Mirvac (WA) Pty Ltd v Binningup Nominees Pty Ltd

[2020] WASC 28

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   MIRVAC (WA) PTY LTD -v- BINNINGUP NOMINEES PTY LTD [2020] WASC 28

CORAM:   ARCHER J

HEARD:   29 APRIL - 16 MAY, 20 & 21 MAY 2019

DELIVERED          :   11 FEBRUARY 2020

FILE NO/S:   CIV 1018 of 2015

BETWEEN:   MIRVAC (WA) PTY LTD

Plaintiff

AND

BINNINGUP NOMINEES PTY LTD

Defendant

BINNINGUP NOMINEES PTY LTD

Plaintiff by Counterclaim

AND

MIRVAC (WA) PTY LTD

First Defendant by Counterclaim

MIRVAC LTD

Second Defendant by Counterclaim

Catchwords:

Development services agreement - Termination - Outstanding loan account - Contractual rights - Good faith obligation - No hindering obligation - Prevention principle - Limited recourse versus limited liability - Damages - Inadequacy of evidence - Net present value - Circuity - Tort of interference - Aggravated and exemplary damages

Legislation:

Nil

Result:

Judgment for the plaintiff
Counterclaim dismissed

Category:    B

Representation:

Original Action

Counsel:

Plaintiff	:	B Dharmananda SC & B K Lim
Defendant	:	D J Marsh & D H Solomon

Solicitors:

Plaintiff	:	Minter Ellison
Defendant	:	Solomon Brothers

Counterclaim

Counsel:

Plaintiff by Counterclaim	:	D J Marsh & D H Solomon
First Defendant by Counterclaim	:	B Dharmananda SC & B K Lim
Second Defendant by Counterclaim	:	B Dharmananda SC & B K Lim

Solicitors:

Plaintiff by Counterclaim	:	Solomon Brothers
First Defendant by Counterclaim	:	Minter Ellison
Second Defendant by Counterclaim	:	Minter Ellison

Case(s) referred to in decision(s):

Atlas Tiles Ltd v Briers (1978) 144 CLR 202

Australis Media Holdings v Telstra Corp Ltd (1998) 43 NSWLR 104

Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219

British Transport Commission v Gourley [1956] AC 185

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Civic Video Pty Ltd v Paterson [2016] WASCA 69

Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312

CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121

Cullen v Trappell [1980] HCA 10; (1980) 146 CLR 1

Daebo Shipping Co Ltd v Ship Go Star [2012] FCAFC 156; (2012) 294 ALR 635

EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23

Electricity Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640

Georgiou Building Pty Ltd v Perrinepod Pty Ltd [2102] WASC 72 (S)

Gold City Developments Pty Ltd v Portpride Pty Ltd [2010] WASC 148

Grainger v Williams [2009] WASCA 60

Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1

Idameneo (No 123) Pty Ltd v Gross [2012] NSWCA 423; (2012) 83 NSWLR 643

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115

Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127; (2015) 237 FCR 534

Noye v Robbins [2010] WASCA 83

Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199

Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; (2017) NSWLR 82

Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443; (2005) 12 BPR 23

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

Servcorp WA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79

Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620

Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80

Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53; (2012) 287 ALR 360

Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232

The Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

The Eastern Extension, Australasia and China Telegraph Company Ltd v Federal Commissioner of Taxation [1923] HCA 62; (1923) 33 CLR 426

Uren v John Fairfax & Sons Pty Ltd [1966] HCA 40; (1966) 117 CLR 118

Watts v Turpin [1999] WASCA 216; (1999) 21 WAR 402

Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380

Zaps Transport (Aust) Pty Ltd v PJG Warehousing & Distribution Pty Ltd [2016] NSWCA 97

Introduction

Original action

Counterclaim

Glossary

Delay in judgment

Issues

Factual background and findings

Evidence

Overview

Second access road

Did Mirvac WA try to avoid the imposition of a condition to avoid expenditure unless or until there was internal approval?

Introduction

2007 - August 2009

The Shire's EPA Letter (August and September 2009)

The handover

The allegation

Reliance on Mr Maiorana

Conclusion on first contention

A separate contention

Did Mirvac WA attempt to cause Coast Pastoral Company not to sell the land?

June 2012

29 June 2012 strategy

August 2012 meetings with the Shire

17 December 2012 strategy

21 March 2013 meeting with Coast Pastoral Company

May 2013 - raising a deemed refusal

27 May 2013 strategy

2 June 2013 email from Simon Hall

4 June 2013 email from Mr Aleksovski

20 June 2013 deemed refusal

25 July 2013 PCG meeting minutes

17 October 2013 meeting with the Shire and 18 October 2013 email from Mr Waller

Conclusion

Overall conclusion on second access road

'Built form'

Golf course

Evidence

Conclusion

Unpleaded allegation

Internal Mirvac documents - feasibilities, assumptions and decisions

Early feasibility analyses, assumptions and negotiations

Deadlock emails January 2013

Mirvac Board Paper February 2013

PWC report

February meeting

Exit strategy

Forecast June 2013

Options Memo September 2013

Alleged statements in 2014 and proposed location of Stage 1

Mr Draffen's alleged statements

Proposed location of Stage 1

Mr Lawrance's alleged statement

Mr Draffen's evidence of Mirvac's views

Decision‑makers, decisions and directions

Conclusion

The AAC document

Refusal to attend recorded PCG meeting

Parties' submissions

Consideration

Failure to prepare program and budget

Evaluation of witnesses

Mr Adam Davidson

Mr Aleksovski

Mr Cooper

Mr Draffen

Mr Waller

Mr Doyle

Mr Maiorana

General contract issues

Construction principles

A suite of documents to be treated as one

Commercial purpose

Particular construction issues

Did Mirvac WA have the right to disapprove a budget?

Contractual provisions in the Services Agreement

Binningup's submissions

Conclusion

Was completion of the Project a contractual benefit?

Contractual provisions in the Services Agreement

Conclusion

Clause 5.5(b) of the Loan Agreement (the First Pathway)

Prevention principle

Was the principle excluded by the Transaction Documents?

The relevant clauses

Evaluation

Ruthol

Conclusion

The Three Obligations and clause 5.6(a) of the Loan Agreement

The Three Obligations

Procure Completion Obligation - cl 6.2(b) Services Agreement

Good Faith Obligation - cl 3 Services Agreement

The No Hindering Obligation - implied term

Repayment regime, including cl 5.6(a)

Clause 5.6(a) Loan Agreement

Proper construction of the Three Obligations

Was Mirvac WA obliged to develop Built Form Lots?

Enforcement v liability

Contractual provisions

The original action

The OLA was repayable as there was a Trigger Event (the First Pathway)

Was the OLA repayable because Binningup committed an Event of Default (the Second Pathway)?

Was Binningup entitled to terminate the Services Agreement?

Did Mirvac WA repudiate the Services Agreement?

Did Mirvac WA commit an Event of Default?

Conclusion - Binningup was not entitled to terminate

Did Mirvac give notice that the OLA was immediately payable?

Mirvac's entitlement

Conclusion on the original action

Counterclaim

Did Mirvac WA breach the Services Agreement?

Is Mirvac Ltd liable?

Performance Undertaking

Did Mirvac Ltd commit the tort of interference?

Damages claim

Binningup's share of the proceeds of sales

The concept plan - foundation for the valuation

Mr Maiorana's expertise

No regard to market demand

Was it conservative?

Conclusion on the concept plan

Adjustment for net present value

The value of the land

Prevention principle and circuity

Atlas Tiles:  wrongdoer should not benefit

Ruthol revisited:  limitations on avoided loss principle

Conclusion

Allowance for having to repay the Initial Advance

When would the sales have commenced?

The development would start at the foreshore

Commonwealth approval

Delay might have been caused by various factors

Conclusion on when the sales would have commenced

Would other advances have become repayable?

Conclusion on damages claim against Mirvac WA

Damages claim against Mirvac Ltd (Issues 21 and 22)

Damages in tort

Aggravated and exemplary damages

Circuity and set‑off

Circuity

Set‑off

Discharge of securities

Conclusion

Glossary of terms

ARCHER J:

Introduction

1. The defendant (Binningup) owns a large area of land in Binningup.  In 2008, it entered into a number of agreements with the plaintiff (Mirvac WA) to develop the land. 

2. The agreements included a development services agreement, a loan facility agreement (Loan Agreement), and a fixed and floating charge (Charge).  The development services agreement was varied in 2009.  I will refer to it in its varied form as the 'Services Agreement'.  I will refer to the agreements collectively as the 'Transaction Documents'.

3. Under the Transaction Documents, Mirvac WA was, in essence, both contractor and financier of the development project.  On the sale of a particular lot, the parties would share in the proceeds according to the terms of waterfall provisions.  The parties recognised it would be a long term project, and no end date was set.

4. By 2014, the relationship between the parties had broken down.  Each accused the other of repudiating the agreements.  Mirvac WA now sues Binningup to recover the money it lent to Binningup.  Binningup counterclaims against Mirvac WA for, in essence, loss of bargain damages, which it says amount to what it would have received if the development project had been completed.  Binningup also counterclaims against the holding company of Mirvac WA, Mirvac Ltd.  Binningup alleges, among other things, that Mirvac Ltd directed Mirvac WA not to proceed with the project unless the Transaction Documents were varied to improve the return to Mirvac WA.

5. At times, the witnesses and counsel did not distinguish between Mirvac WA and Mirvac Ltd, referring to 'Mirvac'.  This occurred when the distinction was immaterial or the matter applied to both entities.  I will use 'Mirvac' in the same way.

Original action

1. Mirvac submits that there are two independent pathways[1] which lead to the conclusion that Binningup must repay the money it was lent.  The first pathway relies on the termination of the Services Agreement being a 'Trigger Event'.  The second relies on an allegation that Binningup repudiated the Services Agreement, constituting an 'Event of Default'.  Each pathway depends upon specific contractual provisions.

   [1] Initially, Mirvac relied on three independent pathways, but it abandoned the third pathway in its closing submissions as it did not materially improve its position.

2. Under the Services Agreement,[2] Binningup appointed Mirvac WA to carry out the 'Services'.  'Services' is defined to mean 'subject to any approvals required …, all services which [Mirvac WA] determines are necessary or desirable for the carrying out of the Project'.  'Project' is defined as including the obtaining of necessary or desirable 'Approvals' for subdivision, the procurement of the carrying out of works, and the procurement of the marketing and sale of 'Sale Lots'.

   [2] Exhibit 1.8.

3. Under the Loan Agreement,[3] Mirvac WA initially advanced $25 million to Binningup (Initial Advance) and then made a number of further advances to fund Binningup's 'Project Cost Payments' under the Services Agreement.  Interest is payable on the advances.[4]  As at October 2014, the outstanding loan amount (OLA), of principal and interest, was $42,776,962.  Binningup has not paid any part of the OLA. 

   [3] Exhibit 1.4.

   [4] Loan Agreement cl 4.

4. On 2 October 2014, Binningup sent a notice alleging Mirvac WA had repudiated the Services Agreement and purporting to accept the repudiation (Binningup's Termination Notice).

5. On 24 October 2014, Mirvac WA sent a notice alleging Binningup had repudiated the Services Agreement and purporting to accept the repudiation (Mirvac's Termination Notice).[5]

   [5] Exhibit 23.795.

6. It is common ground[6] that the Services Agreement was terminated in October 2014 (either, on Binningup's case, on 2 October 2014 when Binningup terminated the Services Agreement by accepting Mirvac WA's alleged repudiation or, on Mirvac's case, on 24 October 2014 when Mirvac WA terminated the Services Agreement by accepting Binningup's alleged repudiation).

