MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 6)
[2011] NSWSC 1613
•22 December 2011
Supreme Court
New South Wales
Medium Neutral Citation: MM Constructions (Aust) Pty Limited and Anor v Port Stephens Council (No. 6) [2011] NSWSC 1613 Hearing dates: 22 March 2010 - 26 March 2010, 31 March 2010, 4 May 2010, 21 May 2010, 25 June 2010, 13 September 2010, 14 September 2010 - 17 September 2010, 20 September 2010 - 23 September 2010, 6 December 2010 - 7 December 2010 Decision date: 22 December 2011 Before: Johnson J Decision: (a) Verdict and judgment for the Defendant.
(b) The Plaintiffs are to pay the Defendant's costs of the proceedings.
(c) If any party seeks an order as to costs different to that contained in order (b) above, written application is to be made in that regard to Johnson J's Associate no later than 17 February 2012.
Catchwords: CLAIM FOR DAMAGES - misfeasance in public office and negligence - Plaintiffs obtain development approval from Defendant to build apartment block at Nelson Bay - lengthy delay by Plaintiffs in commencing work on development - Defendant grants development approval for other apartment blocks in the vicinity in the meantime - Plaintiffs seek to increase height and density of project in light of adjoining developments - Plaintiffs make modification application under s.96 Environmental Planning and Assessment Act 1979 - s.96 application with Defendant for extended period - Plaintiffs at no stage appeal to Land and Environment Court under s.96(6) Environmental Planning and Assessment Act 1979 against deemed refusal - planning officer obtains independent legal advice whether s.96 application or fresh development application appropriate - planning officer follows advice that s.96 application was open - height and density issues - independent legal advice obtained whether Department of Planning concurrence required - Plaintiffs repeatedly provide Defendant with revised plans - Plaintiffs lobbying Councillors as well as dealing with planning officer - Plaintiffs in financial difficulties - mortgagee takes possession of development site - Defendant ultimately refuses s.96 application - Plaintiffs sue Defendant claiming damages by way of loss of chance to make a profit
MISFEASANCE IN PUBLIC OFFICE - elements of tort - claim by Plaintiffs that planning officer acted with intention to harm Plaintiffs - whether planning officer was holder of public office - mental element - whether conscious maladministration demonstrated - planning officer obtained and acted on independent legal advice - substantial cause of delay in determination of s.96 application was frequent amendments of plans by Plaintiffs - prejudgment by planning officer not established- intention to harm Plaintiffs not established - claim for misfeasance in public office fails
NEGLIGENCE - whether duty of care owed by Defendant to Plaintiffs - statutory scheme - availability of appeal under s.96(6) Environmental Planning and Assessment Act 1979 if application not determined within 40 days - whether Plaintiffs vulnerable - whether reliance on Defendant - held duty of care did not arise - no breach of duty in any event - claim in negligence failsLegislation Cited: Environmental Planning and Assessment Act 1979
Evidence Act 1995
Land and Environment Court Act 1979
Real Property Act 1900
Corporations Act 2001
Civil Liability Act 2002
Environmental Planning and Assessment Regulation 2000Cases Cited: MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 1) [2010] NSWSC 241
Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336
MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 2) [2010] NSWSC 242
MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 3) [2010] NSWSC 243
Port Stephens Council v Chan Industrial Pty Limited [2005] NSWCA 232; 141 LGERA 226
Northern Territory of Australia v Mengel [1995] HCA 65; 185 CLR 307
Leerdam v Noori [2009] NSWCA 90; 255 ALR 553
Pharm-a-Care Laboratories Pty Limited v Commonwealth of Australia (No. 3) [2010] FCA 361; 267 ALR 494
Sanders v Snell [1998] HCA 64; 196 CLR 329
Rush v Commissioner of Police [2006] FCA 12; 150 FCR 165
Federal Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; 237 CLR 146
Leinenga v Logan City Council [2006] QSC 294
Trobridge v Hardy [1955] HCA 68; 94 CLR 147
A v State of New South Wales [2007] HCA 10; 230 CLR 500
Parker v Commonwealth of Australia [2011] FCA 1029
Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419
Palmer v Dorman [2005] NSWCA 361
Makawe Pty Limited v Randwick City Council [2009] NSWCA 412; 171 LGERA 165
Coshott v Woollahra Municipal Council (1988) 14 NSWLR 675
Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1
The Beach Club Port Douglas Pty Limited v Page [2005] QCA 475; (2006) 1 QdR 307
Rosenberg v Percival [2001] HCA 18; 205 CLR 434
De Gruchy v The Queen [2002] HCA 33; 211 CLR 85
R v Vjestica [2008] VSCA 47; 182 A Crim R 350
Porter v OAMPS Limited [2005] FCA 232; 215 ALR 327
Chan v Selwood [2009] NSWSC 1335
Neilson v City of Swan [2006] WASCA 94; 147 LGERA 136
Pyrenees Shire Council v Day [1998] HCA 3; 192 CLR 330
Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187; 66 NSWLR 186
Garrett v Attorney General [1997] 2 NZLR 332
Minister of Fisheries v Pranfield Holdings Ltd [2008] NZCA 216; [2008] 3 NZLR 649
Jones v Swansea City Council [1990] 1 WLR 54 (Court of Appeal); [1990] 1 WLR 1453 (House of Lords)
Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; 216 CLR 515
Precision Products (NSW) Pty Limited v Hawkesbury City Council [2008] NSWCA 278; 74 NSWLR 102
Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332
Tabet v Gett [2010] HCA 12; 240 CLR 537
McGovern v Ku-Ring-Gai Council [2008] NSWCA 209; 72 NSWLR 504
Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223Texts Cited: Sappideen and Vines (editors), "Fleming's The Law of Torts", 10th edn, 2011
Trindade, Cane and Lunney, "The Law of Torts in Australia", 4th edn, 2008
Aronson, "Misfeasance in Public Office: A Very Peculiar Tort" (2011) 35 Melbourne University Law Review 1Category: Principal judgment Parties: MM Constructions (Aust) Pty Limited (First Plaintiff)
Milan Maruncic (Second Plaintiff)
Port Stephens Council (Defendant)Representation: Mr BMJ Toomey QC; Mr EG Romaniuk (Plaintiffs)
Mr MJ Joseph SC; Mr S Glascott (Defendant)
Creagh & Creagh (Plaintiffs)
DLA Piper Australia (Defendant)
File Number(s): 2008/289298 Publication restriction: ---
Judgment
JOHNSON J : By Statement of Claim filed 23 May 2008 the Plaintiffs, MM Constructions (Aust) Pty Limited and Milan Maruncic, sue the Defendant, Port Stephens Council ( "the Defendant" or "the Council" ), seeking damages for misfeasance in public office and negligence.
The proceedings relate to the Defendant's consideration of a development modification application lodged by the Plaintiffs in February 2006 pursuant to s.96 Environmental Planning and Assessment Act 1979 ( "EPA Act" ) in respect of property at 11-13 Church Street, Nelson Bay ( "the Church Street site" or "Milan Towers" ). The application was determined by the Defendant adversely to the Plaintiffs in July 2007.
Put shortly, the Plaintiffs contend that they were subjected to a protracted process whereby the Defendant (by its officer, Ms Amanda Gale) purported to consider the modification application on its merits between February 2006 and July 2007, although Ms Gale had formed a predetermined view that it ought be refused. The Plaintiffs' case is that the manner in which the application was dealt with gives rise to tortious liability and an entitlement to damages by reference to loss of a chance to make a profit. The Plaintiffs contend that, but for the tortious conduct of the Defendant, they would have built and sold apartments on the Church Street site with resulting profits between about $2.2 million and $3.7 million.
The Defendant, in essence, asserts that no legal or factual foundation has been demonstrated so as to establish its liability in respect of either of the Plaintiffs' causes of action. Further, defences of contributory negligence and failure to mitigate loss have been pleaded.
Were the Plaintiffs to succeed on the question of liability in respect of either claim, the Defendant disputes that such liability is causative of any loss to the Plaintiffs, or at least disputes the quantum.
The Hearing and Evidence in the Proceedings
The Plaintiffs were represented by Mr BMJ Toomey QC and Mr EG Romaniuk of counsel. Mr MJ Joseph SC appeared with Mr S Glascott of counsel for the Defendant.
