office. He’s the Planning Minister and I think that you’ll find that a Commission of Inquiry will be authorised by him in the very near future”.
Mr Hogarth: “That’s good news”.
Mr Kidd: “What do you think will be achieved by a Commission of Inquiry?”
Mr Dransfield: “We think we can get a Commissioner who’ll be sympathetic to our cause and a positive finding will sort out the impasse with the politicians. We’ve appointed Alf Lester (of Lester Firth & Associates Pty Limited) to handle the town planning issues that may arise for us during the Inquiry. He’s a town planner but he’s also a whiz at all of this and he’s done a lot of work for us in the past and if we get a Commission of Inquiry he’s the one that I believe has the ability to run the Commission of Inquiry for us. As we have said to you both previously, we want you both to take a back seat and only provide information when Alf asks for it. We will organise a meeting for you to meet Alf”.
Mr Hogarth: “Well that’s up to you and Lang as to how you want to manage these issues. We need professional representation at the Commission of Inquiry. If you think that Lester Firth should handle this then go ahead. I’ve never heard of the firm or him”.
Mr Kidd: “Who are you going to use for technical support in this matter?”
Mr Dransfield: “Our feeling at the moment is that we will continue to use GHD. We’ve had the opportunity of having a look at the documents that they’ve prepared. We think they’ve been properly prepared and with Alf’s coordination and assistance and input we think that we can get up an appropriate presentation which we will take to the Commission of Inquiry when it’s announced”.
Mr Kidd: “And how is this to be progressed?”
Mr Dransfield: “Alf will have a look at it and if he thinks he needs any further technical input then he will make the necessary arrangements. Alf and I will be in regular contact and you can leave this all to us. I’m going to try and organise a meeting for 16 November so that you can meet Alf”.
Mr Kidd: “Where does that leave us with GHD?”
Mr Dransfield: “Bob’s told me about the position with the accounts. You’ll have to go and deal with them about the unpaid accounts to date but you can assure them that for present purposes we’ll be continuing to keep them involved and you can tell them that we anticipate a Commission of Inquiry being announced in the near future. Walkers will retain GHD for any additional work and will be responsible for their expenses from now on”.
43. Mr Dransfield then said to Mr Kidd and me in the presence of Mr Walker words to the effect: “We’ll leave it to Brian as the financial person to arrange how Walker will pay you the $4,500,000.”
44. At the conclusion of the meeting a conversation to the following effect ensued:
Mr Walker: “Geoff, could you promptly prepare those amendments as I am anxious to sign the amended document”.’
[emphasis added]
Mr Kidd’s Evidence
307 Paragraph 25 of Mr Kidd’s statement is then, as already indicated, close to word perfect to paragraph 40 of Mr Hogarth’s first statement. 308 Mr Kidd in paragraphs 26 and 27 of his statement then gives the following evidence:
‘23. On 10 November 1993 a discussion took place regarding the acquisition of the land at Helensburgh to the following effect:
Mr Walker: “You’ve indicated that you think the land is worth $9 million and that we should pay half of that now”.
Mr Hogarth: “Actually I think it’s worth more than that but I think that we’ve now reached a point where we agreed that sum as the value to be placed on the land if you’re going to come in and provide the expertise that you have indicated. We are talking about a 50/50 joint venture and you therefore need to contribute half of the present value for the right to play”.
Mr Walker: “Well you’ve had a discussion with Brian (Weinert) about what money you need and I understand that you’ve now reached a point where you need $2 million for AGC and about $700,000 to clear all your debts off the Cronulla properties. Is that right?”
Mr Hogarth: “Yes, that’s right in the case of AGC and I sat down and worked it out with Brian (Weinert) that with the mortgages and the stamp duty, etc which is needed to transfer the properties to Lakatoi, I think that’s about what’s required”.
Mr Walker: “We think that it is important that the properties be unencumbered when we enter into the joint venture so if we give you approximately $2.7 million, that will be enough for you at the time being and we can give you the rest when we get the land rezoned. That won’t take long and it solves your problem – plus it helps our cash flow. We will all win by this and we ask that you allow us this favour”.
Mr Hogarth: “Yes, I guess that’s probably okay”.