   [6] Binningup pleaded in its Amended Further Re‑Amended Defence and Counterclaim filed 26 September 2017 (Defence) [11.3.3] that, in the alternative, the contract had been abandoned.  However, as Binningup did not dispute that a Trigger Event occurred when the Services Agreement was terminated (see The Plaintiff by Counterclaim/Defendant's Outline of Closing Submissions filed 20 May 2019 (Binningup Closing Submissions) [116]), the pleading does not raise a relevant issue (see also Binningup Closing Submissions [113]). 

7. A termination, regardless of the reason, is a 'Trigger Event' under cl 1.1 of the Loan Agreement.  It is therefore common ground that a Trigger Event occurred at the latest by 24 October 2014. 

8. Clause 5.5(b) of the Loan Agreement provides that '[d]espite any other provision', if a Trigger Event occurs, Binningup must repay the OLA one year after the date of the Trigger Event.  

9. Mirvac submits that, therefore, the OLA became payable one year after October 2014, being October 2015.  This is the first of the two pathways which Mirvac submits leads to the conclusion that Binningup must pay the OLA (First Pathway).

10. Binningup submits that, because, on its case, it was Mirvac WA who repudiated the Services Agreement, the 'prevention principle' means that Mirvac WA cannot rely on cl 5.5(b).  'The essence of the prevention principle is that a party cannot insist on the performance of a contractual obligation by the other party if it itself is the cause of the other party's non‑performance'.[7]  Mirvac submits that the Transaction Documents exclude the prevention principle from operating on Mirvac WA's entitlement to be repaid the OLA under cl 5.5(b).

    [7] Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53; (2012) 287 ALR 360 [47].

11. Binningup also submits that, because of the principle of circuity, Mirvac WA is not entitled to the OLA.  The circuity principle prevents one party recovering an amount from another party that is identical to what that second party had a right to recover from the first.  In essence, Binningup alleges that, if Mirvac WA had not breached the Services Agreement, the OLA would have been repaid.  Therefore, Binningup asserts, its damages claim includes the OLA that would have been repaid and that component of its claim is identical to Mirvac WA's entitlement to the OLA.

12. Binningup also pleads that, if it is found to owe any amount, the damages to which it is entitled should be set‑off in reduction or extinction of Mirvac WA's claim.[8]  Binningup appears to argue that, because Mirvac WA's right of recovery is limited to the Project Assets, Mirvac WA is not entitled to set off all of the OLA against Binningup's damages. 

    [8] Defence [12].

13. It is common ground that, if Mirvac WA did not breach the Services Agreement, it is entitled to the OLA under the First Pathway.  If it did breach the Services Agreement, its entitlement will turn on whether the prevention principle applies and, if the principle does not apply, the effect, if any, of the principles of circuity and set‑off.

14. Mirvac WA's second pathway alleges that an 'Event of Default' occurred as a result of Binningup's Termination Notice (Second Pathway). 

15. Clause 7.1 of the Loan Agreement defines an Event of Default as including a default under a Transaction Document, if a Trigger Event has occurred. Mirvac submits that Binningup's Termination Notice was a repudiation at common law,[9] and a default under the Services Agreement. It submits it accepted Binningup's repudiation, terminating the Services Agreement. The termination was a Trigger Event, making the default under the Services Agreement an Event of Default.

    [9] It was also alleged to be a 'Non‑Monetary Event of Default' within the meaning of the Services Agreement, and therefore a default under a Transaction Document, and therefore an Event of Default within the meaning of the Loan Agreement.  However, Mirvac conceded it would succeed on both or fail on both.  Accordingly, it is unnecessary to deal with this second basis.

16. Clause 7.2 of the Loan Agreement relevantly provides that Binningup must immediately repay the OLA if there is an 'Event of Default' and Mirvac WA gives notice that the OLA is immediately repayable.  Mirvac submits, therefore, that the OLA became payable by Binningup to Mirvac WA immediately on notice being given.  Binningup denies it repudiated, and says it was entitled to terminate the Services Agreement.

17. Accordingly, whether Mirvac WA should succeed under the Second Pathway will turn on whether Binningup was entitled to terminate the Services Agreement.  This will turn on, among other things, whether Mirvac WA breached the Services Agreement as alleged in Binningup's counterclaim.

Counterclaim

1. By its counterclaim, Binningup alleges[10] that Mirvac WA repudiated the Services Agreement by doing or omitting to do various 'acts or omissions, matters or things' (Alleged Conduct) in breach of three terms of the Services Agreement (the Three Obligations).  Binningup alleges in the alternative that there was a 'Non‑Monetary Event of Default' within the meaning of the Services Agreement, based on the same Alleged Conduct.[11]

   [10] Defence [26] ‑ [30B] and [32].

   [11] Defence [33].

2. The Three Obligations said to have been breached are:[12]

   (1)the good faith obligation in cl 3 (Good Faith Obligation);

   (2)the obligation in cl 6.2 to 'perform the Services and procure Completion of the Project in accordance with all Approvals, and in a proper, timely, professional and workmanlike manner' (Procure Completion Obligation); and

   (3)an alleged implied term[13] that Mirvac WA would refrain from conduct that would hinder or prevent fulfilment of the purpose of the Services Agreement (No Hindering Obligation).  This is also said to be part of the Good Faith Obligation.[14]

   [12] Defence [26].

   [13] Defence [19.16A].

   [14] Defence [19.16.2].

3. The Alleged Conduct included conduct relating to lot sizes and project costs.[15]  These were withdrawn during the hearing.[16] 

   [15] Defence [28] and [30].

   [16] See ts 1125 ‑ 1126 and 1454.

4. The Alleged Conduct included an allegation that Mirvac WA had decided not to proceed with the Project unless it could negotiate amendments to the Services Agreement that were more commercially favourable to it (Alleged Decision).[17]  Binningup's case is that Mirvac WA repudiated the Services Agreement by making and implementing the Alleged Decision, and that the other Alleged Conduct simply manifested the Alleged Decision.[18] 

   [17] Defence [30B.1].

   [18] ts 1452 ‑ 1453.  See also ts 1454, 1456 ‑ 1457 and 1466 and Binningup Closing Submissions [46] ‑ [49].

5. Binningup alleges[19] that, to give effect to the Alleged Decision, Mirvac WA decided, by no later than December 2012:

   (1)to use deadlock provisions in the Services Agreement to terminate the Services Agreement if Binningup did not agree to vary the Services Agreement; and

   (2)in the meantime, to delay carrying out the Project until the Initial Advance became repayable under cl 5.6 of the Loan Agreement, so as to create pressure on Binningup to either agree to terminate the Services Agreement or to vary the Services Agreement favourably to Mirvac WA.  

   [19] Defence [30B opening line and 30B.2] as modified and developed in Binningup Closing Submissions [2.2], without objection.  Binningup also explained, at ts 1464 ‑ 1465, that the pleading in Defence [30B.2] was intended to assert that the Project would terminate only if it was unable to repay the advances when they were due.

6. I will later discuss the deadlock provisions in detail,[20] but for present purposes it is sufficient to note the following.  A Project Control Group (PCG) was established under the Services Agreement to, among other things, approve or disapprove budgets.  Binningup and Mirvac WA had equal representation on the PCG.  If a dispute over a budget arose, the dispute would be dealt with under cl 15 of the Services Agreement.  Ultimately, if either party did not accept the decision of an expert, then the land would be sold, Binningup would be required to repay to Mirvac WA all moneys owed, and the Services Agreement would be terminated.

   [20] See under the heading 'Did Mirvac WA have the right to reject a budget?'

1. Clause 5.6 of the Loan Agreement[21] required Binningup to repay advances no later than 10 years after each advance was made.  The Initial Advance was repayable in January 2018.

   [21] Discussed later under the heading 'The Three Obligations and clause 5.6(a) of the Loan Agreement'.

2. Binningup pleads[22] that Mirvac WA implemented the Alleged Decision by:

   (1)negotiating to vary the Services Agreement; and

   (2)delaying progress.

   [22] Defence [30B.3].

3. In closing submissions, Binningup confirmed that, in relation to the allegations of delay, it relied only on alleged delays relating to a second access road and the potential development of a golf course that was on the land.[23] 

   [23] See ts 1455 ‑ 1456 and 1465 ‑ 1466 at which Binningup confirmed it did not rely on any more general allegations of delay and confirmed that the allegation of delay in relation to the Local Structure Plan was limited to the allegation that Mirvac held that up 'on spurious grounds' about the second access road.  Binningup also did not address in closing any other allegations of delay.

4. In relation to the second access road, this was an issue that arose in the context of obtaining approval for the 'Local Structure Plan' (Plan).  Before the development could proceed, it was necessary that a Plan be approved by the local authority.  This was the Shire of Harvey.  Binningup alleges that Mirvac WA deliberately caused delay in obtaining the Shire's approval by, in effect, resisting the Shire's demands and creating a false issue.

5. The possibility of converting the golf course into residential lots arose in 2013.  This would have required an amendment to the Services Agreement,[24] but the parties nevertheless were considering it.  Mirvac WA's view was that, if it was decided to develop the golf course, it would be necessary to first seek an amendment to the Plan, which would cause a significant delay in overall progress.  Binningup disagreed it was necessary to first seek an amendment to the Plan.  Binningup's view was that work could commence on the first stage of the development (Stage 1) and, if it was decided to develop the golf course, approval could be sought to develop it when the work was about to occur.  Mirvac WA prepared a budget and program for the September 2014 PCG meeting which included the development of the golf course, and factored in the significant delay that amending the Plan would cause.  Binningup asserts that this was done to deliberately delay progress.[25]  Binningup asserts that it had made it clear that it would not agree to the potential development of the golf course causing substantial delay. 

   [24] This is because, under the Services Agreement, 'Project' is relevantly defined as the obtaining of necessary or desirable approvals for the subdivision of the land, the procurement of the carrying out of work on the land and the sale of the land, and the development, operation and maintenance of the golf course.

   [25] ts 1454 ‑ 1457.

6. In Binningup's written submissions, it summarised the matters which it said manifested the Alleged Decision not to perform under the Services Agreement.[26] 

   [26] Binningup Closing Submissions [3]. See also ts 1452 ‑ 1459.

7. First, statements alleged to have been made by Brett Draffen on 3 April 2014 and by a Kimberley Lawrance on 13 June 2014.[27]  Mr Draffen is the Chief Investment Officer of Mirvac Ltd, and was the National Developments Chief Executive Officer at the time.  Mr Lawrance was the Development Director of Mirvac Ltd at the time.  In its closing submissions, Binningup modified (or clarified) what it had pleaded:[28]

   (1)Binningup asserted that the effect of Mr Draffen's statements was, among other things, that Mirvac's Board was unlikely to decide to carry out the Project but, if Stage 1 was carried out, the Board may possibly decide to proceed.[29]

   (2)Binningup asserted that the effect of Mr Lawrance's statements was that, in addition to PCG approval, Mirvac would need internal Mirvac approval prior to commencing Stage 1.[30] 

   [27] Binningup Closing Submissions [3.1] and [3.3].

   [28] In particulars 29.1 and 29.2 of the Defence [29], Binningup alleged that the statements were to the effect pleaded in Defence [29]. Defence [29] alleged that the reason Mirvac WA did not submit to the PCG for approval a program and budget in relation to subdivision works or construction works was because Mirvac Ltd's directors had not approved the Project being implemented by carrying out subdivision works or construction works and creating Sale Lots, even though Mirvac WA was obliged to carry out those works.

   [29] Binningup Closing Submissions [3.1].

   [30] Binningup Closing Submissions [3.3].

8. Second, that, after a meeting between Mr Draffen and Barry Waller, a director of Binningup, Mirvac WA did work to consider a possible Stage 1 to be located at the foreshore, away from established services.  Binningup asserted this was not a logical place to start and showed that Mirvac never intended to develop the first stage.[31]

   [31] Binningup Closing Submissions [3.2].