The somewhat chequered history of the hearing may be gleaned from a number of judgments which I have already given in these proceedings: MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 1) [2010] NSWSC 241; MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 2) [2010] NSWSC 242 and MM Constructions (Aust) Pty Limited v Port Stephens Council (No. 3) [2010] NSWSC 243.
The following witnesses gave oral evidence in the Plaintiffs' case at the hearing:
(a) Gary Keith Warnes, Environmental Planner (T119.2-568.12);
(b) Paul Geoffrey Mather, Surveyor (T570.1-607.14);
(c) Milan Maruncic, Second Plaintiff (T617.1-716.27)
(d) Peter Milan Maruncic, the Second Plaintiff's son (T717.1-720.20);
(e) Robert Patrick Westbury, Councillor and later Mayor of the Defendant (T723.14-757.37); and
(f) Robert Richard Dupont, Real Estate Valuer.
The following witnesses gave oral evidence in the Defendant's case at the hearing:
(a) Amanda Jane Gale, employee and Development Co-Ordinator of the Defendant (T759.1-883.42);
(b) Mary Deborah Laidlaw, Town Planner (T885.1-985.50); and
(c) Nick Cesta, Real Estate Valuer.
In accordance with contemporary practice in this Court, Mr Dupont and Mr Cesta, the parties' expert valuation witnesses, gave their oral evidence concurrently (T988.8-1035.25).
Use of Mr Warnes' Evidence on the Voir Dire
A voir dire was conducted following objection by the Defendant to certain aspects of Mr Warnes' evidence, chiefly concerning his ability to give admissible expert opinion evidence in the proceedings. Mr Warnes gave evidence on the voir dire (T190.48-221.28).
I subsequently overruled the objection: MM Constructions (Aust) Pty Limited and Anor v Port Stephens Council (No. 3) . At [49] of that judgment, I noted that evidence on a voir dire in a civil proceeding without a jury is, when taken, evidence in the proceeding unless some order is made qualifying its status or significance under ss.135 or 136 Evidence Act 1995 .
Accordingly, and with the parties' consent, Mr Warnes' evidence on the voir dire was admitted as evidence in the proceedings generally (T335.15).
Affidavits, Expert Reports and Other Documentary Evidence
The Plaintiffs read and relied upon the following affidavits at the hearing:
(a) affidavit of Gary Warnes sworn 15 August 2009 (Exhibit C);
(b) affidavit of Gary Warnes sworn 20 April 2010 (Exhibit N);
(c) affidavit of Milan Maruncic sworn 20 May 2009 (Exhibit P);
(d) affidavit of Milan Maruncic sworn 16 May 2010 (Exhibit Q);
(e) affidavit of Peter Milan Maruncic sworn 24 July 2010 (Exhibit R); and
(f) affidavit of Robert Patrick Westbury sworn 15 April 2010 (Exhibit T).
The Defendant read and relied upon the following affidavits:
(a) affidavit of Amanda Gale sworn 10 November 2009 (Exhibit 1);
(b) affidavit of Amanda Gale sworn 25 June 2010 (Exhibit 14).
With respect to town planning issues, the Plaintiffs tendered an expert witness report of Mr Warnes dated 16 April 2010 (Exhibit L). The Defendant tendered an expert witness report of Deborah Laidlaw dated 7 July 2010 (Exhibit 18).
A separate folder containing the expert reports of the parties' valuation witnesses was tendered (Exhibit V). This relevantly contained the following documents:
(a) Valuation Report of Robert Dupont dated 28 July 2009;
(b) Addendum to Valuation Report of Robert Dupont dated 3 March 2010;
(c) Valuation Report of Nick Cesta dated 11 November 2009; and
(d) Joint Valuers' Report of Robert Dupont and Nick Cesta dated 28 June 2010.
A large volume of documentary evidence including correspondence, plans and diagrams was also tendered. I will refer to specific parts of the documentary evidence as necessary in the course of this judgment.
At the close of evidence on 23 September 2010, I adjourned the proceedings to allow the parties time to exchange written submissions. Counsel made closing addresses on 6 and 7 December 2010. By that time, both parties had furnished to the Court comprehensive written submissions in chief and in reply.
Parties to the Proceedings
The Defendant's written submissions raised a preliminary issue concerning the identity of the parties to the litigation. I will deal with it briefly.
At all material times, the Second Plaintiff, Mr Maruncic, was the sole director and shareholder of the First Plaintiff, MM Constructions (Aust) Pty Limited. The First Plaintiff was the developer of the Church Street site.
It is sufficient to observe, for present purposes, that Mr Maruncic had at least one other company of a similar name, of which he was also the sole director and shareholder. A number of communications to the Defendant in respect of the modification application were purportedly made on that company's behalf. It was not disputed that Mr Maruncic was the registered proprietor of the Church Street site (Exhibit E, Tab 41), and was the applicant identified on both the Application Form for Development and the original development consent (Exhibit 1, Tabs 1 and 9).
At paragraphs 3-6 of its principal written submissions dated 21 October 2010, the Defendant pointed to the fact that Mr Maruncic's other company is not a party to the proceedings, with a question raised as to the person or entity on whose behalf he was lodging documents and communicating with the Defendant. Without more, the submission seeks to raise a question whether the correct parties have been joined to the proceedings and their entitlement to relief. The Plaintiffs note that no such matter was pleaded in the Defendant's Amended Defence (Plaintiffs' written submissions in reply, paragraph 3).
I do not consider that this issue has any legal or practical effect upon the determination of the proceedings. I accept the Plaintiffs' submission that Mr Maruncic, as sole director and shareholder of both companies concerned, was the person entitled to any monies generated from development of the Church Street site. He is an appropriate party. I am satisfied, as well, that the First Plaintiff is an appropriate party to the proceedings.
The Environmental Planning Statutory Scheme and Relevant Instruments
It is appropriate at this point to identify certain provisions of the EPA Act and planning instruments relevant to these proceedings.
The development application and assessment process is governed by Part 4 EPA Act. The introductory note to Part 4 provides a convenient overview of how applications are dealt with, and the interaction between the various types of planning instruments. The note states:
"Note. The environmental planning legislation comprises 3 elements, namely, this Act, the environmental planning instruments and the regulations made under this Act. The legislative scheme for environmental planning control is, broadly speaking, distributed between the 3 elements as follows:
(a) This Part of the Act, Part 4, lays the foundation for the legislative scheme. It contains the major concepts and addresses the major matters of principle.
(b) The environmental planning instruments identify particular forms of development according to the threefold classification that is established by Division 1 of this Part. They also determine whether development is exempt development as referred to in section 76 (2) or complying development as referred to in section 76A (5).
(c) The regulations contain much of the detail of the various processes that, having regard to the nature of the proposed development, lead to the granting of development consent. They also largely determine whether development is designated development."
The EPA Act
Section 5 EPA Act describes the objects of the Act as follows:
"5 Objects
The objects of this Act are:
(a) to encourage:
(i) the proper management, development and conservation of natural and artificial resources, including agricultural land, natural areas, forests, minerals, water, cities, towns and villages for the purpose of promoting the social and economic welfare of the community and a better environment,
(ii) the promotion and co-ordination of the orderly and economic use and development of land,
(iii) the protection, provision and co-ordination of communication and utility services,
(iv) the provision of land for public purposes,
(v) the provision and co-ordination of community services and facilities, and
(vi) the protection of the environment, including the protection and conservation of native animals and plants, including threatened species, populations and ecological communities, and their habitats, and
(vii) ecologically sustainable development, and
(viii) the provision and maintenance of affordable housing, and
(b) to promote the sharing of the responsibility for environmental planning between the different levels of government in the State, and
(c) to provide increased opportunity for public involvement and participation in environmental planning and assessment."
Development applications are made to and determined by a "consent authority" : s.78A EPA Act. A consent authority is either the council having the function to determine the development application; or may be a specified Minister, the Planning Assessment Commission, a joint regional planning panel or public authority if so specified by a provision of the EPA Act, the regulations or an environmental planning instrument: s.4 EPA Act.