Mr Kidd: “So that’s what you want me to include in Heads of Agreement?”
Mr Walker: “Yes” (and turning to Mr Hogarth).
Mr Hogarth: “Yes”.’
‘26. I was concerned how this arrangement was going to operate and a conversation to the following effect took place:
"Before any of the above, Whitehouse recommends that we write to the relevant Minister and the Premier advising them that we have reviewed Carlton's report, had reached a dead end, and have no option but to dispose of the land or maximise its utilisation under the provisions of the existing zoning."
1719 Mr Hogarth's evidence under cross-examination included the following:
Q Now, when you received this document, you understood, did you not, that the message was, in that paragraph that I have read, that there was no further action that could be taken to utilise the Carlton report, didn't you.
A YesQ And you understood also, and I referred to what followed immediately after that, "and have no option but to dispose of the land or maximise its utilisation under the provisions of the existing zoning.
Q Now, that is what you understood to be the position, did you not, with that? All that was left that you could do was to dispose of the land or maximised its utilisation under the existing zoning.
A Yes
A Yes.[transcript page 382]
1720 As I understood Mr Powell's submissions he accepted that the plaintiffs claim appeared grounded upon a holding rejecting the claim to a breach of the best endeavours covenant having taken place by the time the Commissioner's recommendations were handed down. The relevant transcript in argument includes the following:
POWELL: The complaint is that we've done nothing to establish further studies into water settling ponds and, your Honour, the defence at page 41, the relevant parts are A, B and C …
I heard what your Honour said about whether or not or how an agreement not to pursue the studies is relevant if you've got an obligation to do so short of waiver - I think that was the discussion - but we say it ties in with the other points. Whatever "best endeavours" means, it can't mean to pursue the either impossible or the futile in circumstances where the other party is not urging you to do so.
HIS HONOUR: Well, there are two windows here, are there not? There is, first of all, the question of the content of the obligation in the first place to properly prepare and present a case, use one's best endeavours up to that point in time to try to achieve positive recommendations. If there is a breach in that exercise, then presumably that is something which, if Annan can be galvanised and Poseidon and so forth can be galvanised, and if the paragraph in those statements of principle that there are some cases where it is totally impossible to do this expectation exercise, if that is inapplicable, then the plaintiffs may be able presumably to recover in some way for breach of window 1.
When you get to window 2, what about what happened after the report? If there is some way of the defendants establishing that, notwithstanding on this hypothesis a breach of the best endeavours obligation in relation to conducting the Commission, what happened thereafter was a new event and rubs out the breach in some way because of consensus or some legal doctrine, then no doubt I'll be shown, and maybe this is what you're going to now do.
POWELL: Yes.
HIS HONOUR: It is what the defendants say and how it works.
POWELL: Well, firstly, your Honour should see in B we say that it is not a breach of the best endeavours covenant when there is no reasonable possibility of obtaining it following the report.
HIS HONOUR: But you follow my problem is that it seems to assume all the time that there is no breach already. If there was a breach then, unless in some fashion the plaintiffs say to themselves or must be held in law by reason of their conduct to have said to everyone …
… we excuse all the past, we give up all our legal rights, now let's go up another road. Unless one gets in it maybe that's a type of election notion, then the pervasive position is always going to be there was the primary breach.
POWELL: Yes, your Honour, I understand that, but the way that I understand the case is being put is, well, you didn't use your best endeavours at the Commission of Inquiry and if you had then the Commissioner would have recommended rezoning. That is the first way they put their case.
HIS HONOUR: Yes.
POWELL: They also say, as I understand it, if they are wrong on that, let's say your Honour found that we did use best endeavours with the Commission of Inquiry, then they say: Well, that's one thing. However, you didn't use best endeavours following the report of the Commission in going on to obtain or commission the further studies. So yes, I understand what your Honour is saying, but, as I understand the way the plaintiffs put their case, they can be unsuccessful in their argument as to our endeavours at the Commission of Inquiry, but still get up by saying we breached our best endeavours following the Commission of Inquiry.