9. Third, Binningup alleged that there was no possibility of an 'approval to commence construction' (ACC) being issued by Mirvac Ltd to commence construction on any stage of the Project as at the dates of the statements alleged to have been made by Mr Draffen and Mr Lawrance.[32]  Mirvac WA sought to renegotiate the Services Agreement (allegedly manifesting the Alleged Decision[33]) and its feasibility studies were based on assumptions that the Services Agreement would be varied.  Later, in February 2013, Mirvac provisioned for a loss on the basis that Binningup would agree to release Mirvac WA from its obligations under the Services Agreement and refund the Initial Advance, as it was thought that Binningup would not want the land sold after a deadlock.  Binningup asserted that Mirvac provisioned for this loss because it recognised that Binningup was not going to agree to vary the Services Agreement.  Binningup submitted that, in September 2013, Mirvac realised it was going to make a loss if the Services Agreement was not varied, even if the golf course was developed.  Binningup asserted that, as a result, an ACC would never have been issued. 

   [32] Binningup Closing Submissions [3.4].  See also ts 1457 ‑ 1459.

   [33] ts 1457 ‑ 1458.

10. Fourth, Binningup alleged that Mirvac WA abandoned 'built form' work when, Binningup asserted, Mirvac WA was obliged to do that work under the Services Agreement.[34]  'Built form' work means, in effect, constructing a building on a lot before selling it.  

    [34] Binningup Closing Submissions [3.6] ‑ [3.7]. See also Defence [27].

11. Fifth, the 'AAC document'[35] was alleged to have concealed from Mr Draffen the extent of the fall in the internal rate of return (IRR) since the Approval to Purchase was prepared.[36]

    [35] AAC means approval for additional costs.  The AAC document is exhibit 7.256.

    [36] Binningup Closing Submissions [3.8].  See also ts 1436 ‑ 1439.

12. Sixth, Binningup alleged that Mirvac WA deliberately delayed progress[37] by its handling of the issue relating to a second access road[38] and pursuing the development of the golf course.[39]

    [37] At ts 1454 ‑ 1455, Binningup submitted this manifested the intention to delay carrying out the Project until the Initial Advance became repayable under cl 5.6 of the Loan Agreement in January 2018.

    [38] Binningup Closing Submissions [3.5] and [3.9] ‑ [3.13].  See also Defence [30B.3 particular B] and Defence [30A.2].

    [39] Binningup Closing Submissions [3.14].  See also Defence [30B.3 particular C] and [29.3.3] and ts 1455 ‑ 1456.

13. Seventh, Mirvac WA refused to attend further PCG meetings if they were recorded.[40]  As will be seen, in mid‑2014, Binningup advised it intended to record all future PCG meetings.  Mirvac WA refused to agree to the meetings being recorded and suggested instead an independent minute‑taker.  Neither party budged from that position and Binningup then sent its Termination Notice.

    [40] Binningup Closing Submissions [3.15]. This was not pleaded as a particular of the implementation of the Alleged Decision, but was pleaded as a particular of Mirvac WA's alleged failure to submit a proper budget - see Defence [29].

14. As against Mirvac Ltd, Binningup alleges[41] that Mirvac Ltd breached a performance undertaking, under which it had promised to ensure the due performance of Mirvac WA's obligations under the Services Agreement (Performance Undertaking).

    [41] Defence [35].

15. Binningup further alleges[42] that, by no later than December 2012, Mirvac Ltd determined that it would cause Mirvac WA not to proceed with the Project unless the Services Agreement was materially amended to improve the return to the Mirvac parties and determined that it would direct Mirvac WA to trigger the deadlock provisions of the Services Agreement if Binningup refused to agree to a variation.  Binningup alleges that, as a consequence of that direction, Mirvac WA committed the alleged breaches and repudiated the Services Agreement.  Binningup alleges that, by reason of these matters, Mirvac Ltd committed the tort of unlawful interference with the Services Agreement. 

Glossary

[42] Defence [38].

1. Attached to these reasons is a glossary of defined terms.

Delay in judgment

1. It was not possible to complete this judgment as quickly as I would have liked.  However, the sections titled 'Factual background and findings' and 'Evaluation of witnesses' were substantially completed, subject to proofreading, by 17 July 2019.

Issues

1. Prior to the trial, the parties filed a list of issues in the original action and a list of issues in the counterclaim.  On each list, there are 22 issues and numerous sub‑issues. 

2. At my request, the parties produced a list of contract construction issues during the first week of the trial.  There are 25 issues and sub‑issues on the construction issues list.  As is to be expected, many of them reflect issues on the other lists, but by reference to the specific construction issue that arises.

3. It would be unhelpful to reproduce the lists in full.  Rather, the issues can be broadly grouped as follows:

   (1)Did Mirvac WA breach the Services Agreement?  This question raises numerous factual and construction issues. 

   (a)The factual issues include determining whether Mirvac WA engaged in the Alleged Conduct. 

   (b)The construction issues include:

   (i)Did Mirvac WA have the right to disapprove a budget under the Services Agreement?

   (ii)Was it a contractual benefit that the Project would be completed?  That is, was Mirvac WA obliged to ensure that the Project was completed?

   (iii)What is the proper construction of the Three Obligations?  In particular, did those obligations require Mirvac WA to endeavour to ensure that Binningup's obligation to repay the Initial Advance by a particular date[43] would be wholly, or at least substantially, satisfied from proceeds from the sale of lots before that date?

   [43] Clause 5.6 required Binningup to repay any unrepaid part of an advance to Mirvac WA no later than the tenth anniversary of the date on which that advance was made or taken to be made by Mirvac WA.

   (iv)Was Mirvac WA obliged to construct built form lots under the Services Agreement?

   (2)If Mirvac WA breached the Services Agreement:

   (a)Does the 'prevention principle' mean that Mirvac WA cannot rely on cl 5.5(b) of the Loan Agreement that would otherwise require Binningup to repay the OLA a year after the termination?

   (b)Is Mirvac Ltd liable under the Performance Undertaking?

   (c)Did Mirvac Ltd commit the tort of unlawful interference?

   (d)What is the appropriate quantification of Binningup's damage?

   (e)Does the principle of circuity mean that Mirvac WA is not entitled to the OLA?

   (f)Is the whole of the OLA to be set off against Binningup's damages, or only what Mirvac WA could recover against the Project Assets?  In other words, do the limitations on Mirvac WA's rights of enforcement under the Services Agreement and Loan Agreement also limit Binningup's liability?

   (3)If Mirvac WA did not repudiate the Services Agreement, was Binningup's Termination Notice an 'Event of Default' under the Loan Agreement such that Mirvac WA was entitled to demand immediate repayment of the OLA under cl 7.2 of the Loan Agreement?

4. As will be seen, I find that Mirvac WA did not breach the Services Agreement.  I also find that Mirvac WA was entitled to demand immediate repayment of the OLA.

5. Before turning to the issues, I will set out the factual background and my findings in relation to key factual matters.

Factual background and findings

Evidence

1. The trial bundle exceeded 25 lever arch volumes.

2. Mirvac called four witnesses to give oral evidence:  Adam Davidson, Tony Aleksovski, Colin Cooper and Mr Draffen.

3. Adam Davidson was engaged as a Senior Development Manager for Mirvac WA in 2007.  From 2007, until he left Mirvac WA in 2010, he had the day‑to‑day responsibility for the Project. 

4. Mr Aleksovski joined Mirvac as a Development Manager on 31 May 2010.  He took over the day‑to‑day responsibility for the Project after Adam Davidson left Mirvac.  Apart from six months in 2015, he has continued to work for Mirvac.

5. Mr Cooper was appointed as one of Mirvac WA's representatives on the PCG in September 2014.  He is currently employed in the position of Fund Manager Wholesale Residential of Mirvac Ltd. 

6. As noted earlier, Mr Draffen is the Chief Investment Officer of Mirvac Ltd.  In 2008, he became the National Developments Chief Executive Officer and was subsequently given responsibility for group strategy.

7. Binningup called three witnesses:  Mr Waller, Michael Doyle and David Maiorana.

8. As noted earlier, Mr Waller is a director and secretary of Binningup.

9. Mr Doyle is a finance broker and has been a consultant to Mr Waller's family group of companies, including Binningup, since late 2012.  He began attending the PCG meetings as a representative of Binningup from 20 December 2012.

10. Mr Maiorana is an expert in town planning.  He was called by Binningup in support of its damages claim. 

Overview

1. In this overview, I will set out a chronology of some of the major events.[44]  In relation to those events that were relied upon by Binningup in support of its allegation that Mirvac WA repudiated the Services Agreement, I will not include the detail in this overview section, but will instead do this in separate sections, by topic. 

   [44] Most of what follows comes from the agreed chronologies and statements of facts helpfully filed by the parties prior to the trial.  The balance comes from the witness statements, in particular the statement of Mr Adam Davidson.

2. Binningup and Mirvac WA entered into a preliminary Heads of Agreement on 15 February 2007 concerning the possible development of four lots of land owned by Binningup in Binningup.  Mirvac WA was, at all times, a wholly‑owned subsidiary of Mirvac Ltd. 

3. Three of the lots (Lots 9003, 304 and 195) had common boundaries and were referred to as 'Binningup South'.  To the north of Binningup South was the existing town site of Binningup.  The fourth lot, Lot 100, was to the north of the town site.  It was referred to as 'Binningup North'. 

4. At the time of the Heads of Agreement, Binningup North was virgin bushland which had never been developed.  Binningup South had been the subject of some development by Binningup, primarily in an area called Lakewood Shores.

5. The key authorities whose approval would be needed for the development were:

   (1)the local authority responsible for Binningup, being the Shire of Harvey;

   (2)the Western Australian Environmental Protection Authority (EPA);

   (3)the Commonwealth Department of Environment, Heritage, Water and the Arts, which later became the Department of Sustainability, Environment, Water, Population and Communities.  I will refer to both as the 'Commonwealth Department'; and

   (4)the Western Australian Planning Commission (WAPC).

6. In October 2007, the Shire initiated Amendment 63 to its Town Planning Scheme to rezone Binningup South to a 'Residential Development Zone' from 'Residential', 'General Farming' and 'Recreation' (Scheme Amendment). The Shire referred the Scheme Amendment to the EPA under s 38 of the Environmental Protection Act 1986 (WA). Ultimately,[45] the EPA decided that the Scheme Amendment was required to be advertised and that an environmental review was required.

   [45] On 30 October 2008, the Service Unit of the EPA made a recommendation that the Scheme Amendment be assessed via the environmental review process. On 2 February 2009, the EPA determined that the Scheme Amendment should be assessed under pt 4 div 3 of the Environmental Protection Act.

7. On 11 January 2008, the parties executed a development services agreement, the Loan Agreement, the Charge, the Performance Undertaking and a mortgage.  Mirvac WA also made the Initial Advance to Binningup of $25 million under the Loan Agreement on that date (and then made various periodic advances to Binningup between 31 January 2008 and 30 September 2014). 

8. At that time, Adam Davidson, a senior development manager for Mirvac WA, had the day‑to‑day responsibility for the Project. 

9. In 2008, among other things, Mirvac WA held an 'engagement forum'.  It was attended by representatives from Mirvac WA, Binningup, the local authorities and the relevant consultants.  The urban planning consultants appointed by Mirvac WA, Roberts Day, ran the forum with a view to coordinating the consultant teams, authorities, the Shire, the golf course and other representative groups.[46] 

   [46] Exhibit 28 (Mr Davidson's witness statement) [59] ‑ [63].

10. With its consultants, Mirvac WA worked with the Shire in relation to the drafting of the provisions of the Plan.  Mirvac WA also worked with the EPA, including arranging a visit to the site.[47]

    [47] Mr Davidson's witness statement [67], [71] and [73].

11. At the beginning of 2009, the development services agreement was varied by the execution of a variation agreement.  I refer to it in its varied form as the 'Services Agreement'.