Section 79C EPA Act deals with the evaluation of a development application. Section 79C(1) sets out those matters which a consent authority is to consider in determining whether to grant development consent. It is in the following terms:
"(1) Matters for consideration - general
In determining a development application, a consent authority is to take into consideration such of the following matters as are of relevance to the development the subject of the development application:
(a) the provisions of:
(i) any environmental planning instrument, and
(ii) any proposed instrument that is or has been the subject of public consultation under this Act and that has been notified to the consent authority (unless the Director-General has notified the consent authority that the making of the proposed instrument has been deferred indefinitely or has not been approved), and
(iii) any development control plan, and
(iiia) any planning agreement that has been entered into under section 93F, or any draft planning agreement that a developer has offered to enter into under section 93F, and
(iv) the regulations (to the extent that they prescribe matters for the purposes of this paragraph), and
(v) any coastal zone management plan (within the meaning of the Coastal Protection Act 1979),
that apply to the land to which the development application relates,
(b) the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impacts in the locality,
(c) the suitability of the site for the development,
(d) any submissions made in accordance with this Act or the regulations,
(e) the public interest."
An environmental planning instrument may require a consent authority to obtain the concurrence of another person before it grants consent to a development application: s.79B EPA Act. For example, the concurrence of the Department of Planning or the Director-General may be required unless the consent authority determines to refuse to grant development consent. Part 6 Division 2 Environmental Planning and Assessment Regulation 2000 ( "EPA Regulation" ) sets out procedural requirements relating to the process of obtaining concurrence.
Part 4 Division 7 EPA Act deals with certain matters arising once development consent has issued in respect of a development application. This includes s.96, the construction and application of which forms a significant issue in these proceedings.
Section 96 provides that a consent authority may modify its consent to a development application in certain circumstances. It is in the following terms:
"96 Modification of consents - generally
(1) Modifications involving minor error, misdescription or miscalculation
A consent authority may, on application being made by the applicant or any other person entitled to act on a consent granted by the consent authority and subject to and in accordance with the regulations, modify a development consent granted by it to correct a minor error, misdescription or miscalculation. Subsections (1A), (2), (3), (5) and (6), section 96AB and Division 8 do not apply to such a modification.
(1A) Modifications involving minimal environmental impact
A consent authority may, on application being made by the applicant or any other person entitled to act on a consent granted by the consent authority and subject to and in accordance with the regulations, modify the consent if:
(a) it is satisfied that the proposed modification is of minimal environmental impact, and
(b) it is satisfied that the development to which the consent as modified relates is substantially the same development as the development for which the consent was originally granted and before that consent as originally granted was modified (if at all), and
(c) it has notified the application in accordance with:
(i) the regulations, if the regulations so require, or
(ii) a development control plan, if the consent authority is a council that has made a development control plan that requires the notification or advertising of applications for modification of a development consent, and
(d) it has considered any submissions made concerning the proposed modification within any period prescribed by the regulations or provided by the development control plan, as the case may be.
Subsections (1), (2) and (5) do not apply to such a modification.
(2) Other modifications
A consent authority may, on application being made by the applicant or any other person entitled to act on a consent granted by the consent authority and subject to and in accordance with the regulations, modify the consent if:
(a) it is satisfied that the development to which the consent as modified relates is substantially the same development as the development for which consent was originally granted and before that consent as originally granted was modified (if at all), and
(b) it has consulted with the relevant Minister, public authority or approval body (within the meaning of Division 5) in respect of a condition imposed as a requirement of a concurrence to the consent or in accordance with the general terms of an approval proposed to be granted by the approval body and that Minister, authority or body has not, within 21 days after being consulted, objected to the modification of that consent, and
(c) it has notified the application in accordance with:
(i) the regulations, if the regulations so require, or
(ii) a development control plan, if the consent authority is a council that has made a development control plan that requires the notification or advertising of applications for modification of a development consent, and
(d) it has considered any submissions made concerning the proposed modification within the period prescribed by the regulations or provided by the development control plan, as the case may be.
Subsections (1) and (1A) do not apply to such a modification.
(3) In determining an application for modification of a consent under this section, the consent authority must take into consideration such of the matters referred to in section 79C (1) as are of relevance to the development the subject of the application.
(4) The modification of a development consent in accordance with this section is taken not to be the granting of development consent under this Part, but a reference in this or any other Act to a development consent includes a reference to a development consent as so modified."
Section 96(6) EPA Act is an important provision in the context of this case. Section 96(6) provides:
"(6) Appeals
An applicant who is dissatisfied with the determination of the application or the failure of the consent authority to determine the application within 40 days after the application is made may appeal to the Court and the Court may determine the appeal."
On appeal to the Land and Environment Court under s.96(6) EPA Act, the Court has all the functions and discretions of the relevant consent authority (here, the Defendant): s.39(2) Land and Environment Court Act 1979 . Accordingly, a dissatisfied applicant, who is faced with a council which fails to determine a s.96 application within 40 days, may take the matter out of the council's hands by appeal under s.96(6), leading to the Court becoming the decision maker on the application.
In due course, it will be observed that the Plaintiffs did not seek to utilise this avenue of appeal at any time after it became available. What flows from this approach will be considered later in the judgment.
Relevant Planning Instruments
Part 3 Division 2 EPA Act permits the Governor to make environmental planning instruments for the purpose of environmental planning by the State: s.37(1) EPA Act. These are called State Environmental Planning Policies, and cover a wide range of matters.
"State Environmental Planning Policy No 1 - Development Standards" ( "SEPP1" ) is relevant to these proceedings. The object of SEPP1 is as follows:
"This policy provides flexibility in the application of planning controls operating by virtue of development standards in circumstances where strict compliance with those standards would, in any particular case, be unreasonable or unnecessary or tend to hinder the attainment of the objects specified in section 5(a)(i) and (ii) of the Act."
Clause 6 SEPP1 permits a person to make a development application supported by a written objection to compliance with a development standard on the basis that it is unreasonable or unnecessary in the circumstances. If the consent authority is satisfied the objection is well-founded and is of the opinion that granting consent to the development is consistent with the objects described at [37] above, the consent authority may, with the concurrence of the Director, grant consent to the development application: Clause 7 SEPP1.
Now repealed, Part 3 Division 3 EPA Act provided for the making of environmental planning instruments for regional areas ( "REPs" ). Relevant to these proceedings is the Hunter Region Environmental Plan 1989 ( "HREP" ).
Part 3 Division 4 EPA Act provides for the making of environmental planning instruments for local areas ( "LEPs" ). Relevant to these proceedings is the Port Stephens Local Environmental Plan 2000 ( "Port Stephens LEP" ).
Part 3 Division 6 EPA Act provides for the making of development control plans ( "DCPs" ) by a relevant planning authority, including councils. DCPs may make more detailed provision with respect to development to achieve the purpose of an environmental planning instrument (s.74C(1)(a)), or to specify additional criteria a council is to take into account when ordering a person to do or not do certain things with respect to a development as provided for in Part 6 Division 2A EPA Act (s.74C(1)(d)). The "Port Stephens Development Control Plan PS1 - Urban Housing and Dual Occupancy Controls" , effective 1 May 2003 ( "Port Stephens DCP" ), is relevant to these proceedings.
Each of the HREP, Port Stephens LEP and Port Stephens DCP make provision for height, floor space ratio and density restrictions on developments, and in certain circumstances require the concurrence of the Director before a development consent may be granted.
Factual Matters
I turn now to the facts of the case. In a sense, there are limited areas of factual dispute in these proceedings. A number of the principal arguments were directed to the findings which ought be made by reference to the undisputed documentary evidence, taken in conjunction with the oral evidence, and what conclusions ought be reached concerning the elements of the causes of action pleaded by the Plaintiffs.
As will be seen, I have set out detailed extracts from contemporaneous documents. I have taken this course, in particular, because the Plaintiffs contend that Ms Gale, an officer of the Defendant, acted with intent to harm the Plaintiffs and that such a conclusion should be inferred from all the circumstances. To assess a serious allegation such as this, an examination of the contemporaneous documentations is especially appropriate.
The following recital may be taken as my findings of fact, subject to any areas of dispute where I will identify the dispute and express my findings. I make further findings, as well, later in the judgment when considering the elements of the causes of action upon which the Plaintiffs sue.