HIS HONOUR: Then do you develop this in coming pages by suggesting that it was clearly perceived by all that it was then hopeless?"[Transcript at page 447]
1721 On my findings the evidence does not establish any agreement by Mr Hogarth or by the Hogarth interests to vary the terms of the joint venture agreement or to abandon such claims as the Hogarth interests may have had to sue the Walker interests for breach [by reason of acts or failure to act up to the point in time when the Commissioner's findings were handed down], of the covenant to use best endeavours to secure a rezoning. No waiver of the plaintiffs’ rights in that regard took place. 1722 I do not see that there are any further findings required in relation to paragraph 49 of the third amended summons or paragraph 32 of the second further amended defence.
The Ensile maintenance expenses proceedings
1723 This is at least in one respect, a somewhat unusual claim pressed by Ensile. This is because the claim depends upon an alleged oral agreement said on the pleading to have been reached in about late July 1994 between Mr Weinert on behalf of Walker Consolidated and Mr Hogarth on behalf of Ensile. Yet even at the time when the case was being opened by both leading counsel no evidence had been filed by Mr Hogarth setting out detail of the conversations said to constitute such an oral agreement. Notwithstanding that Mr Shand QC alluded to this matter in his opening, the only evidence now relied upon by the plaintiffs to prove the oral agreement came forward during the cross-examination of Mr Hogarth.1724 Notwithstanding this circumstance, the plaintiffs seize upon the evidence given by Mr Hogarth during this cross-examination and rely upon that evidence on this aspect of their sundry cases.
1725 The HUTA in clause 1.9 defines the Walker Expenses as the moneys described in item 3 of the Schedule and clause 7. Paragraph (e) (x) in item 3 of the Schedule is "The Ensile Expenses". Clause 1.6 of the HUTA provides that:
"Ensile expenses" -- means the aggregate of the following:
(a) outgoings;
(b) work required to comply with any notice issued by WCC or any other Statutory Authority to Ensile in respect of the Land;
(c) the reasonable costs of any maintenance and repair work on the land provided it has previously been approved by Ibenmore
(d) calls/expenses payable to Helensburgh Land Pooling Inc.”
1726 In the District Court proceedings now transferred into the Commercial list, [District Court proceedings No 1798 of 1998] the claim is made to $210,000 as "being the moneys due and payable by the defendant to the plaintiff in respect of the "Ensile Maintenance Expenses" (as hereinafter defined) for the period 6 October 1994 to 5 October 1997. The plaintiff now claims the amount said to be owing from 6 April 1994 up to the date of judgment.1727 The only relevant documents are an invoice of 2 August 1994 on Ensile letterhead addressed to Ibenmore to the attention of Mr Weinert, claiming the sum of $35,000 as "For general maintenance of the joint venture property... as agreed for the period 12 November 1993 to 12 May 1994".
1728 Detail of this invoice having been paid by two separate payments on 1 September 1994 and on 16 September 1994, each of $17,500 [Exhibits PX 14/61 and 16/85].
1729 A further invoice again in the sum of $35,000 [in the form in which the invoice was originally typed] seeks an amount of $35,000, this time for the period 13 May 1994 to 11 November 1994 [again in the form in which the invoice was originally typed]. [PX 16/51]. This invoice has handwritten alterations suggesting the period was1 July 1994 to 31 December 1994.
1730 Under cross-examination of Mr Officer QC asked:
" Q. And you would have, would you his Honour believe that there was some arrangement that it would be $17,500 a quarter, regardless of what in fact the expenses were?
Q And that claim is just fault is it not Mr Hogarth?
A. Yes.
A No it's not"[transcript page 570]
1731 It was then put to Mr Hogarth that he knew by 23 December 1998 when he swore his first statement that the District Court proceedings had been transferred into the Supreme Court to be heard at the same time as the main proceedings. Mr Hogarth supposed that he knew this fact. He was unsure as to whether anywhere in that statement he had said anything about the Ensile Expenses claim. It is common ground that no reference was made to this claim in that statement.1732 It was also put to Mr Hogarth that even after hearing Mr Shand QC opened upon the basis that no evidence had been filed by the plaintiffs in support of this claim, no further evidence was so filed and that this was because, so it was put to Mr Hogarth, he knew that the claim was false. Mr Hogarth denied this proposition.