12. On 5 February 2009, Mirvac submitted Revision A of the Plan to the Shire.

13. Mirvac WA continued to work with the Shire.[48]  One of the issues under discussion was secondary access to the site.  The details surrounding this issue are set out in a separate section below, as Binningup relies on this issue in support of its primary contention.

    [48] See, for example, Mr Davidson's witness statement [76] ‑ [81] and [83] ‑ [84].

14. At some point prior to 15 September 2009, Mirvac submitted a referral to the Commonwealth Department under the Environment Protection and Biodiversity Conservation Act 1999 (Cth).

15. On 9 November 2009, the EPA produced a report to the Minister for Environment recommending that no development be allowed on the southern part of the Binningup South site, comprising nearly half of that area.  The recommendation was appealed by Mirvac WA on behalf of Binningup on 23 November 2009.[49]  Mirvac WA met with the Appeals Convenor several times between December 2009 and March 2010.[50] Mirvac WA then submitted a draft conservation corridor plan, and later a revised concept plan with a separate analysis prepared by RPS,[51] to the Appeals Convenor.[52]  The Minister partially allowed Mirvac WA's appeal on 1 July 2010.[53]  The outcome was seen to be an excellent one by Mirvac WA and Binningup.[54]

    [49] Under s 100 of the Environmental Protection Act.

    [50] On 17 December 2009, 28 January 2010 and 17 March 2010. See Mr Davidson's witness statement [111] ‑ [112] and [114].

    [51] RPS were Mirvac WA's environmental consultants.

    [52] Mr Davidson's witness statement [115] ‑ [116].

    [53] Exhibit 10.346.

    [54] Exhibit 10.347.

16. In May 2010, Mr Aleksovski replaced Mr Davidson as the person responsible for the Project.  

17. Mirvac WA sent a copy of the Minister's decision to the Commonwealth Department on 19 July 2010, asking to revive previous discussions about the two issues that remained of concern.  These were the presence of the Graceful Sun Moth on the land and the changes to the scheme brought about by the appeal outcome.[55]  The following month, Mirvac WA provided further information, and continued to do so as required.[56]

    [55] Exhibit 10.351.

    [56] Exhibit 30 (Mr Aleksovski's witness statement) [47] ‑ [48], [54] ‑ [55], [59] ‑ [61], [72], [85] ‑ [86] and [97]. See also [106] ‑ [107] and [115].

1. On 16 September 2010, a ministerial statement was issued indicating that the Scheme Amendment could be implemented.  This was the final step in the EPA appeal.

2. Mirvac WA commissioned market research, to commence in November 2010 and finish mid‑December 2010.[57]

   [57] Mr Aleksovski's witness statement [65] ‑ [66] and [73] ‑ [75].

3. In February 2011, Mirvac WA held a design workshop for the Project.[58]  From that time onwards, many meetings and discussions occurred in relation to the design and other issues relating to the Project.[59]

   [58] Mr Aleksovski's witness statement [90] and [93].

   [59] See Mr Aleksovski's witness statement from [99].

4. On 22 March 2011, the Commonwealth Department advised Mirvac WA that the development would be a 'controlled action' that would require assessment under the Environment Protection and Biodiversity Conservation Act.  On 21 June 2011, Mirvac WA sent an email to the Commonwealth Department reminding them that the statutory time frame for deciding on the development expired the following day.  The next day, the Commonwealth Department wrote to inform Mirvac WA that it intended to approve the development subject to stated conditions.  The letter gave Mirvac WA 10 business days in which to comment on the conditions.  It also said that the time for making the final decision had been extended to 13 July 2011.[60]  Mirvac WA then worked to have the conditions varied.[61]  On 21 July 2011, the Commonwealth Minister approved the Project subject to conditions.[62]  The conditions related to, among other things, protecting the Graceful Sun Moth.

   [60] Mr Aleksovski's witness statement [106] ‑ [107] and [115] ‑ [116].

   [61] Mr Aleksovski's witness statement [117] ‑ [118], [122] ‑ [124] and [130] ‑ [132].

   [62] Exhibit 12.417.  See also Mr Aleksovski's witness statement [134] ‑ [135] and [137].

5. Meanwhile, on 17 June 2011, Mirvac WA lodged Revision B of the Plan with the Shire.  The Shire then lodged that revised Plan with the WAPC. 

6. On 6 September 2011, the Shire recommended that the Shire Council adopt the amendment text of the Plan subject to the modification as requested by the Minister of Environment and Youth[63] for final approval and recommended that the Council forward it to the WAPC for endorsement. 

   [63] This was a reference to the conditions set out in the ministerial statement of September 2010.

7. On 13 September 2011, the Shire adopted the Scheme Amendment.  This was subsequently supported by the WAPC. 

8. Two days later, on 15 September 2011, Mirvac submitted Revision C of the Plan to the Shire. 

9. On 14 February 2012, the Shire approved advertising of the Plan and required further information to be provided by Mirvac WA prior to final approval of the Plan, including in relation to a second access road. 

10. Throughout 2012, Mirvac WA and the Shire continued to discuss various issues, in particular the second access road.

11. On about 20 May 2013, the Commonwealth Department removed the Graceful Sun Moth from its list of species protected on the basis of national environmental significance.  In light of that, Mirvac WA asked for the removal of the conditions relating to the Graceful Sun Moth.  The Commonwealth Department agreed to this and, on 11 June 2013, the conditions were varied.

12. Further revisions of the Plan, Revision D and Revision E, were submitted by Mirvac WA to the Shire in August and November 2013 respectively.  On 3 December 2013, the Council by resolution adopted Revision E of the Plan. 

13. On 18 December 2013, the WAPC advised that it supported Revision E of the Plan, subject to the endorsement of the Local Water Management Strategy by the Department of Water.  This endorsement was obtained on 10 February 2014.  The following day, the Plan was approved. 

14. On about 24 April 2014, Binningup sent a notice to Mirvac WA requiring it to provide a report on various matters.[64] 

    [64] Exhibit 17.649.  See also Mr Aleksovski's witness statement [292] ‑ [298].

15. On 9 May 2014, Binningup sent another notice.[65]

    [65] Exhibit 21.673.

16. By July 2014, the relationship between Binningup and Mirvac WA was poor.  Among other things, a dispute had arisen over the minutes of the July 2014 PCG meeting, which led to a protracted and at times hostile exchange between the parties.[66]

    [66] See Mr Aleksovski's witness statement [335] ‑ [345] and [347] ‑ [353].

17. Then, on 9 September 2014, Binningup advised that it would be recording all future meetings of the PCG.  Mirvac WA said it would not agree to the meetings being recorded, but suggested instead that an independent minute‑taker be appointed.  Binningup refused, insisting the meetings be recorded.[67] 

    [67] Exhibits 22.758 and 22.760.

18. Mirvac WA decided that, due to the serious deterioration in the relationship between Mirvac WA and Binningup, it should replace its representatives on the PCG.  It notified Binningup of this on 15 September 2014.[68]

    [68] Mr Aleksovski's witness statement [351] ‑ [352].

19. The parties continued to engage in correspondence in relation to the recording of the PCG meeting.  Neither side would shift its position.  As a result, no further PCG meeting was ever held.[69] 

    [69] See under the heading 'Refusal to attend recorded PCG meeting'.

20. On 2 October 2014, Binningup's Termination Notice was sent, alleging Mirvac WA had repudiated the Services Agreement and purporting to accept the repudiation.

21. On 24 October 2014, Mirvac's Termination Notice was sent, alleging Binningup had repudiated the Services Agreement and purporting to accept the repudiation.

Second access road

1. As noted in the Introduction, Binningup alleges that Mirvac WA repudiated the Services Agreement by deciding not to proceed with the Project unless it could negotiate amendments to the Services Agreement that were more commercially favourable to it.  I refer to this as the 'Alleged Decision'.  Among the matters said to manifest this Alleged Decision was Binningup's allegation that Mirvac WA deliberately delayed progress on the Project by its handling of an issue relating to a second access road.[70]

   [70] See Binningup Closing Submissions [2.2], [3], [3.5], [3.9] ‑ [3.13], [50] ‑ [55], ts 1452 ‑ 1456 and Defence [30A.2].

2. Binningup contends that:[71]

   The evidence has established that Mirvac (WA) sought to avoid the imposition of a condition of a planning approval for the carrying out of the Project requiring immediate construction of a second access road in order to avoid expenditure by Mirvac (WA) unless and until the carrying out of the Project had been internally approved by Mirvac Ltd …

   [71] Binningup Closing Submissions [51].

3. Binningup also contends that:[72]

   Mirvac (WA) attempted to cause the Coast Pastoral Company, the owner of the required land for the second access road, to not sell that land, which had the purpose and effect of delaying and impeding implementation of the Project.

   [72] Binningup Closing Submissions [52]. See also [55].

4. I will deal with each contention in turn.

Did Mirvac WA try to avoid the imposition of a condition to avoid expenditure unless or until there was internal approval?

Introduction

1. As I will explain, I do not accept that the evidence establishes Binningup's first contention that Mirvac WA sought to avoid the imposition of a condition to avoid expenditure unless and until there was internal approval.

2. Almost all of the evidence relied upon by Binningup in support of this first contention related to events that occurred prior to Mr Davidson's departure in 2010.[73]  Binningup sought to discredit Mr Davidson's evidence.  As I explain in a later section,[74] I found Mr Davidson to be a reliable and truthful witness and accept his evidence entirely.

   [73] Binningup provided a detailed chronology of evidence during the hearing titled 'Defendant and Plaintiff by Counterclaim Expanded Chronology After Evidence' (Chronology).  The Chronology sets out both the content of documents and oral evidence.  The rows of the Chronology cited by Binningup in support of its first contention were rows 5, 15, 18, 19, 20, 31, 35, 37, 42, 43, 44, 48, 49, 50 and 57.

   [74] See under the heading 'Evaluation of witnesses'.

3. Mr Davidson explained why Mirvac WA sought to avoid the imposition of a condition for a second access road.  It had nothing to do with internal approval for expenditure.  There were two main reasons.  First, he was trying to avoid, for the benefit of both Mirvac WA and Binningup, incurring costs earlier than required (and indeed that may not be required at all).  Second, he was trying to avoid the EPA approval process being derailed just when it seemed approval was about to be granted.  Both goals were valid and appropriate goals to pursue, and were entirely consistent with Mirvac WA's obligations under the Services Agreement.  The evidence shows that he acted consistently with those goals. 

4. In an effort to achieve those goals, Mr Davidson tried to ensure that traffic needs and fire safety needs were addressed independently.  He explained that he wanted the Shire to understand that the two needs were distinct and may require different responses at different times. 

5. For example, fire safety may require secondary access into the site but may not need a fully sealed road or indeed any road at all.  Instead, access may be able to be achieved by installing a gate at the boundary of the site from which emergency vehicles can access the site and then follow a path identified on a map but that is not physically formed.  By contrast, if the traffic demands would exceed the capacity of the existing access road, a bituminised road would have to be built.  Of course, a road to accommodate additional traffic would only be required if and when there was going to be such additional traffic.  Accordingly, both the type and timing of access could be different depending on whether the purpose was fire safety or traffic. 

6. Mr Davidson pointed out that there was a difference between secondary access and a secondary (or a second) access road.  He pointed out that, if a need for secondary access was established, this did not mean that a second access road was inevitably required.  He was required to repeat this on multiple occasions, as the difference did not seem to be appreciated by the cross‑examiner.[75] 

   [75] Some examples are extracted below, but see ts 465, 474, 504, 532, 545 and 549 ‑ 510.

7. Mr Maiorana, the planning expert called by Binningup in the trial, agreed there was a difference and agreed that, if there was a need for secondary access for emergency purposes, this did not mean that a second access road would be required.  Mr Maiorana agreed that the need for a second access road would primarily be driven by traffic requirements, and that whether a constructed road was required would depend on the volume of traffic.[76]

   [76] ts 1414 ‑ 1419.