Mr Maruncic was born in 1934. He was 75 years' old in May 2009. He came to Australia in 1958 from Croatia, where he was a qualified mechanical fitter and had studied architecture.
After his arrival in Australia, Mr Maruncic obtained his real estate licence. From 1967 to 1977, Mr Maruncic operated a real estate and development business in the Cabramatta area of Sydney, and later continued similar activities in and around Sydney's Northern Beaches.
Mr Maruncic moved to Nelson Bay in 1987. He purchased the adjoining properties that comprise the Church Street site for approximately $325,000.00 and $265,000.00 respectively. Mr Maruncic lived at 11 Church Street, Nelson Bay until it was demolished in 2003.
Mr Maruncic commenced a bakery business in Nelson Bay, which proved to be quite successful. Both he and his son worked at the bakery. When his son had health problems, Mr Maruncic sold the business because his primary interest was real estate and property development.
I am satisfied that Mr Maruncic was a successful businessman who had worked in a range of fields, chiefly in the area of real estate and property development.
Between 1999 and 2000, Mr Maruncic commenced planning the design and drawings for the Church Street site, which he intended to name "Milan Towers" . The original design was for a twin-tower, 25-luxury apartment development.
"Milan Towers" was to be a reflection of Mr Maruncic's life work and achievements. Subsequent correspondence from Mr Maruncic to the Defendant frequently made reference to his project as an "exceptional" and "unique" development in the Port Stephens area (see, for example, Exhibit P, Tabs 10-11).
Approval of and Early Construction at the Church Street Site - "Milan Towers "
On 6 March 2000, Mr Maruncic submitted a development application to the Defendant for the construction of "Milan Towers" , being two five-storey residential buildings at the Church Street site (Exhibit 1, Tab 1). At their highest point, the buildings were 15.7 metres above natural ground level ( "NGL" ) (Exhibit 1, Tab 6).
Clause 58(1) HREP required the concurrence of the Director in order for consent to be granted in respect of any development application for the erection of a building over 14 metres in height. Accordingly, the Defendant wrote to the Department of Urban Affairs and Planning on 17 May 2000 requesting Director's concurrence in respect of "Milan Towers" (Exhibit 1, tab 7). The Director's concurrence was granted on 22 May 2000 (Exhibit 1, Tab 8).
On 29 May 2000, the Defendant approved the application, subject to conditions. The Defendant's approval was for 25 medium-density residential units (Exhibit P, Tab 1) in accordance with the plans approved, which provided for a maximum height of 15.7 metres.
In or about May 2002, demolition work commenced at the Church Street site. In September 2002, Mr Maruncic purchased a crane and other equipment necessary to begin "Milan Towers" , with construction commencing soon after.
In March 2003, a stop-work order was placed on development at the Church Street site due to complaints by the owner of an adjoining property. Thereafter, the adjoining property owner obtained an injunction prohibiting further work on the Church Street site. The injunction remained on foot for about 18 months, until it was lifted in December 2004.
Between 2001 and 2005, Mr Maruncic lodged eight development modification applications with the Defendant pursuant to s.96 EPA Act in respect of the Church Street site. After receiving and considering objections from adjoining property owners and others, the Defendant granted its modified consent to each application, in most instances subject to conditions. Consent was granted on the following dates:
(a) Modification 1 - 17 April 2001 (Exhibit 1, tab 15);
(b) Modification 2 - 18 June 2001 (Exhibit 1, tab 18);
(c) Modification 3 - 11 October 2001 (Exhibit 1, tab 22);
(d) Modification 4 - 18 February 2002 (Exhibit 1, tab 25);
(e) Modification 5 - 26 August 2002 (Exhibit 1, tab 30);
(f) Modification 6 - 11 September 2003 (Exhibit 1, tab 34);
(g) Modification 7 - 10 February 2004 (Exhibit 1, tab 37); and
(h) Modification 8 - 21 April 2005 (Exhibit 1, tab 40).
Mr Maruncic said these modifications were "minor changes to the aesthetic and engineering details of the original plans" . He stated that their purpose was to beautify the building and included changes to the balconies, windows and the building's lift well (Maruncic affidavit, 20 May 2009, page 5).
A number of the modifications listed at [58] above included increases in the height of "Milan Towers" . By 21 April 2005 (Modification 8), the Defendant had consented to a maximum height of "Milan Towers" of approximately 18 metres. Although the plans submitted with Modification 8 (Exhibit 1, Tab 40a) do not contain the 18 metre figure (as heights are expressed in reduced levels ( "RL" )), a height of 18 metres appears to be common ground as reflected by Mr Maruncic's letter to Ms Gale and the minutes of the November 2005 Development Assessment Panel ( "DAP" ) (Exhibit E, Tabs 9 and 10).
The Donald Street, Nelson Bay Developments - Especially "Cote D'Azur "
At the same time as the Defendant was dealing with Mr Maruncic's development of the Church Street site, a number of other development applications were made in respect of adjacent properties in Donald Street, Nelson Bay.
In August 2002, the Defendant approved a development application in respect of 65-67 Donald Street, Nelson Bay for 15 serviced apartments (Exhibit 1, Tab 107). That development has not been completed and the site remains vacant (Exhibit 1, Gale affidavit, 10 November 2009, paragraph 110).
In March 2004, the Defendant received a development application in respect of 61 Donald Street, Nelson Bay for construction of a seven-storey building known as "Cote D'Azur" . The proposal consisted of commercial premises, nine tourist units, 45 residential units and parking.
The original development application for "Cote D'Azur" was approved on 18 February 2005 (Exhibit 1, Tab 109). Between January and December 2006, the Defendant consented to four development modification applications in respect of it (Exhibit 1, Tab 110). Construction of "Cote D'Azur" was completed in February 2007.
The Department of Planning provided concurrence to the Defendant's consent to construct "Cote D'Azur" on 4 January 2005 and, on 31 October 2005, gave concurrence to a s.96 application permitting a maximum height of 17 metres NGL, an increase in permissible height under Clause 58 HREP (Exhibit 1, Tab 104, pages 38-39; Exhibit 15).
In October 2004, the Defendant received a development application in respect of 63 Donald Street, Nelson Bay for construction of 14 residential units, three retail shops and parking. The Defendant approved the application on 30 August 2005 (Exhibit 1, Tab 111).
Mr Maruncic was concerned that the size, height and bulk of the various developments in Donald Street, Nelson Bay would have a significant detrimental effect on his "Milan Towers" project, particularly in terms of blocked views and other design issues such as privacy and light. He submitted formal objections (to the Defendant) to the original development applications concerning both "Cote D'Azur" and 65 Donald Street, Nelson Bay.
Mr Maruncic considered that the Donald Street, Nelson Bay developments had the potential to compromise the financial viability of "Milan Towers" . He decided that in order to make his development viable, it was necessary to increase the height of "Milan Towers" and to increase the number of units.
Mr Maruncic's Dealings with the Defendant in 2005 Concerning "Milan Towers "
Mr Maruncic first wrote to the Defendant on 8 February 2005 requesting approval to increase the height of "Milan Towers" and to increase the number of units from 25 to 41 (Exhibit P, Tab 10).
At this time, Ms Amanda Gale was employed by the Defendant as its Development Co-Ordinator. Ms Gale commenced employment with the Defendant in 1991. She served in various administrative and customer support roles from 1991 to 1998. She worked as a student (unqualified) Development Planner from 1998 to 2001. From 2001 to 2003, Ms Gale served as a Development Planner, and then as a Senior Development Planner in 2003 and 2004. She was appointed as Development Co-Ordinator in December 2004. Ms Gale holds a degree of Bachelor of Urban and Regional Planning from the University of New England.
Ms Gale's involvement with Mr Maruncic and the "Milan Towers" project had begun when the Defendant received an application, and subsequently approved the application in respect of Modification 8 (T764.26) (see [58] above).
The evidence reveals that Ms Gale had a substantial planning application workload in the period 2005 to 2007 (Exhibit 17). This should be kept in mind when considering complaints by the Plaintiffs concerning occasional delays in her responding to communications from them.
In or about May 2005, Mr Maruncic engaged Gary Warnes to assist him in furthering the development of "Milan Towers" .