1733 The cross-examination then included the following:
“Q And the reason it was false was because it was claiming $17,500 a quarter rather than what the expenses in fact may have been?
Q You have not made a claim for those in any proceedings you commenced so far, have you?
A Yes, well the expenses as it - as we’ve worked out, are much in excess of what we've claimed.
A Not at this point, but it can be either way one way or the other, the true expenses or an arranged figure....
A We're quite quite prepared to have the expenses - to prove the expenses to what they are and seek those moneys"[transcript at page 573]
1734 A section of Mr Weinert’s statement was then put to Mr Hogarth. It was put to Mr Hogarth that Mr Weinert had said to him words to the effect "At the end of the first year, payments will be adjusted to accord with the actual maintenance expenses". Mr Hogarth did not accept that this conversation had taken place. It was further put to Mr Hogarth that in neither of his statements did he take issue with what Mr Weinert had stated had taken place. He accepted this. Mr Hogarth then gave evidence that:
"The arrangement with Mr Weinert was to save a lot of book work. We would agree to an amount to be paid with respect to the Ensile expenses. I thought that they would be more and we settled on the figure of $70,000 per year for the Ensile expenses".
1735 At transcript page 577 the cross-examination includes the following:
“Q ... if your version is correct, you weren't going to have to worry about what the expenses were; you were just going to substitute $17,500 for the bit in the clause [the HUTA] about reasonable expenses.
A Well, this is what Mr Weinert agreed to and acted on."[transcript page 577]
1736 Finally at transcript page 579 Mr Hogarth was asked what was the reason for the two payments which were made and answered as follows:
"At this point in time we had - because the amount of money that had been paid by Walkers was insufficient to leave us with any money to handle certain matters, I brought this up with Walker, what our idea was; that we would attempt to put any of the expenditure that we spent and credit it to our joint venture account, and we were short of money, and I asked Mr Weinert, on the basis of the expenditure, to give us sufficient funds to tide us over at that point in time. That's why those two payments were made...
... We agreed that it was $70,000 a year".
1738 In the result, the short minutes of order to be brought in will have to make provision for reference out to a referee of the question of proof of the actual Ensile Expenses which once quantified, will then require to be included in an appropriate order. Leave is reserved to the plaintiffs to address upon whether any further evidence is sought to be adduced and if so how, and when, and is likewise reserved to the defendants to address upon the same issues. It may be that exhibit PX 10 is able to be utilised by parties in this exercise.
1737 Notwithstanding that neither Mr Walker nor Mr Weinert gave evidence to contradict Mr Hogarth's evidence on this matter, I reject his evidence as not reliable. Having listened to the cross-examination on the issue, bearing in mind the failure of the plaintiffs to produce any earlier evidence in relation to the suggested oral agreement, bearing in mind Mr Hogarth's repeated statements during the cross-examination of his even at this point in time preparedness to have his claims to the Ensile expenses judged according to the actual expenses incurred, and bearing in mind that aside from the above described invoices, no other invoices were sent by Ensile, I do not accept that the agreement which Mr Hogarth alleges, took place. Mr Hogarth’s evidence on this issue is rejected as unreliable and as significantly against the probabilities.1739 The further amended cross-claim in the main proceedings is pursued by Walker Consolidated and Walker Corporation against Lakatoi and Ensile. The claim is to an order that the assets of the Helensburgh Unit Trust including the Land be realised and after payment and discharge of debts and liabilities [said to include the defendants’ claims as to what in fact are "the Walker expenses"], including those said to have been incurred by Walker Consolidated, any surplus is to be paid to Walker Consolidated and Lakatoi in equal shares. 1740 The cross-claimants plead the Heads of Agreement and in particular clause 4(c) whereunder the parties agreed that if, after five years, rezoning was no longer an option, the land would be sold and, subject to an option to Mr Hogarth to purchase the house block land for $1 million, net proceeds would be to the account of the joint venture and profits split between Mr Walker and Mr Hogarth or their companies on a 50/50 basis. 