8. Mr Davidson also did not want the Shire to reason that, because it appeared that a second access road might be needed for fire safety reasons and might be needed for traffic, a second access road was definitely required, and required from the start.

9. As will be seen, numerous documents show that Mirvac WA consistently distinguished between fire safety requirements and traffic requirements.  The potential benefit to both Mirvac WA and Binningup is obvious.  If it transpired that a secondary access road was not required for traffic, and emergency access could be provided without a bituminised road, the expense of building a road would be wasted.  Further, even if a bituminised road was eventually needed to deal with the traffic generated as the Project progressed, it would not be sensible to incur the expense of constructing the road before that traffic was generated.  It would require Mirvac WA to outlay the funds, and would start the clock running on Binningup's obligation to repay them, earlier than necessary. 

10. It was not only Mirvac WA who distinguished between fire safety requirements and traffic requirements.  Its planning consultants did too.[77]  As I have noted, so too did Mr Maiorana, the planning expert called by Binningup in the trial.

    [77] See, for example, exhibit 9.298.

11. Mirvac were projecting that there would not be a need for a second access road for traffic reasons for nearly 10 years.  A second access road may not have been needed at all, depending on the final yield.[78]

    [78] ts 505, 508 and 518.

12. In his evidence, Mr Waller, director of Binningup, agreed he was aware that Mirvac was concerned to not have a requirement to construct the second access road before it was necessary.  He added 'that's just prudent'.[79] 

    [79] ts 1232.

13. The evidence also shows Mr Davidson's efforts to achieve the second goal - that of preventing the EPA approval process being derailed.  Mr Davidson knew that, if the construction of a second access road was a condition of granting approval, this would cause significant delay. 

2007 - August 2009

1. In 2007, prior to the Transaction Documents being executed, Mirvac WA commissioned a report from civil engineers Cossill & Webley in relation to anticipated development costs.  The authors of the report advised Mirvac WA, among other things, that it may be necessary to provide secondary access into the southern part of the site.[80]  As will be seen, in September the following year, Mirvac WA received a report from traffic engineers Riley Consultants who advised that, from a traffic perspective, the existing road could accommodate the development of up to 90% of the existing lots in the town site plus 1,200 lots within the subject land.  It recommended that a traffic analysis be done after there were 750 dwellings in the subject land.[81] 

   [80] Exhibit 5.178 and ts 408 ‑ 409.

   [81] Exhibit 6.236.  In May 2011, Mirvac WA received a further report from Riley Consulting.  Similarly to its previous report, Riley Consulting indicated that acceptable operation of the existing single access road could be expected with the full development of the town and 1,063 additional lots, but it was recommended that an assessment of the intersection operation be undertaken when approximately 750 dwellings in the subject land had been developed - see exhibit 12.394 pages 4932 and 4947 ‑ 4948.

2. In 2008 Mirvac WA received a report titled TME Fire Management Guidelines (TME Fire Report).[82]  The report said there was a need for a second external access to the southern portion of the site that could accommodate particular types of fire trucks.[83]  Mr Davidson agreed that, after receiving that report, it seemed highly likely that a second access road would have to be built, and it was likely it would be required in order to get planning approval.  He said, however, that Mirvac WA were hopeful that there may yet be alternative strategies available.[84]  Indeed, he never felt, throughout his time at Mirvac WA, that the road would have to be built:[85]

   I wouldn't say that I had twigged at that point in time, or any of my time at Mirvac, really, that it was a near certainty that we would have to build that road.  I think there were points along the journey where it became more likely and less likely that we would have to build the road.  We looked at a range of alternate - and discussed with Geoff [Geoff Lush of TME] a range of alternate kind of potential emergency access means.

   [82] Exhibit 6.224.

   [83] Exhibit 6.224 page 2334.  See also page 2335.

   [84] ts 460 ‑ 461.

   [85] ts 460.

3. As will be seen, as a result of those discussions with Mr Lush of TME, a revised fire report was provided in January 2009, indicating that the need for secondary access should be evaluated and reviewed once approximately 750 dwellings had been completed.[86]

   [86] Exhibit 7.250.  See also ts 502 ‑ 503.

4. In October 2008, Mirvac wrote to the EPA,[87] stating that a second access road did not form part of the current proposal.  It was put to Mr Davidson that this was inaccurate, in light of the TME Fire Report.  He said:[88]

   No, I don't agree with that.  The - the issue of a second access road for the purposes of traffic and the issue of fire access, we've tried very clearly to keep separate so the two wouldn't stack on top of each other and make it absolute that you would need a second access road.

   … There were always options in regard to delivering safe fire access to the site.  The discussions I had had with Geoff [Geoff Lush of TME] at around the time of that report - because we were concerned about the potential that it would lock in a second access road - were actually around formalising an emergency access.  So literally having a gate at the southern end of the site with a paper road[89] that vehicles and fire vehicles could drive on to get across to Buffalo or Springhill Road.  We also - the main problem with access to the town site for fire and emergency vehicles on Binningup Road was that it was a single lane in either direction.  One alternative to fix that problem was to duplicate Binningup Road, which would possibly have been a part of our proposal anyway and might have been a preferred outcome because you could turn right out of Binningup Road intersection, whereas the intersections further to the south, that would be a different sort of upgrade to enable turning right out of that intersection.  So we needed to keep the fire access issue and the second road access issue quite separate, and I felt that it wasn't quite as crystal yet as to whether the second access road would be triggered purely on fire access concerns.  There were a range of other means and measures we could look at first.

   [87] Exhibit 6.241.

   [88] ts 465 ‑ 466.

   [89] From the overall context, I infer that, by 'paper road', Mr Davidson was referring to a path that was identified on a map or a plan but that was not a physically formed road. 

5. Mr Davidson used a colourful metaphor to illustrate his experience of dealing with the EPA:[90]

   There were many, many available options at that point in time and we were playing a game of whack-a-mole on the environmental approval.  We did not want to have to readvertise the environmental approval, which is what I felt could have happened if the EPA had a sniff that for some reason a second road was absolutely required at that point in time.

   [90] ts 467.

6. Mr Davidson explained that there were two reasons why he did not want a secondary access road to form part of the application:[91]

   One, we didn't absolutely know it was required.  There were two different reasons why it could be required, traffic‑related and fire‑related.  But, also, it would have been a change to the proposal, and that would have required a readvertising, and that would have caused a substantial delay, and we felt that it wasn't worth delaying where we were getting quite close to a potential outcome, on the basis of something that may or may not be required at that point in time.

   [91] ts 472.

7. Mr Davidson added:[92]

   I knew that we needed to resolve fire access to the site.  A second access road was one means of resolving that fire access issue.  A second access road may or may not have been required, based on the number of dwellings built.  We were sitting on a traffic report that suggested that Mirvac's development alone would not trigger the need for a second access road.

   …

   We wanted them to focus on the environmental approval that was in front of them and not get caught up in what we felt could have been secondary issues at the time and may or may not have been required at that point in time.

   …

   [O]ur key concern at that point in time was not having the EPA readvertise the proposal.  We had been on the - the treadmill for a couple of years and we felt that if it was readvertised at that point in time there could be increasing stacks on by other authorities on a range of other issues and members of the public.

   [92] ts 473 ‑ 474.  See also ts 474 ‑ 475, 508 and 540.

8. On 20 January 2009, Mirvac WA received the revised fire management plan from TME,[93] mentioned earlier.  In the revised plan, TME amended its previous position that there was a need for a second external access to the southern portion of the site.  TME also wrote that there is a need for '[e]valuation of the need for a formal secondary (emergency) access to the southern portion of the site as the development reaches its full potential. … The need for this access will be reviewed during later stages of the development once approximately 750 dwellings have been completed'.

   [93] Exhibit 7.250.

1. On 30 March 2009, Dan Pearce of Roberts Day, a Mirvac WA planning consultant, emailed Jake Davidson, Manager of Planning Services at the Shire.[94]  Jake Davidson and the witness Adam Davidson are not related.  To avoid confusion, I will refer to each man by his full name.

   [94] Exhibit 7.257.

2. Mr Pearce's email attached a proposed policy statement for inclusion in the Plan.  He wrote it was

   intended to act as [a] trigger point for review of the need for a second access road and addresses the issue - which is maintain acceptable levels of service - rather than the possible solutions, one of which is a second access to the site.

3. The proposed policy required the developer to prepare an updated traffic impact assessment upon the issue of titles to facilitate 750 dwellings.  It stated that, if the assessment showed that an acceptable level of service was unlikely to be achieved at the intersection of Binningup Road and Old Coast Road (based on an assessment of household trip generation at that time and the projected final trip generation), the assessment would need to address options, which may include upgrades to the intersection and/or the provision of secondary access.

4. In cross‑examination, Adam Davidson was asked why that proposed policy statement referred only to an acceptable level of service and did not also refer to an evaluation of the need for secondary access for emergency purposes.  Adam Davidson said that the Shire was primarily focused on maintaining access to the site, so that was what was being addressed.  He said the Shire's engineers wanted to do a separate piece of work to confirm at which level the triggers for a second access road should be set.  He said he also knew, as a result of his discussion with Mr Lush of TME, that there were options available for dealing with emergency access.[95]  Adam Davidson said they were focused on the traffic issue at that time and that being a trigger for a second access road.[96] 

   [95] ts 507 ‑ 508.

   [96] ts 508.

5. Adam Davidson said:[97]

   We were very keen to avoid the environmental review being re‑advertised, which we felt could have led to a bunch of other complications and reassessment and inevitable further delays of years and years.

   … We were also in a situation where, you know, the EPA had, at that point in time - roughly at that point in time, suggested it would like to knock the southern half of the development out.  And so we were trying not to bolster the arguments for that to occur.  We didn't want another factor to come into the assessment, especially one that we felt, on balance, might not be required in any event.  And if it was required, could be dealt with through a subsequent approval.

   [97] ts 508.

6. It was put to Adam Davidson that he approved the email of 30 March 2009 being sent on behalf of Mirvac WA because he 'knew that if the need for a second access road to provide a second emergency access was also stated in the proposed policy statement as a matter to be considered, there was no possibility of there being found to be no need for a second access road based solely upon whether there was an effective level of service'.  Adam Davidson replied:[98]

   Again, I don't quite agree with that.  We were very keen to tackle the issue separately.  We didn't want to have them conflate each other and therefore go, 'Look, you sort of look like you need it there.  You sort of look like you need it there, let's just do it'.  We wanted to tackle the, 'sort of look like you need it for traffic', and then tackle the, 'sort of look like you need it for emergency access'.  On emergency access in particular, at least at that point in time, I felt that there were a range of other options available which were more likely to be the outcome. 

   [98] ts 509.

7. Jake Davidson discussed with Adam Davidson appointing an independent consultant to facilitate the resolution of the second access issue.  In May 2009, Mirvac WA and the Shire commissioned independent traffic consultants, Shawmac Pty Ltd, to address access to the site.[99] 

   [99] See exhibits 7.260, 7.261, 7.267, 7.271, 7.273, 7.276 and ts 510 ‑ 511, 522 and 524 ‑ 526.

8. On 17 June 2009, Adam Davidson sent an email to the Shire stating:[100]

   We understand from our discussion yesterday that the Draft [Plan] does not require further amendment prior to advertising. The Shire will instead require that the triggers for commencement of approvals and construction (probably separated) for the second access road to the site in the [Plan] will require amendment prior to adoption of the [Plan]. 

   [100] Exhibit 7.275.

9. It was put to Adam Davidson that, from the second sentence of that email, he knew that a second access would be required to be provided for in the Plan, although details for it did not have to be finalised before the advertising of the Scheme Amendment.  Adam Davidson said:[101]

   It's probably more fair to say that I knew that the triggers for construction - for assessment and construction of the second access road would need to be included in the [Plan], rather than the second access road itself would need to be included in the [Plan]. 