Mr Warnes is an experienced town planner. He worked for various councils or with the Department of Planning between 1971 and 1997. Between 1989 and 1992, he was Deputy Regional Manager Hunter and Central Coast Regions with the Department of Planning (NSW). Between 1992 and 1997, he was Planning Services Manager/Strategic Planning Manager with the Defendant. In 1997, he left his employment with the Defendant to take up a position in the private sector as a planning consultant. It has not been suggested that Mr Warnes left his employment with the Defendant in 1997 in other than amicable circumstances. Between 1997 and 2002, he worked as a senior environmental planner with a private consultancy business and, since 2002, he has been an environmental planner and director of Synergy Environmental Planning Pty Limited ( "Synergy" ).
As mentioned at [8] and [11]-[13] above, Mr Warnes gave evidence in the Plaintiffs' case. His evidence concerned his involvement in relevant events between 2005 and 2007 and, over objection, opinion evidence on a range of matters.
On 23 June 2005, Mr Maruncic and Mr Warnes addressed a meeting of the Defendant's DAP in relation to the proposed further modifications to "Milan Towers" . Ms Gale, and other representatives of the Defendant, were present at the meeting. The minutes of the meeting record the following (Exhibit 1, tab 41):
"1. Interviews
23 June 2005
9:30am - 10:00am
i. Gary Warnes, Michael Maruncic
...
Proposal consists of both increasing the number of units and the overall height of Block A and B.
Increase the number of units to 36 units (Block A - 16 units & Block B - 20 units) by converting some existing 3 bedroom units into 2 bedroom and one bedroom units.
Propose to add an additional level raising overall height by approximately 2.5 metres.
*Land is zoned 2(c) Residential pursuant to Port Stephen's [sic] Local Environmental Plan 2000.
*Height - The proposal to increase the height by approximately 2.5 metres is considered a considerable increase and is unlikely to be supported. A SEPP1 objection to height was lodged with original Development Application and therefore, a further modification / increase in height is possible via a Section 96 modification to development consent. However, given the extent or increase in height, Council considers this would warrant a new development application.
*Density - The proposal to increase the density of this development (from 25 units to 36 units) is considered a considerable increase and is unlikely to be supported. It does not appear that the original development application included a SEPP 1 for density, therefore, if the current density approved on this site is at its limit, then Council cannot accept lodgement of a Section 96 modification to Development Consent that includes a SEPP 1 objection to density. A new Development Application would be required in this instance.
*Notwithstanding the above individual comments regarding height and density, it is advised that the proposed changes in their entirety (ie. increase in height and unit numbers) would not be considered to be substantially the same development. Therefore, on this basis a new development application would be required.
*The land is within State Environmental Planning Policy No. 71 - Coastal Protection Policy (SEPP 71). Given Council considers the changes require the lodgement of a new application, the Minister would be the consent authority. Any new development application is to be lodged with the Department of Infrastructure Planning & Natural Resources.
...
*The applicant should be aware that the completeness and quality of the application could impact on assessment time. Any incomplete or insufficient applications may not be accepted and returned to the applicant."
Mr Warnes gave evidence that it was Ms Gale who made the comments listed in bullet form in the minutes, being the Defendant's position in respect of Mr Maruncic's proposal (T127).
In May 2004, the Plaintiffs mortgaged the Church Street site to Australian Secured Investments Limited ( "Aussec" ). On 22 July 2005, Davis Lawyers, on behalf of Aussec, served notices on the Plaintiffs under s.57(2)(b) Real Property Act 1900 and under the Corporations Act 2001 demanding payments arising from default under the mortgage (Exhibit 24).
In September 2005, Mr Maruncic and Mr Warnes had a "parting of the ways" (T128.42). Mr Maruncic wrote to the Defendant on 11 October 2005 advising that Mr Warnes was no longer involved with the "Milan Towers" project (Exhibit 1, Tab 42), and provided the name of another person who would assist with the modification application, Mr Steve O'Connor of Environmental Resources Management Australia ( "ERM" ).
The evidence reveals that between about June and December 2005, Mr Maruncic was also in contact with the Department of Planning concerning his proposed modifications to "Milan Towers" . Mr Warnes had advised Mr Maruncic that he did not consider the proposed modifications to be within the scope of s.96 EPA Act and that a new development application would be required, with the Minister for Planning being the relevant consent authority in accordance with SEPP71 (Exhibit P, Maruncic affidavit, 20 May 2009, paragraph 26; T669-670).
Mr Warnes arranged a meeting between officers of the Department of Planning and Mr Maruncic at the Church Street site in July 2005 (T671). In cross-examination, Mr Maruncic said that the Department of Planning advised him of two options to progress his proposals, either write to the Department of Planning or obtain a refusal to the proposed modifications from the Defendant (T671).
In October 2005, Mr Maruncic took advice from Mr O'Connor of ERM. Mr O'Connor had prepared the development application for "Cote D'Azur" and Mr Maruncic thought that this may assist him (T673). Mr O'Connor advised Mr Maruncic that a Part 3A project plan would have little prospect of success. Mr O'Connnor suggested that the right approach would be to do a study reviewing the controls (such as floor space ratio, height and density) but that "would take 12 months and would be expensive with no certainty of success" (Exhibit 25). Mr Maruncic terminated the services of Mr O'Connor in November 2005 (Exhibit 25; T673-674).
On 3 November 2005, the Department of Planning wrote to Mr Maruncic stating that his proposal "may be a matter to be dealt with under Part 3A" of the EPA Act. The letter then outlined a number of steps Mr Maruncic would be required to take, including submission of certain information to the Department of Planning, before an application for the Minister's consent could be made (Exhibit E, Tab 7). That information included the following:
"Pursuant to clause 2 of Schedule 2 of the Major Projects SEPP, it is necessary to provide information on the proposed maximum height of the building or structure. Should the proposed height contravene the height standard stipulated in any environmental planning instruments such as the Local Environmental Plan, it is necessary to indicate your intention to seek a SEPP 1 objection."
On 15 November 2005, the members of the Strata Plan for 63-65 Donald Street, Nelson Bay wrote to the Office of Sustainable Development Assessment and Approvals confirming that they had "no objection to the amendments to height and density that are proposed by Mr Maruncic" (Exhibit E, Tab 8). Mr Maruncic had arranged for that letter to be prepared as, at that time, he was intending to proceed with his application through the Department of Planning (T676.24).
On 22 November 2005, Mr Maruncic wrote to the Defendant requesting Council's support for his proposed modifications to "Milan Towers" . The letter said (Exhibit P, Tab 11):
"Dear Ms Gale
Re: Development No 16-2000-380-1. For 25 Medium Density Units.
Property description Lot 18 SEC:7 DP:8611, Lot 17:SEC:7DP:8611
Over the past three years I have made and have had approved, several changes to my plans.
These changes were made to enhance the visual appearance of the buildings and to improve the interior design to make it a very different and unique development.
My original development was for very large apartments, some having up to five bedrooms. Since I have become aware of the design of the developments which surround my property, which have been approved by Council, I have had to re think [sic] the concept of my development.
The buildings which have been approved will have an enormous adverse effect on my development. The result will be huge losses in value of four floors of apartments on block B and three floors of apartments on block A.
Owing to the designs of adjoining developments, especially the one that is going to be built on the boundary, I am forced to reduce the size of my apartments and increase the number of my apartments. I am endeavouring to end up with a total of 43 apartments.
...
I am endeavouring to be able to increase the height of my buildings by approximately five metres and I will reduce the impact and shadow from the original design. Part of the height increase is an increase of ceiling height of 100mm per floor, to allow for air conditioning ducting. This is an increase from the last amendment.
...
I am seeking full support from Council and or the Ministers [sic] Department. I firmly believe that such a unique development should be supported because it is a totally new concept in urban living.
Council may not have a code to deal with this private owners resort. I feel that it should be dealt with as a special development, or, pass it onto the Ministers [sic] Department with no objections.
...
I believe that because of surrounding building approvals and the impact it will have on my project, I need this new design and the number of apartments to cover losses. It is going to cost an extra $1.7m more to build my project as against a basic / standard development of the same size and dimensions.
...
I have taken an enormous risk preparing new plans and engineering prior to approval, believing I will get the support to bring Port Stephens a higher quality of development.
I would appreciate very much if you would advise me today or as soon as possible if Council will, or, will not, support the changes I propose.