1741 The cross-claimants then plead that the HUTA was entered into. 1742 The cross-claimants plead that Lakatoi and Walker Consolidated were respectively, the company's nominated by Mr Hogarth and Mr Walker to receive their respective shares of the proceeds of the sale of the land in accordance with the Heads of Agreement and the HUTA. 1743 The cross-claimants then plead that it was a term of the HUTA that upon the termination of the Helensburgh Unit Trust for any cause whatsoever, the assets of the trust would be realised and the proceeds applied to the payment and discharge of any debts and liabilities incurred by the unit holders in relation to the trust and that any surplus would be paid and distributed to the unit holders in equal shares. [Clause 15.3 of the HUTA] 1744 The cross claimants then plead that the substratum of the joint venture relationship between the unit holders has been removed and that the purpose of the joint venture, namely the rezoning of the land for suburban style residential use cannot be attained. The cross claimants assert that there is no likelihood now of the land being zoned residential as it has been designed "Environmental Protection". 1745 The cross claimants claim that the joint venture relationship between the unit holders has broken down completely and that the purpose of the joint venture, namely the rezoning of the land for suburban style residential use, cannot be attained. 1746 For these reasons the cross-claim asserts that the Helensburgh Unit Trust ought to be dissolved. The claim is that the assets of the trust should be realised and the proceeds applied in accordance with the provisions of the HUTA. 1747 The cross defendants assert that it is the HUTA which, where inconsistent with the Heads of Agreement, clearly represents the ultimate agreement between the parties. The cross claimants assert that on this issue the HUTA is in fact inconsistent with the Heads of Agreement. 1748 The cross defendants refer to clause 3.8 of the HUTA which makes it quite clear, as I accept, that a resolution would be required to be agreed to unanimously by both parties if after five years, namely 31 March 1999, the residual option of Ensile was to be exercised and the balance of the land was to be taken by Ibenmore. The cross defendants assert that if this happens, Ibenmore would own the land other than the homestead area. The cross defendants assert that clause 3.11 is open to the construction that if the option was not exercised, Ensile would be entitled to be paid for the land. 1749 Ultimately the cross defendants’ stance is that whatever be the true construction of clause 3.11, the fact is that clause 3.8 which only came into operation in March 1999, leaves it to the parties to make a decision on the question. The cross defendants assert that the parties did not commit to a court the power to decide the issue and that the situation which has arisen is not governed by section 66 G of the Conveyancing Act, 1919. 1750 The cross defendants submit that the notion of substratum failing has no relevance to the situation here, where the parties have agreed upon their own regime for bringing to an end the HUTA, remembering that it was only in March 1999 that the five-year period elapsed. 1751 On this issue it seems to be appropriate to invite the parties to address further submissions following their having had an opportunity to consider the above reasons for judgment. Whilst the court may have jurisdiction in the instant circumstances to make appropriate orders to terminate the joint venture agreement, questions also arise as to whether and if so by precisely what orders, such power ought be exercised. However, for example, is the homestead area to be dealt with? Ought, for example, Ensile to be placed into the same position as it would have been had it exercised the Ensile residual right option? It seems appropriate to first permit the parties to reconsider their positions on the matters raised in the cross-claim in the light of the above reasons. For those reasons it seems to me necessary defer final determination of the cross-claim until after the parties have had the benefit of reading these reasons and then indicating what their then attitude is to the matters raised by the cross-claim. Should both parties continue to take the stances which they have taken up to this point in time then subject to clarification of the matter raised above, I propose to invite the parties to address on the authorities and on the legislation which bear upon the court’s jurisdiction to make the orders sought by the cross claimants.
The Amended Cross-Claim in the Principal Proceedings
1752 As will have been noted, the judgment in several places grants leave to the parties to address further submissions on a number of particular issues. 1753 Bearing in mind the number of sets of proceedings, the complex and in a number of cases, interrelated claims, and the need for the parties to have an opportunity to read the reasons before final orders can be formulated and made, it is appropriate to grant leave to the parties:
Further submissions and Short Minutes of Order
1754 The proceedings will be stood over to a convenient date for the receipt of such further submissions and for such short minutes of order as the parties may be able to agree upon to be brought in.
(a) to address submissions on any claims for relief which had been sought and which may not yet have been dealt with;(b) to press for any relief on such claims as may not yet have been dealt with;
(c) to press for relief on matters reserved for further submissions.
*****
16
28
6