   [101] ts 527 ‑ 528.

10. This answer is entirely consistent with the words he wrote.

11. The minutes of the Shire's Development Services Committee meeting on 7 July 2009 recorded that:[102]

    The need for a second access has been considered and Staff have sought independent specialist advice on this matter.  As a result, it has been recognised that a second access will be required for the development based on expected traffic generation and provision of an emergency access.  The timing of this second access is currently being discussed with the proponent, although it is expected a staged approach will be used, tied to development milestones.  This matter will be resolved prior to final consideration.

    [102] Exhibit 8.281 page 3014.

12. It appears that[103] the Council resolved at its meeting on 14 July 2009, among other things, that provisions addressing the proposed secondary road access to the development were to be incorporated into the Plan to the satisfaction of the Council.

The Shire's EPA Letter (August and September 2009)

[103] Minutes of the Shire's Development Services Committee on 7 February 2012 set out what the Council had apparently resolved at the meeting on 14 July 2009 - see exhibit 14.461 pages 6754 ‑ 6755.

1. On 20 August 2009, the EPA wrote to the Shire, advising that it had become aware of the July Council minutes.  The EPA sought clarification of whether the amendment and the development envisaged by the amendment could proceed without the provision of a secondary access road.[104]

   [104] Exhibit 8.285.

2. At that time, the EPA was assessing the Scheme Amendment.  Mirvac WA and the Shire were working together to address the EPA's concerns.

3. Adam Davidson prepared a draft response to the EPA for the Shire, and emailed it to Mirvac WA's consultants for their input on 24 August 2009, writing:[105]

   DP [Dan Pearce] - draft words for us to supply to Jake [Jake Davidson of the Shire] for him to pass back to the EPA - for when you get a chance to give me a call (today please!).

   Kristen [Kristen Bennetts of RPS] / Mark [Mark Wallis of Cossill & Webley] - any feedback on this would be welcome:

   'Amendment 63 to Shire of Harvey District Planning Scheme No 1 and the development envisaged by the amendment can proceed without the provision of a secondary access to the town site.

   Whether a second access road to the town site is ultimately required is dependent on a range of factors including the number of dwellings constructed within the site and elsewhere within the existing town and other development areas, household occupancies, and the frequency of vehicle movements (and their direction) that result.  Many of these factors, particularly those relating to other development sites within Binningup and the development of housing and occupancy patterns within the existing town are unrelated to this amendment.

   A second access road therefore does not form a part of the current proposal.

   However, Council and the developer consider it appropriate to include provisions with the proposed amendment to provide for further traffic investigations at the appropriate time, and the commencement of planning and approvals, and construction of a second access road, should it eventually be necessary.  This does not mean that the amendment is contingent on construction of a second access road.  It simply means that if and when a second access road is required (on the basis of growth within the amendment area, and elsewhere within Binningup), that any further development beyond that point will be conditional on development of that road.  Development of the road will be subject to all appropriate approvals at that time.'

   Do we need more? Any more powerful arguments we can make?

   We need to be very careful not to end up encouraging approval for the northern half only, but at the same time inclusion of the second access road within the current approvals process could cause delays of the type significant enough for Mirvac to walk away from this project. (so focus hard as the above is very serious for all us).

   [105] Exhibit 8.286 and see Mr Davidson's witness statement [86].

4. Adam Davidson was cross‑examined about this document extensively. 

5. It was put to him that, while he referred to proposed traffic studies, he did not mention 'the need for a second access road to provide required emergency access'.  Adam Davidson explained:[106]

   Again, I think the use of 'second access road for emergency access' is misleading.  We needed to provide access for emergency access rather than a second access road.  The access - the secondary emergency access questions and answers [were] quite separate to a secondary road to the township.

   [106] ts 532.

6. Adam Davidson again explained the different requirements and planning around emergency access as distinct from traffic:[107]

   … that arrangement to deal with emergency access was quite different to construction of a secondary access road in the format being discussed in regard to the traffic triggers.  The traffic triggers would have required construction of … a dual lane road designed for vehicles to operate on, on a daily basis.  Emergency access could have consisted of a track … to the south, crossing a small portion of land; a much smaller and simpler affair.  The exact route and alignment of any potential emergency access to the south, the timing was a little unclear and I think, in TMEs report, they hadn't been totally clear about when it would be required relative to what number of dwellings;  it would need to be assessed on a continuing basis. 

   [107] ts 532 ‑ 533.

7. It was put to Adam Davidson that he did not refer to any need for a second emergency access road in the draft response he prepared because Mirvac WA wished to avoid the EPA requiring construction of the second access road as a condition of giving environmental approval for the Scheme Amendment.  Adam Davidson replied:[108]

   The EPA probably had no interest in a secondary access road being constructed.  It was assessing the proposal that was put in front of it.  It was our decision as to whether we included the secondary access road in that proposal or not.

   [108] ts 533.

8. Adam Davidson was asked about the final sentence of his email.  He denied that he was referring to delays which would result from Mirvac not giving internal approval to commence construction of infrastructure on the land.  He said he was referring to 'delays associated with the approvals process, rather than the construction of the second access road per se'.  He said:[109]

   So I was … aware of the financial implications of both the delay and the potential construction cost of a second access road but my focus was actually on the delay.  The delay was what would have been a result of including the second access road at that time because it would have required readvertising of the amendment.

   …

   The delay would have been very significant because it's not just readvertising.  There would have been full design of that road, collecting the information about it.  It would have taken us a long time to negotiate an exact route, to prepare the exact design detail, to have those design details endorsed, then to submit that back to the EPA, then have the whole thing readvertised.  Meanwhile, other issues would have kept on cropping up and it could have caused a snowball of issues when we were so close to the end of obtaining an approval for the site overall.

   [109] ts 533 ‑ 534.

9. He said that, in writing that delays could be significant enough for Mirvac WA to walk away from the Project, he was probably being a little over‑dramatic to 'put the wind up' the consultants to try and get them to respond quickly and do a bit more work.[110]  He said he knew that Mirvac WA would not have had the right under the Services Agreement to walk away merely because construction of a second access road was required by regulatory authorities as a condition of granting planning or environmental approval to the Scheme Amendment.[111]

   [110] ts 537.

   [111] ts 535.

10. The day after sending the draft response to his consultants, Adam Davidson emailed Jake Davidson.  Adam Davidson wrote:[112]

    We are preparing (hope you are okay with that) draft content for a Shire response to this letter from the EPA. 

    The most critical issue raised is the second access road - the EPA and the Shire's approach to that item is critical to the development proceeding in the near term as envisaged. 

    I have prepared draft commentary on this issue first (for inclusion in the overall letter from the Shire to the EPA) - we will come through with material for the other issues shortly also.  I think that this commentary (attached) is aligned with our joint current position (read the whole rather than getting caught just in the first paragraph), but would like to discuss with you as soon as possible as the outcome here could have very serious implications in terms of how the process unfolds.

    [112] Exhibit 8.288.

11. Adam Davidson attached to his email a document setting out the proposed response to the EPA (Mirvac's Draft EPA Letter).

12. In cross‑examination, Adam Davidson said:[113]

    Our primary goal was not to cause further delays at that point in time, and not to lock in the absolute requirement for - not to conflate emergency access and traffic access, and to try and keep options open as to what would happen in the future based on various yield outcomes, given that the thing only needed to lose 300 dwellings for the secondary access road not to be required at all.

    [113] ts 540.

13. On 9 September 2009, Jake Davidson replied to Adam Davidson, attaching Mirvac's Draft EPA Letter to which he had made some amendments.  Adam Davidson made some further minor amendments and emailed the document back.[114]  He asked Jake Davidson to send him a copy of the letter the Shire sent to the EPA.[115]  Jake Davidson did so the same day.[116]  The letter sent to the EPA (Shire's EPA Letter) by Jake Davidson stated:[117]

    Second Access Road

    Amendment 63 to Shire of Harvey District Planning Scheme No 1 is not contingent on the provision of a second access road to the town site and as such the second access road does not form a part of the proposal.

    Council has granted consent to advertise the proposed Binningup Beach Local Structure Plan whilst noting that several modifications are required prior to final consideration. One of these modifications relates to the inclusion of provisions addressing secondary road access to Binningup.

    The Shire of Harvey and Mirvac jointly commissioned a further study into the provision of secondary access to Binningup to clarify the likely need for such an access. The results of that study indicate that, although development of the area addressed by Amendment 63 alone (to the maximum yield likely to be possible under the proposed Local Structure Plan) would be unlikely to trigger a requirement of a second access road, a second access road may be required when the potential for new homes on vacant land in the existing town site and other development sites in Binningup are taken into account.

    The Shire has therefore indicated that provisions addressing the need for a secondary access road be included in the proposed Binningup Beach Local Structure Plan. The provisions are to provide for planning, approvals and ultimately construction of secondary access to Binningup in a timely and coordinated fashion based on the point at which a particular number of lots are constructed (if at all). Should the trigger points (in terms of number of lots) be reached and the necessary approvals not be obtained, then further development would be precluded.

    [114] Exhibits 8.288 and 13.434 page 5355.

    [115] Exhibit 8.288. 

    [116] Exhibit 8.290.

    [117] Exhibit 9.291.

14. Jake Davidson also included in his email to Adam Davidson on 9 September 2009 a copy of draft plan provisions which were under review.  Jake Davidson had added a third bullet point to the version he sent.[118]  Adam Davidson said he was happy with that amendment.[119]  The amended version of the provisions (2009 Trigger Provisions) read:

    The investigations, approvals and timing for the provision of a second public access road to the site will be undertaken in accordance with the following development milestones:

    •Upon the issue of titles to facilitate the development of 750 dwellings, the developer will prepare a 'Route and Funding Study' to determine the alignment and funding arrangements for the provision of a second public access road to the site;

    •Upon the issue of titles to facilitate the development of 850 dwellings (aggregate) the developer will commence the process of securing the necessary approvals and other commitments to facilitate construction of the second public access road; and

    •Upon the issue of tiles [sic: titles] to facilitate the development of 1,000 dwellings (aggregate), the construction of the secondary road is to be undertaken in accordance with the approved 'Route and Funding Study'.

    No further subdivision will be permitted beyond each of the stipulated milestones until such time as the relevant actions have been undertaken to the satisfaction of the Shire of Harvey.

    [118] Exhibit 13.434 page 5356.

    [119] Exhibits 8.288.

15. As I will later discuss, despite these two documents, it was put to Adam Davidson in cross‑examination that there had not been any agreed position with the Shire. 

The handover

1. As noted earlier, in May 2010, Mr Aleksovski replaced Mr Davidson as the person responsible for the Project.  Adam Davidson prepared handover notes for Mr Aleksovski in relation to the Project.[120]

   [120] Exhibit 10.341.

2. Under the heading 'Authorities', Adam Davidson wrote:[121]

   •Shire of Harvey:

   Key contact is Jake Davidson (Planning Manager).  CEO, Michael Parker, is familiar with the plan and several presentations have been delivered to the whole of the council (see: I: Binningup Beach 4. Project Management 4.3 Presentations Binno Beach Shire of Harvey 14.07.09.ppt for most recent full presentation).

   Key issues going forward include: repeal of Scheme 12 (relates specifically to this site, and includes a second nine holes and community open space provisions), funding management costs for all conservation/POS areas (probably through a special area rate), and resolving path forward on the second access road to Binningup (refer provisions on the proposed local structure plan for current agreement: I: Binningup Beach 4.  Project Management 4.5 Miscellaneous Bin Secondary access (ammend [sic] 63) 09.09.09.Shire Approved.doc)

   [121] Exhibit 10.341 page 4236.