Yours faithfully,
Michael (Milan) Maruncic"
On 24 November 2005, Mr Maruncic addressed another meeting of the DAP. Again, Ms Gale and other representatives of the Defendant were present at the meeting. The minutes record the following (Exhibit 1, Tab 45) (emphasis added):
"Applicant now considers changes to the height (approved approx. 18m, proposed 23.5m), density (proposed increase to 43 units), internal design of the units and some faade changes with the building footprint remained unchanged. A new Development Application is required as the changes fall outside the scope of a Section 96 modification to original consent. The Department of Planning would be the consent authority. The Department have requested the applicant make preliminary representations to Council and provide these comments with the development application .
...
*In regards to the basis for lodging a new development application (being proposed changes to height and density), Council considers these changes to be major departures from both the original approved development application, the Tall Building Study, which formed the foundation for the height limit within the area and Council's Local Environmental Plan 2000 (ie. Clause 19 development standards). Therefore, Council would not support such variations and inconsistency with Council's policy .
In regards to Council's Local Environmental Plan 2000, Clause 19 - Urban Housing developments in the Residential 2(c) Zone include: Minimum Site Area per Dwelling of 150m2, Floor Space Ratio of 1:8:1 and Maximum Height Limit of 15.0m.
Whilst Council supported variations to both height and density under the original application, a further variation and extent of variation to both height and density is considered unacceptable as stated above ."
By letter of the same date (24 November 2005), Mr Maruncic again wrote to Ms Gale wanting to "discuss a couple of small points" following the meeting (Exhibit E, Tab 9). The letter said:
"When (Port Stephens) Council calculate their height measurements, they measure from the floor of the basement to the top of the roof.
When the Department of Environment and Planning calculate their heights they are measured from the original land level to the top of the roof.
Therefore, there is a difference of one floor level.
According to Council my last amended plans are two floors above and according to Dept of Land & Environment I am only one floor higher.
My original approval from the basement to the top of the roof was 18.3 m, my present height is 23.5 m.
So the difference is 5.2m, or, according to the Dept of Land & Environment, 2.7m higher than what I had approved earlier.
I would appreciate very much Council's favourable support with your report from our meeting."
In the meantime, Mr Maruncic remained in contact with the Department of Planning. He wrote to the Department of Planning again on 12 December 2005 attaching a copy of the minutes of the Defendant's DAP meeting on 24 November 2005. He requested an appointment to discuss his proposals for "Milan Towers" (Exhibit E, Tab 10).
In cross-examination, Mr Maruncic said that during his contact with the Department of Planning, he was given oral advice that his proposed modifications could be dealt with by the Defendant under s.96 EPA Act, upon which he relied (Exhibit P, Maruncic affidavit, 20 May 2009, paragraph 31; T677-678).
By letter dated 23 January 2006, Mr David Mutton of the Department of Planning stated to Mr Maruncic (Exhibit E, Tab 11):
"I refer to your recent preliminary enquiries regarding a proposed development at 11-13 Church St Nelsons [sic] Bay, Port Stephens LGA.
The Department notes that consent for an urban housing development (25 units and 18m) has been granted by Port Stephens Council over this land (20 May 2000), a total of 8 minor s96 applications have been lodged with Council and works have commenced on site. The Department also notes that the proposed changes to this development have been established by Port Stephens Council (Minutes - Port Stephens Council Development Assessment Panel 24 November 2005) as a substantial departure from the current consent and a new approval is to be sought.
Given the scope of the proposed changes to your development the proposal may be a matter to be dealt with under Part 3A of the Environmental Planning and Assessment Act. Given the proposed changes include further variations to the development standards in the Port Stephens LEP and relevant policies for the area and the original consents predate current design standards you are advised that the Department, in any assessment should the Minister form the opinion that the project be deemed a Major project, is likely to examine the merits of the whole development proposal and apply current development standards. You are advised to seek planning advice and clarify whether your building, in its entirety, will satisfy the provisions of instruments such as SEPP 1, SEPP 65 and BASIX."
The letter continued to indicate a number of additional processes which would arise if the matter was to be taken further.
Mr Maruncic agreed in cross-examination that he considered the previous oral advice of the Department of Planning that his proposal could be dealt with under s.96 EPA Act to be very important, and accordingly proceeded anyway to lodge such application with the Defendant (T678).
Formal Lodgement of the s.96 Application - 15 February 2006
On 15 February 2006, Mr Maruncic attended the offices of the Defendant to formally lodge a s.96 modification application in respect of his proposed changes to "Milan Towers" (Exhibit P, Tab 15) ( "the s.96 application" ). The s.96 application proposed the following main amendments to the consent previously granted by the Defendant (Exhibit P, Tab 15; Exhibit 1, Tab 46; Exhibit 1, Gale affidavit, 10 November 2009, paragraph 49):
(a) an increase in the total number of units from 25 to 41;
(b) an increase in the maximum height of the development by approximately five metres (from approximately 18 metres to approximately 23 metres) to accommodate an increase in the ceiling height of 100 millimetres per floor ;
(c) conversion of the first-floor apartments into parking spaces; and
(d) the addition of balconies to the southern side.
Ms Gale met Mr Maruncic at the counter when he lodged the s.96 application. In cross-examination, Mr Maruncic accepted that a conversation took place with Ms Gale to the following effect (Exhibit 1, Gale affidavit, 10 November 2009, paragraphs 140-141; T683-684):
"GALE: I have major concerns regarding the proposed changes which are a significant departure from the original approval. I expect there will be issues with lodgement of the variations as a Section 96 application as opposed to a new development. What you are proposing is a new development.
MARUNCIC: I am going to lodge the modification application anyway and see how it progresses. I believe in the proposal. I do not want to have to lodge a new development application with the Department of Planning."
I do not accept Mr Maruncic's evidence in cross-examination that at this time Ms Gale also said to him, among other things, that "Mr Maruncic, I personally will object" (T684.2). Mr Maruncic made no reference to such words being spoken by Ms Gale in either his affidavit or evidence-in-chief, and indeed later conceded that it was some time after the s.96 application was lodged that Ms Gale indicated she would not support his proposal (T684.37-685.15).
Mr Maruncic and Ms Gale had further conversations following the lodgement of the s.96 application. The content of those conversations are disputed, however, and nothing material turns on their content.
Ms Gale was the Assessment Officer for the Plaintiffs' development and was responsible for assessing the s.96 application lodged on 15 February 2006 (Exhibit 14, Gale affidavit, 25 June 2010, paragraph 4-5).
Accompanying the s.96 application lodged on 15 February 2006 were a number of plans dated 1 January 2006 (Exhibit 14, Gale affidavit 25 June 2010, paragraph 9).
Ms Gale undertook an examination of the application, leading to a view that the application should be refused. Ms Gale proposed to issue a Notice of Intent to Refuse, a non-statutory notice utilised by the Defendant at the time. Before doing so, she decided to seek legal advice.
Ms Gale Seeks Legal Advice - April 2006
On 10 April 2006, Ms Gale sought advice from the Defendant's legal advisors, Sparke Helmore, regarding Mr Maruncic's s.96 application. In her email to Dianna Grant of Sparke Helmore, Ms Gale wrote (Exhibit B):
"Hi Dianna
In regards to the S.96 I briefly mentioned last week to you which I'm proposing to issue an Intent to Refuse for the following reasons and would like some advice as to whether you think Council has good reason to refuse this modification to the original consent.
The reasons are as follows:-
1) The extent and nature of proposed modifications are not considered to relate to substantially the same development as the development for which consent was originally granted and therefore, considered outside the scope of a Section 96 modification application pursuant to the Environmental Planning and Assessment Act 1979.
2) The development does not comply with Council's Minimum Area per Dwelling (ie. density) development standard pursuant to Clause 19 of Port Stephens Local Environmental Plan 2000, with the extent of variation to the standard considered unacceptable.
3) The development does not comply with Council's Height development standard pursuant to Clause 19 of Port Stephens Local Environmental Plan 2000, with the extent of variation to the standard considered unacceptable.
4) The development is contrary to the public interests and expectations, of an orderly and predictable built environment.
Dianna,
The original development consent was issued for 25 Medium Density Units on 29 May 2000. The development was configured in two separate building blocks - Block A & B.