3. Under the heading 'Second Access Road', Adam Davidson wrote:[122]

   •Will be a contentious issue.  Deliberately deferred from the approvals process as it is not required at this time.  The Shire wants it built, but is particularly concerned about emergency access (as is FESA).  Best way forward is I think to separate those two issues by tackling the issue of a separate emergency access up front.  Jon Riley did the original traffic study - see:

   •The agreed outcome with the shire is located at: l:\Binningup Beach\4. Project Management\4.5 Miscellaneous - it is the file called: 'Bin Secondary access (ammend [sic] 63) 09.09.09.Shire Approved.doc' and is as follows:

   [122] Exhibit 10.341 page 4239.

Costs

1. In relation to costs, Mirvac seeks an order that Binningup pay its costs of the action and counterclaim, including any reserved costs, in an amount to be taxed if not agreed:

   (1)on a party‑party basis until 27 March 2019;

   (2)on an indemnity basis from 28 March 2019; and

   (3)without regard to the limits on costs fixed in any relevant legal costs determination, including any limits on maximum hourly rates, pursuant to s 280(2) of the Legal Profession Act 2008 (WA).

2. Binningup does not oppose an order that it pay Mirvac's costs of the action and counterclaim in an amount to be taxed if not agreed, but says that the entire costs should be taxed on a party‑party basis.

Indemnity basis - Calderbank

1. Mirvac contends that the indemnity costs order is justified because Binningup unreasonably rejected a Calderbank[720] offer.

   [720] Calderbank v Calderbank [1975] All ER 333.

2. On 28 March 2019, Mirvac made a Calderbank offer to Binningup.[721]  Mirvac offered to settle the proceedings on the basis that Binningup pay to Mirvac the sum of $25 million and that each party bear its own costs.  The offer was not accepted.  

   [721] Affidavit of Michael Geoffrey Hales sworn 6 April 2020 (Hales Affidavit) MGH‑6.

3. Binningup submits, however, that it was not unreasonable for it to reject the offer.

Principles

1. The relevant principles were recently summarised by the Court of Appeal in Strzelecki Holdings Pty Ltd v Jorgensen (citations omitted):[722]

   There must be some special or unusual feature of a case to warrant an award of indemnity costs.  One well-recognised basis for an award of indemnity costs is that the unsuccessful party unreasonably rejected a Calderbank offer.  The party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in their favour.

   The mere fact that the recipient of a Calderbank offer is ultimately worse off than they would have been had the offer been accepted, does not mean that its rejection was unreasonable.  Instead, in determining whether the rejection of the offer was unreasonable, all relevant facts and circumstances must be considered.  Ordinarily, regard should be had to at least the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success, assessed as at the date of the offer (and not with the benefit of hindsight as to the result of the proceedings); the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejection of it.

   [722] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [82] ‑ [83].

2. Mirvac submits that it was unreasonable for Binningup to reject the offer, having regard to these factors.

3. Binningup submits that it was not unreasonable for it to reject the offer because of the 'extent of the compromise offered'.  It does not suggest that any of the other factors are relevant to the assessment of whether it was reasonable for it to reject the offer.  Nevertheless, I will briefly consider those other factors before turning to the critical factor, the 'extent of the compromise'.

Analysis

The stage of the proceeding at which the offer was received

1. The Calderbank offer was made on 28 March 2019.  This was about a month before the commencement of the trial.  I accept Mirvac's submission that, although substantial costs had already been incurred by that time, it was also readily foreseeable at the time that substantial avoidable costs would be incurred in conducting the hearing.  Binningup did not argue otherwise.  

The time allowed to the offeree to consider the offer

1. The offer was open for a period of three weeks.  This was plenty of time for Binningup to consider the offer.  Binningup did not argue otherwise.

The offeree's prospects of success

1. This is to be assessed as at the date of the offer, and not with the benefit of hindsight as to the result of the proceedings.

2. In my view, I consider that Binningup's prospects of success as at the date the offer was made were not high. 

3. At the time the offer was made, the parties' evidence had been filed.  Some critical aspects of Binningup's case would not be affected by whatever oral evidence emerged during the trial, such as the proper construction of the transaction documents.  In particular, Binningup's defence and counterclaim was built on its assertion that, on a proper construction of the transaction documents, Mirvac did not have the right to reject a budget and was required to approve a budget even if it thought the expenditure was improvident.  In my view, an objective assessment of that construction argument would have concluded it was unlikely to succeed.  

4. Further, an objective assessment of Binningup's prospects on its counterclaim would have identified the deficiencies in the evidence that Binningup proposed to lead (or not lead) in relation to its alleged loss. 

5. In particular, Binningup's loss calculation was based on the evidence of a valuation of the Project had it been developed in accordance with a concept plan prepared by a town planner, Mr Maiorana.  In his report, Mr Maiorana had recommended that the concept plan 'be reviewed by suitably qualified specialists to inform the final design used for the purpose of valuation'.[723]  In other words, Mr Maiorana himself disclaimed the necessary expertise to create a concept plan for valuation purposes.  Binningup did not act on Mr Maiorana's recommendation.  Further, this deficiency could not have been overlooked by Binningup.  Mirvac advised Binningup of its objection to Mr Maiorana's report for this very reason, prior to the making of the Calderbank offer.[724]

The clarity with which the terms of the offer were expressed

[723] Exhibit 34 pt 4 [1.0].

[724] Subsequently, the parties agreed that their respective objections in relation to all of the expert witnesses should be treated as submissions as to weight, rather than admissibility.

1. Binningup admits that the terms of the Calderbank offer were unambiguously clear. 

Whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejection of it

1. The offer foreshadowed an application for indemnity costs in the event of it being rejected.

The extent of the compromise

1. I turn then to the real issue in dispute - the 'extent of the compromise offered'.

Limited recovery

1. Binningup points out that the Calderbank offer did not merely seek judgment for $25 million; it sought payment of that sum.  While the judgment (for more than $54 million) obtained is for an amount well in excess of $25 million, Mirvac may only enforce a judgment against the Project Assets and Project Securities, by cl 1.5 of the Loan Agreement.  In a practical sense, that clause limits Mirvac's right to enforce the judgment to the land.

2. Binningup submits that, as a result, the rejection of the offer was not unreasonable.  The offer required payment of $10 million more than the $15 million that was recoverable under the judgment, based on the value of the land estimated by the court.  It says that it was not unreasonable to refuse this.

3. Mirvac points out that Binningup's argument starts from the premise that it will not pay the judgment sum; that is, Binningup asserts that it is better off under the judgment because it will not satisfy it.  Mirvac submits that this was an 'unpromising position' for Binningup to adopt.  Mirvac submits there are many litigants who could argue that they would be better off not settling litigation because they have limited assets against which an adverse judgment could be enforced and therefore have nothing to lose by proceeding to trial.  Mirvac submits that the court should not encourage such an attitude to settlement.  Mirvac submits that Binningup's position raised the 'same moral hazard' as the impecunious litigant.  Mirvac adds that, in this case, it is not even that Binningup cannot pay the judgment.  It is that it has simply decided not to.

4. I agree that the court should not encourage an attitude that settlement offers can be rejected simply because the offeree has nothing to lose from the litigation.  However, I do not accept that the moral position of Binningup is analogous to the impecunious litigant who rejects an offer knowing he or she has nothing to lose.  Binningup did not and does not rely on any factual limitation in its assets.  It relies on the contractual agreement it reached with Mirvac, before the Project commenced; namely, that Mirvac's right of recovery would be limited to the land. 

5. I am evaluating whether it was unreasonable for Binningup to reject the offer at the time it was made.  At that time, Binningup knew that the parties had agreed that Mirvac's right of recovery would be limited to the land.  It was entitled to have regard to that in considering whether it should accept the offer.  In my view, it was entirely reasonable for Binningup to assess the offer in the context of Mirvac's limited recovery right.  Binningup was not required to feel any moral inhibition in relying on that clause to its full extent.

Proof of value

1. In my judgment, I estimated, 'doing the best I can', the value of the land to be $15 million for the purpose of assessing Binningup's damages claim.  In its written submissions,[725] Mirvac submitted that it does not follow that the extent of the compromise offered should be assessed against that same estimate.  It submitted that Binningup has not shown that the compromise offered was not valuable to it.

   [725] Mirvac Submissions [14].

2. The parties disagree as to who should have proved the value of the land during the trial.  In my view, it should have been Binningup, for the reasons set out in my judgment at [834] ‑ [852].  Contrary to Binningup's submission in this costs application, Mirvac did not have to prove the value of the land retained by Binningup at the time of termination of the Services Agreement 'in order for Mirvac to successfully contend that the value of the land should be deducted from the damages claimed by [Binningup]'.[726]  Mirvac simply had to prove that the value of the land should be deducted from Binningup's damages claim.  Acceptance of this proposition did not depend on the value of the land.  It depended on the proper basis upon which damages are to be assessed as a matter of principle.  If the proposition was accepted, it would be yet another deficiency in Binningup's proof of damages.  Having said that, in my view, the question of who should have proved it at trial is beside the point.

   [726] Defendant and Plaintiff by Counterclaim's Responsive Submissions Regarding Orders as to Costs filed 17 April 2020 [4].

3. It is not for Binningup to prove that the offer had no value.  It is for Mirvac to prove it was unreasonable for Binningup to reject it.  If Mirvac wanted to submit that it was unreasonable because the land was worth more than the amount I estimated it to be worth for the purposes of Binningup's damages claim, Mirvac needed to prove the value of the land.

4. During today's hearing, counsel for Mirvac clarified that he was not suggesting that Binningup had the burden of proving the value of the land in this application.  Nor was he seeking to assert that the value of the land exceeded $15 million, or saying that I should make that assumption.  Rather, he simply sought to make the point that I should take into account, in assessing the reasonableness of Binningup's rejection of the offer, that it was an unproven assumption that the land is worth $15 million.  With respect, I do not accept this.  In my judgment, I assessed the value of the land.  I accept this was merely my best effort estimate, on the evidence before me.  I accept it was for the purpose of assessing Binningup's damages claim if I was wrong on liability.  Nevertheless, it was a factual finding. 

5. My best effort estimate, on the evidence before me, was that the land was worth $15 million.  Mirvac has not adduced any evidence to suggest it was worth more.  In my view, I am therefore required to assess the reasonableness of the rejection of the offer in that context.  Accordingly, I am assessing the rejection of an offer that would have required Binningup to pay $10 million more than the maximum amount Mirvac could recover. 

Although recovery is limited, there is full liability

1. Mirvac makes two points in response to Binningup's submissions about its limited recovery.

2. First, Mirvac points out[727] that, although Mirvac's right of recovery is limited, Binningup's liability is not.  Under cl 1.5(c) of the Loan Agreement, Binningup remained liable to pay all amounts which may from time to time be payable by it.  Mirvac says that Binningup therefore still had substantial risk, including credit risk, notwithstanding the limited recourse provisions. 

   [727] Mirvac's Submissions on Interest and Costs filed 6 April 2020 (Mirvac's Submissions) [13].

3. Mirvac acknowledges that it itself could not apply to have Binningup made insolvent, under cl 1.5(a)(ii) of the Loan Agreement.  However, Mirvac points out that, if Binningup has other creditors, those creditors could take action to have Binningup made insolvent.  If that happened, Mirvac would be entitled to participate, by cl 1.5(c)(ii) of the Loan Agreement. 

4. Mirvac's second point is that, if Binningup had accepted the offer, it could have retained the land, and the benefit of the approvals obtained in relation to it.  Mirvac submits that Binningup clearly placed a high non‑monetary value on the land.

5. Mirvac submits that the comparison between the extent of the compromise and the judgment sum is, therefore, not a purely numerical comparison.

Conclusion on Calderbank

1. I accept that the comparison is not purely numerical.  I accept that, by rejecting the offer, Binningup remained liable for the full amount of the judgment.  I accept that, by rejecting the offer, Binningup lost the land to which it attributed considerable non‑monetary value and lost the benefit of the work that had been done.  Despite this, I am not satisfied that it was unreasonable for Binningup to reject an offer that required it to pay $10 million more than Mirvac could recover. 