The current S.96 modification relates to:-
- an increase in no. of units (from 25 approved) to proposed 41 units (by large front units being converted into two units, some of level 4,5 & 6 units have been changed from 1 & 2 units into 3 units per floor and increase in height / level will provide for remaining extra units).
- change in height of minimum 4 metres and up to 5 metres.
- changes have affected Block A - 3 floors and Block B - 4 floors
- propose to provide adequate visitor parking by removing pre-approved units on the lower levels and replacing them with parking.
- a series of new balconies for extra open space have been proposed to Block A & Block B.
The building footprint doesn't actually change, however with added floors/levels and a change in roofline, along with extra balconies I assume to provide open space for additional units contribute to the unacceptable increase in height and density involved in this s.96 modification.
...
Your advice in regard to this matter at your earliest convenience would be appreciated as I'm hoping to finalise and issue the Intent to Refuse (pending your advice) as soon as possible as the applicant is chasing me for a response."
By letter dated 21 April 2006, Sparke Helmore provided its advice to the Defendant. After setting out the history of approvals and modifications to consent granted in respect of the Church Street site, the advice turned to the interpretation and application of s.96 EPA Act. The advice stated (Exhibit E, Tab 13, paragraph 3.3):
"There is therefore a jurisdictional requirement that the development to which the consent as modified relates is substantially the same development as the development for which consent was originally granted. This means that the formation of Council's opinion as to whether a proposed development can be characterised in a particular way can be challenged in judicial review proceedings in the Land & Environment Court."
The fact that, from time to time, the Plaintiffs furnished amended plans and then further amended plans, indicated that there was some understanding on the Plaintiffs' part as to areas of concern on behalf of the Defendant and its officers. I do not accept that it was necessary for the Defendant to tell the Plaintiffs what the Defendant would approve, so that the Plaintiffs could then submit a proposal using that formula. Although the evidence of Mr Warnes, Ms Laidlaw and Ms Gale touched upon different approaches on the part of town planners working for councils as to the way in which a s.96 application might be progressed, no witness expressed the opinion that it was either appropriate or necessary for a council to tell an applicant what it would accept, so that the applicant could then submit exactly that.
I have considered earlier (at [188] and [190]) the Plaintiffs' argument concerning the use by Ms Gale of Mr Warnes' letter of 5 April 2007 (based upon Mr Mather's letter of 4 April 2007). To the extent that the Plaintiffs' argument is that Ms Gale misled Councillors by suppressing information concerning the height of "Cote D'Azur" and the height of "Milan Towers" between April and June 2007, it is once again pertinent to mention that Mr Warnes and Mr Maruncic were maintaining a regular line of communication to Councillors in support of the application. Communications were made directly to Councillors, and Ms Gale was not the sole line of communication.
Further, the manner in which the height issue was addressed at the hearing, through the evidence of witnesses and the submissions of the Defendant, demonstrates the complexity of the topic. The evidence at its best, from the point of view of the Plaintiffs, is that Ms Gale did not include in material to Councillors a possible argument based upon Mr Warnes' letter concerning the height of "Cote D'Azur" .
This is not a case where there was a clear and reliable piece of information which Mr Mather had provided to Mr Warnes, and which Mr Warnes had provided to Ms Gale, with Ms Gale thereafter concealing it from Councillors. Rather, Mr Warnes had advanced an argument which Ms Gale did not pass on in terms to the Councillors.
Once again, I observe that the issue here is what this feature of the evidence indicates concerning the intention of Ms Gale at the time. I am far from persuaded that this aspect supports a conclusion that Ms Gale intentionally suppressed material in a manner indicating a desire to harm the Plaintiffs. If the position was as clear as the Plaintiffs now contend, it would have been a risky approach indeed for Ms Gale to intentionally omit a piece of information to be provided to Councillors, given that the Plaintiffs were themselves providing information direct to Councillors as well.
In my view, the Plaintiffs have fallen far short of demonstrating that Ms Gale intended to cause harm to them in her involvement with the s.96 application between February 2006 and June 2007. The Plaintiffs have not established this element of the tort of misfeasance in public office.
In light of this finding, it is not necessary to consider the next step if a finding of intention to cause harm had been made. If, as I accept, Ms Gale had a genuine belief at all times that she was applying and not breaking the law, then it may be that the Plaintiffs would not have succeeded on this tort in any event. However, as I have said, this issue does not arise.
Insofar as the Plaintiffs' case for misfeasance in public office has, at times, been said to arise from recklessness on the part of Ms Gale, a fundamental problem for the Plaintiffs is that she sought independent legal advice in April 2006, October 2006 and April 2007 in a manner which stands in the way of a finding in the Plaintiffs' favour on that issue. I am not persuaded that a case of misfeasance in public office based on recklessness has been established by the Plaintiffs.
Given these findings, it is not necessary to consider a further question, namely whether the Defendant could be vicariously liable for alleged misfeasance in public office on the part of one of its officers. If this point had been reached, I would have been inclined to accept that vicarious liability would be open. However, the issue is not free from doubt: Jones v Swansea City Council [1990] 1 WLR 54 (Court of Appeal), Revd [1990] 1 WLR 1453 (House of Lords); Aronson, above, at 44-48.
The Plaintiffs have not established the tort of misfeasance in public office in this case.
Negligence
As mentioned earlier, the Plaintiffs' claim in negligence represents a secondary position. This is understandable given the issues raised in the proceedings and the necessity to satisfy the requirements of the Civil Liability Act 2002 .
I have referred earlier to statutory provisions which bear upon the Plaintiffs' claim in negligence.
The ascertainment of whether a duty of care was owed by the Defendant to the Plaintiffs takes, as a necessary starting point, the legislation in question.
A significant issue affecting the question whether a duty of care is owed is the ability of the Plaintiffs, at any time after the passage of 40 days from the lodging of the s.96 application, to appeal to the Land and Environment Court under s.96(6) EPA Act. The statement of Wood J (as his Honour then was) in Coshott v Woollahra Municipal Council (1988) 14 NSWLR 675 at 681 is pertinent:
"What to my mind distinguishes the present from those cases where a duty of care has been found is the deemed refusal of consent where there has been no determination within forty days, and the right of appeal then conferred. The plaintiffs could not have had any legitimate expectation that their application would necessarily be approved, and they could not have relied on a favourable exercise of the powers conferred upon the consent authority. The outcome of their application depended on the many factors referred to in s 90, and the response of any persons qualified to lodge an objection to the proposal.
Clearly, the legislature contemplated the possibility that development applications would not be processed within the respective periods laid down, and provided for that contingency by conferring a deemed refusal accompanied by a right of appeal."
In Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1 at 25-26, the Court of Appeal described (without criticism) Coshott v Woollahra Municipal Council as authority for the proposition that a council did not have a duty to assess an application promptly. However, the Court observed that the duty asserted in Avenhouse v Hornsby Shire Council was a duty, having approved an application, to process it within a reasonable time.
In my opinion, Coshott v Woollahra Municipal Council remains helpful when considering a situation such as this, where the Plaintiffs have made a s.96 modification application. The presence of the appeal avenue under s.96(6) supports a construction that a council does not owe an enforceable duty of care (in tort) to an applicant to assess an application promptly.
It is critical to the determination of whether a duty of care is owed to protect a plaintiff, as a member of a class of persons whose economic interests are to be protected by such recognition of the duty, to identify the "salient features" of the relationship: Makawe Pty Limited v Randwick City Council [2009] NSWCA 412; 171 LGERA 165. The Plaintiffs contend that an examination of the salient features in this case will demonstrate that a duty of care was owed by the Defendant to the Plaintiffs and that that duty was breached in the circumstances of this case. The Defendant advances a contrary submission.
In considering the Plaintiffs' claim that they were owed a duty of care by the Defendant because of their vulnerability, it is appropriate to bear in mind the observations of McPherson JA (Gerrard JA and Chesterman J agreeing) in The Beach Club Port Douglas Pty Limited v Page [2005] QCA 475; (2006) 1 QdR 307 at 314 [21]:
"This leads naturally on to the plaintiff's claim that a duty of care was and is owed to it because it was 'vulnerable' to the loss and damage it claims to have sustained and was unable to protect its interests against it. So, in a sense, it was. It is a direct consequence of legislative action in affording to specified persons, of whom the defendant is one, the right to appeal against Council decisions granting development permits in respect of land. But the plaintiff was in that respect no more vulnerable than any other developer or applicant for a permit in similar circumstances. Vulnerability in this context was said in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515.