2. I would therefore dismiss Mirvac's application for indemnity costs.

Special costs order

1. The final order sought by Mirvac is a special costs order under s 280(2) of the Legal Profession Act to remove the limits imposed by the relevant costs determination.  That section provides that a court may make such an order if it is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter.

The legal framework

1. The core requirements of special costs orders were set out in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2][728] (citations omitted):

   Before such a power will be exercised, the court must form an opinion that has two components.  First, the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant cost determination.  Secondly, the court must also form the opinion that the inadequacy of the costs allowable under a costs determination arises because of the 'unusual difficulty, complexity or importance of the matter'.  Issues of the kind which arise are addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.

   For the purposes of exercising the powers conferred by s 280(2) of the Act, it will not ordinarily be necessary for the court to determine what amount should be allowed on taxation, but only whether there is a fairly arguable case that a greater amount should be allowed than that which is allowable under the relevant determination …

   A fairly arguable case to that effect will not be established merely because a party incurred greater costs than those allowable under the relevant determination.  However, depending on the particular case and all the circumstances, the fact that a party has applied significantly greater legal resources to each step in the litigation than those for which allowance is made under items of the relevant determinations, when viewed in the context of the difficulty, complexity or importance of the matter, may sustain the conclusion that there is a fairly arguable case that each of the items identified is inadequate (and thereby the amount of costs allowable in respect of the matter is inadequate) because of the unusual difficulty, complexity or importance of the matter.

   The word 'unusual' in s 280(2) of the Act qualifies only the 'difficulty' of the matter, and not its 'complexity' or 'importance'. The word 'unusual' in this context means unusual having regard to what one might describe as the usual run of civil cases determined in the court. That essentially involves the making of a value judgment by the court, having regard to the court's experience of the particular case when compared with the usual run of cases: … Also, the reference to 'importance' in this context allows the court to have regard to the significance of the issues that arose in the litigation. Significance can arise either because of the significance of the issues to the parties, or because of the significance of the issues to other prospective parties, or to the public or community generally …

   … the question of unusual difficulty, complexity or importance arises in respect of the proceedings as a whole and not in respect of each individual item in the relevant costs determination.

Analysis

Unusual difficulty, complexity or importance

[728] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [12] ‑ [16].

1. It is convenient to begin with the issue of whether the proceedings were unusually difficult, complex or important.

2. As noted in the extract above, the adjective 'unusual' qualifies only the term 'difficulty' and not the terms 'complexity' or 'importance'.  

3. The legal issues were undoubtedly complex.  The case involved construction of a suite of related commercial contracts.  Some of the construction issues were complex, raising issues about the concurrent rights and obligations of Mirvac as both developer and financier.  Binningup's defence and counterclaim also raised several complex arguments, including, for example, its reliance on the 'prevention principle'. 

4. The factual issues were also complex.  The proceedings required an examination of events spanning seven years.  The trial bundle exceeded 25 lever arch volumes.  Experts in four different fields provided reports.  It was necessary to examine Mirvac's internal financial records and processes.  There were numerous significant factual disputes. 

5. Each party's written closing submissions exceeded 100 pages.  Binningup's chronology of the evidence was an additional 128 pages.  The trial took 16 days.  The length of the written closings, the chronology, and the hearing reflected the complexity.

6. The proceedings were undoubtedly complex compared to the usual run of civil cases. 

7. I am also satisfied that the proceedings were important compared to the usual run of civil cases.  The importance arose due to the significance of the case to the parties.  Mirvac was seeking approximately $50 million.  Binningup denied it was liable to pay Mirvac anything, and counterclaimed in an amount that was eventually identified as exceeding $15 million. 

The opinion

1. As set out in the above extract, before a special costs order may be made, the court must form an opinion that there is a fairly arguable case that, on taxation, costs may properly be allowed in an amount greater than the limit imposed by the relevant costs determination, and that that is because of the unusual difficulty, complexity or importance of the matter. 

1. In its written submissions, Binningup submitted that it was not possible for me to form such an opinion because Mirvac failed to produce material establishing the relevant scale items that may properly be taxed at an amount greater than the relevant limit that would otherwise be imposed.[729]  Although Binningup's submissions were filed the same day as an affidavit filed on behalf of Mirvac, it appears that Binningup had not received that affidavit at the time of filing its submissions. 

   [729] Defendant and Plaintiff by Counterclaim's Submissions Regarding Orders as to Costs filed 6 April 2020 [16] ‑ [17].

2. In oral submissions, Binningup said that it accepted the proceedings were unusually difficult, complex or important.  It said it accepted that the items in relation to discovery and preparation should be lifted.  Counsel submitted, however, that there was no justification for the amounts spent on the Writ and the Statement of Claim, for example, and no evidence that Mirvac could not find lawyers whose rates did not exceed scale rates. 

3. I do not accept Binningup's submissions. 

4. Mirvac filed an affidavit sworn on 6 April 2020 by Michael Hales.  Mr Hales is a partner in Minter Ellison and had conduct of the matter on behalf of Mirvac.  Mr Hales' affidavit set out the legal fees billed to Mirvac by the solicitors and the disbursements, including counsel fees.  Mr Hales set out the hourly rates of counsel, himself and another solicitor, Ms Chappelow.  He set out the nature of the work undertaken by the lawyers in various respects.  Mr Hales also prepared a table setting out his estimate of which items the costs would be allocated to, and explained his methodology in detail.  He did not, however, prepare a draft bill of costs.  He said this was because it was not possible to do so in the time available, as it would be a lengthy and complex task.  I accept this entirely. 

5. The failure to produce a draft bill of costs is not fatal.[730]  Indeed, in some cases, no evidence will be required at all.[731]  The issues that arise in an application for a special costs order are to be addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.[732]  It would be undesirable to require a party to produce more evidence than was necessary to enable the court to address the issues.  This would inevitably involve extra, and self‑evidently unnecessary, costs.[733]  It should be remembered that the reasonableness of costs actually to be awarded will always remain within the discretion of the taxing officer.[734]

   [730] Atwell v Roberts [2013] WASCA 37 (S) [23].

   [731] See Eclipse Resources Pty Ltd v The State of Western Australia [No 2] [2015] WASC 137 [33] (Beech J), citing Martin CJ in Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq) [2014] WASC 478 (S).

   [732] Sino No 2 [12]; Blatchford v Laine [2018] WASC 207 (S) [43].

   [733] And see Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [20] (Martin CJ) and Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S) [4] (Martin CJ).

   [734] Sino No 2 [11].

6. In my view, Mirvac has produced sufficient material to enable me to address the issues. 

7. In [22] of Mr Hales' affidavit, Mr Hales identifies the various scale items that are relevant in this case.

8. In my view, on the facts in this case, no evidence is required before I could conclude that there is a fairly arguable case that Mirvac's bill would properly tax at an amount that is greater than the total amount allowable under those items that stipulate a capped sum for particular work.  Further, no evidence is required before I could conclude that this would be because of the importance or the complexity of the proceedings.

Items 1(a) and 1(c)

1. First, I will deal with the Writ and the Statement of Claim.

2. The assessment I am required to make is not whether the amounts Mirvac actually incurred in relation to these items was reasonable.  Rather, I must assess whether there is a fairly arguable case that Mirvac's bill for those items would properly tax at an amount that is greater than the total amount allowable under those items.

3. The work involved in relation to the Writ cannot be separated entirely from the work involved in the Statement of Claim.  Both required Mirvac to calculate the OLA[735] throughout the life of the Project, including the interest, and to take instructions.  Binningup put Mirvac to proof of each individual component of the OLA.  As a result, Mirvac reasonably sought to track down the historical documents in which Binningup had acknowledged the size of the OLA at various times.  Mirvac also amended the Statement of Claim to particularise each component.  The amendments traversed over 10 pages.

   [735] The 'OLA' is the outstanding loan amount that Binningup owes Mirvac.

4. Further, at the time the proceedings were commenced, Mirvac knew this was not going to be a simple debt recovery claim.  Binningup had purported to terminate the Services Agreement.  A counterclaim was highly likely. 

5. I am satisfied it was reasonable for greater amounts of time to be spent than the time allowed under items 1(a) and 1(c).  I am so satisfied because of the importance of the proceedings.

Other capped items - items 4, 6, 7, 18 and 21(a) and (b)

1. Second, Binningup's defence and counterclaim significantly increased the complexity of the proceedings and the issues that needed to be addressed.  Having regard to the various interlocutory steps in this matter, the evidence that was produced, and the redactions that were undertaken, I am satisfied it was reasonable for significantly greater amounts of time to be spent than the time allowed under items 4, 6, 7, 18 and 21(a) and (b).  Even disregarding the importance of the proceedings, this was justified by the complexity of the proceedings alone.  

Lawyers' hourly rates

1. In relation to the rates charged by Mirvac's lawyers, the affidavit of Mr Hales establishes that the rates charged by senior counsel and by Mr Hales himself exceeded the scale rates.  I am also satisfied that the rates charged by some of the other lawyers within Minter Ellison working on the matter exceeded the scale rates.  In particular, the evidence is sufficient to establish for these purposes that the rates for special counsel and partners within Minter Ellison exceeded the scale rates and that Ms Chappelow's rates exceeded the scale rates after 1 July 2018.[736]

   [736] Hales Affidavit [16] ‑ [20].

2. Merely because the actual rates are higher than the scale rates is not a sufficient reason of itself to lift the scale rates.[737]  I also accept that, in some cases, this issue may be better left with the taxing officer.[738]  However, the nature and importance of the proceedings may permit the court to conclude that a party was justified in engaging counsel and solicitors with greater experience and expertise in commercial litigation than in the usual run of civil cases.  It may permit the court to conclude that a party was justified in engaging lawyers who charged more than the scale rates.[739]  I am satisfied that the importance and complexity of these proceedings fully justified this.

   [737] Sino No 2 [22].

   [738] Kidd v The State of Western Australia [2015] WASCA 62 (S) [13].

   [739] See, for example, The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 5] [2013] WASC 121 (S) [20] (Le Miere J); Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2017] WASC 348 (S) [10]; Insurance Commission of Western Australia v Antony Leslie John Woodings as Liquidator of the Bell Group Ltd (in liq) [No 3] [2018] WASC 44 (S) [55] (Pritchard J, as her Honour then was).

3. I am satisfied that there is a fairly arguable case that a taxing officer might properly allow costs for senior counsel and solicitors at a rate greater than the scale rates, due to the importance and complexity of the proceedings.

4. I have decided not to restrict the lifting of the rates to those lawyers in respect of whom there is direct proof that their individual rates exceeded the scale rates, for the following reasons. 

5. First, the decision I am required to make involves impression rather than precision.  Second, it would be undesirable to require successful litigants to spend time assembling evidence as to costs where that would be a complex exercise, and where sufficient general information can be provided to enable the court to make the assessment.  Third, making the order in these terms could not cause unfairness.  It would not mean that Mirvac could recover costs at a rate higher than the scale rates for the work done by lawyers whose rates did not in fact exceed the scale rates.

Conclusion

1. Binningup submitted that, even if a special costs order was made, it should not simply lift all the limits, but should identify specific items in respect of which the limits would be lifted.  It is unnecessary to do this.[740]

   [740] See, for example, Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S).

2. For the reasons I have given, I would make orders in terms of Mirvac's amended minute of proposed orders filed 1 May 2020, with proposed order 3 amended to read:

   Binningup is to pay the Mirvac parties' costs of the action and counterclaim, including any reserved costs, in an amount to be taxed if not agreed on a party‑party basis without regard to the limits on costs fixed in any relevant legal costs determination, including the limits on maximum hourly rates, under s 280(2) of the Legal Profession Act.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

SW
Associate to the Honourable Justice Archer

12 MAY 2020