... not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, 'vulnerability' is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.
Here the plaintiff's mistake lay in its own failure to build into its plans and arrangements for obtaining finance, its pre-selling units in the proposed resort, and its construction of the building the possibility that someone would 'negligently' appeal under the Act and throw its carefully laid plains into confusion. From where we sit, it is a rare event to see a development proposal that does not encounter some such opposition that causes delays to its planned completion. On the other side of the line, the defendant in appealing might be seen as simply protecting his business interests for as long as possible against unwelcome competition. Provided he has not inflicted financial harm by adopting unlawful or conspiratorial means, the decision in Allen v Flood [1898] AC 1 suggests that he may do so without incurring civil liability in damages to the plaintiff."
It is necessary to have regard to the cumulative effect of the salient features in this case: Makawe Pty Limited v Randwick City Council at 171-172 [17]. I accept the Defendant's submission that the salient features of this claim (which alleges a duty of care in respect of economic loss) are:
(a) vulnerability, meaning an inability on the part of a plaintiff (as a member of a relevant class) to protect him or itself from the economic losses: Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; 216 CLR 515 at 530-531 [22]-[24];
(b) reliance (as a matter of fact) on any representation or conduct which is reasonably foreseeable;
(c) degree of control exercisable by the Defendant;
(d) consistency with the statutory regime under which the duty is said to arise;
(e) coherency with legal principles which afford or preclude remedies.
It has not been demonstrated that the Plaintiffs were vulnerable in the relevant sense. They were not vulnerable in the sense of being unable to protect themselves from the consequences of what they contend was the Defendant's want of reasonable care, either entirely or at least in a way which cast the consequences of loss on the Defendant: Woolcock Street Investments Pty Limited v CDG Pty Limited at 530 [23]; Makawe Pty Limited v Randwick City Council at 180 [52], 181-182 [63] and 192 [139].
The Plaintiffs were able to protect themselves from the consequences of a lack of reasonable care by the Defendant in its assessment of the s.96 application, by taking legal advice (as they did), retaining a planner to advance their case to the Defendant (as they did with Mr Warnes) and (should they wish) by appealing to the Land and Environment Court under s.96(6) at any time after 27 March 2006, a step which would take the whole process away from the Defendant and place it before a new decision maker, the Court.
I do not consider that the financial pressures under which the Plaintiffs were operating, taken alone or in conjunction with other factors, rendered them vulnerable for the purposes of determining whether a duty of care was owed.
Further, though it was foreseeable to the Defendant that the exercise of power to refuse the s.96 application may cause economic detriment to the Plaintiffs, the Plaintiffs have not demonstrated reliance on any representations or conduct by the Defendant.
For these reasons, I am not satisfied that a duty of care existed as between the Defendant and the Plaintiffs in the circumstances of this case.
Even if a duty of care arose, however, I am not satisfied that the Plaintiffs have established any breach of such a duty. I have made factual findings earlier which bear upon this issue as well. The Defendant and its officers progressed the application, taking legal advice at different stages in circumstances which were appropriate.
The Plaintiffs submitted that the conduct of the Defendant's employed staff in respect of the s.96 application was of a character that was so unreasonable that no reasonable authority with like power could properly consider the acts and omissions to be a reasonable exercise of them: ss.43 and 43A Civil Liability Act 2002 . As Allsop P observed in Precision Products (NSW) Pty Limited v Hawkesbury City Council [2008] NSWCA 278; 74 NSWLR 102 at 141 [175], such wording can be seen to have its source in what is often referred to as "Wednesbury unreasonableness" ( Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223 at 229-230). The rigorous nature of this test is well known.
I record my conclusion that the demanding test provided for in these provisions is not made out in this case. The evidence including that of Mr Warnes, does not provide a foundation for such a finding and, when regard is had as well to the evidence of Ms Gale and Ms Laidlaw, the Plaintiffs cannot succeed in satisfying this statutory test.
I reject the Plaintiffs' claim against the Defendant in negligence.
Causation and Damages
I have recorded my conclusions that the Plaintiffs have not succeeded in establishing either cause of action upon which they sue. Accordingly, it is not strictly necessary to consider issues of causation and damages. However, as against the possibility that a later need may arise for these matters to be considered, I should record shortly my conclusions on these issues.
I have mentioned earlier (at [282]-[285]) the difficulties which affect the Plaintiffs' claim on issues of causation. By about 13 November 2006, the Plaintiffs' difficulties were such that the mortgagee had taken possession of the Church Street site. In March 2007, the mortgagee sought to withdraw the s.96 application, in circumstances which gave rise to legal controversy.
I have already mentioned that one of the Plaintiffs' problems is proving relevant facts that could constitute (in particular) the tort of misfeasance in public office as at a particular time. The later any tortious conduct occurred, the more difficult is the Plaintiffs' position from the point of view of causation and damages. As it happens, I have rejected the Plaintiffs' claims in their entirety.
I note that the Plaintiffs contend that, but for the misfeasance or negligence of the Defendant, they could have obtained refinance before 13 November 2006. However, I accept the Defendant's submission that there is no evidence that the Plaintiffs would have been able to refinance the mortgage, even if the s.96 application had been approved. The Plaintiffs have not demonstrated that finance was available, or likely to be available if consent was obtained. The highest point reached by the evidence was that of Mr Maruncic expressing confidence (or hope) that he would be able to refinance with a number of different lenders or joint venturers.
Mr Maruncic's case in damages is that his company, the First Plaintiff, lost the chance of realising a profit upon the sale of units in "Milan Towers" over the period from 2006 until 2010. The sales period was agreed between the expert valuers.
I accept the Defendant's submission that the Plaintiffs' case in this respect attracts a number of difficulties. As the mortgagee took possession of the Church Street site on about 13 November 2006, any loss of chance should relate to a proposal promoted before that date. It is difficult to see how the Plaintiffs' attack upon the handling of the s.96 application after 13 November 2006, if established, could assist them on a claim for damages based upon a loss of chance of realising a profit upon the sale of units.
In order for a loss of a chance to realise a commercial opportunity, the Court must be satisfied, on the balance of probabilities, that some loss would have been suffered: Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 364; Tabet v Gett [2010] HCA 12; 240 CLR 537 at 560 [50], 578 [111]. The chances of profit being realised are to be assessed as a matter of probability: Sellars v Adelaide Petroleum NL at 348-355, 364.
If this point had been reached in the proceedings, I would have accepted the Defendant's submission that the Plaintiffs have not proved, on the balance of probabilities, that a profit would have been realised, for the reasons set out at paragraph 407 of the Defendant's principal written submissions dated 21 October 2010 (pages 88-89).
In these circumstances, I would have concluded that the Plaintiffs' prospects of realising a profit were so low that the Court would not find that the prospect permitted a sensible chance.
Accordingly, even if either of the Plaintiffs' causes of action had succeeded as to other elements (which is not the case), I would have determined that the Plaintiffs had not established an entitlement to damages.
I note that this conclusion does not depend upon which valuation expert was to be accepted. The problem for the Plaintiffs is more fundamental than that. However, if the point had been reached, I would have accepted and applied the approach adopted by Mr Cesta, the Defendant's valuation witness.
Conclusion
The Plaintiffs have not established either of their causes of action in misfeasance in public office and negligence. The Defendant is entitled to a verdict in its favour.
The ordinary rule is that costs should follow the event. There does not appear to be any reason why the ordinary rule should not apply in this case. I will make an order that the Plaintiffs should pay the Defendant's costs of the proceedings.
If, however, either the Plaintiffs or the Defendant seek a different order as to costs, I will allow the parties an opportunity to approach the Court in that respect.
I make the following orders:
(a) verdict and judgment for the Defendant;
(b) the Plaintiffs are to pay the Defendant's costs of the proceedings;
(c) if any party seeks an order as to costs different to that contained in order (b) above, written application is to be made in that regard to my Associate no later than 17 February 2012.
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Decision last updated: 22 December 2011
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