Newtown Village No. 2 Pty Limited v Magtio Pty Limited

Case •

[2016] NSWSC 749

•

09 June 2016

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Newtown Village No. 2 Pty Limited v Magtio Pty Limited [2016] NSWSC 749
Hearing dates:1 June 2016
Date of orders: 09 June 2016
Decision date: 09 June 2016
Jurisdiction:Equity
Before: Darke J
Decision:

Declaration made that plaintiff validly extended Call Option Period.

Catchwords:

CONTRACTS – general contractual principles – construction and interpretation of contracts – Call Option Deed provides for extension of Call Option Period in the event Grantee intends to make application to Land and Environment Court – whether purported extension of Call Option Period in accordance with Call Option Deed – whether intention must be definite rather than provisional

  WORDS AND PHRASES – “intends”
Legislation Cited: Environmental Planning and Assessment Act 1979 (NSW), ss 82, 96, 97
Land and Environmental Court Act 1979 (NSW), s 34
Environmental Planning and Assessment Regulation 2000 (NSW), cl 113
Cases Cited: Cunliffe v Goodman [1950] 2 KB 237
Electricity Commission Corporation v Woodside Energy Limited [2014] HCA 7; (2014) 251 CLR 640
Texts Cited: “Terms Implied in Fact: the Basis for Implication” (1998) 13 Journal of Contract Law 103;
J W Carter et al, ‘Terms Implied in Law: ‘Trust and Confidence’ in the High Court of Australia” (2015) 32 Journal of Contract Law 203
Category:Principal judgment
Parties: Newtown Village No. 2 Pty Limited (Plaintiff)
Magtio Pty Limited (Defendant)
Representation:

Counsel:
B A Coles QC, S B Docker (Plaintiff)
G Drew (Defendant)

  Solicitors:
Kemp Strang Lawyers (Plaintiff)
McDermott & Associates (Defendant)
File Number(s):2016/129769
Publication restriction:None

Judgment

Introduction

  1. These proceedings were commenced by Summons filed on 27 April 2016. The issue to be determined is whether on 6 April 2016 the plaintiff validly extended the Call Option Period under a Call Option Deed entered into by the plaintiff and the defendant on 26 March 2015.

  2. The Call Option Deed (hereafter referred to as ‘the Deed’) was entered into by the defendant as Owner and the plaintiff as Grantee. By clause 2.1, in consideration of payment of an option fee of $97,500 by the Grantee to the Owner, the Owner granted the Grantee an option to purchase a property known as 2C Gladstone Street, Newtown (‘the property’). Clause 4.1 provided that the Grantee or its Nominee may exercise the option during the Call Option Period. The Call Option Period was defined in such a way that it commenced on 9 April 2015 and terminated on 9 April 2016, unless some other terminating date was agreed or the period was extended in accordance with clause 3.5.

  3. Clause 3.5 of the Deed provides:

The Owner acknowledges and agrees that the Call Option Period may be extended for a period of three (3) calendar months, in the event the Grantee intends to make an application to the Land and Environment Court. If the Grantee wishes to extend the Call Option Period it may only do so by notifying the Owner and giving to the Owner evidence of the payment of the Extension Fee, in accordance with Clause 3.4, before 5pm on the last day of the Call Option Period. If the Grantee complies with this clause, for the purpose of this document, the Call Option Period will be extended to 5.00pm on the date being three (3) calendar months after the last day of the Call Option Period (as may be extended from time to time).

  1. The Plaintiff purported to extend the option period on 6 April 2016. On that day, a letter dated 4 April 2016 from the plaintiff’s solicitors, Kemp Strang Lawyers, was hand delivered to the office of the defendant’s solicitors, McDermott & Associates. The letter is relevantly in the following terms:

In accordance with Clause 3.5 of the Option Deed, our client hereby extends the Call Option Period by three (3) months to 5.00pm on 9 July 2016. Attached is a copy of the electronic transfer receipt showing the transfer directly to your client of the amount of $16,250.00 on account of the Extension Fee.

By way of an update, we note that our client has not yet received Development Approval. As at the date of this letter, should the application not be approved within a reasonable time, and/or contains development conditions which our client considers unreasonable, we will seek our client’s instructions to lodge an application with the Land and Environment Court.

  1. The defendant accepts that the purported extension was notified in accordance with the requirements of clause 3.5 of the Deed. However, the defendant contends that it was not open to the plaintiff to extend the Call Option Period. In particular, the defendant contends that the existence of the right to extend the Call Option Period under clause 3.5 is conditional upon the plaintiff holding an intention to make an application to the Land and Environment Court, and that the plaintiff did not hold such intention at the relevant time.

  2. The plaintiff initially contended that the holding of such an intention was not a condition precedent to an extension of the Call Option Period. It was submitted that the words “in the event the Grantee intends to make an application to the Land and Environment Court” merely described a reason why the Owner acknowledges and agrees that the Call Option Period may be extended and that the words “in the event” are synonymous with “just in case”. Ultimately, the plaintiff seemed to accept that in order to extend the Call Option Period under clause 3.5, the plaintiff had to hold an intention to make an application to the Land and Environment Court.

  3. The central issue is thus whether the plaintiff, at the time it purported to extend the Call Option Period, intended to make an application to the Land and Environment Court within the meaning of clause 3.5 of the Deed.

  4. The question of what (if any) intention the plaintiff held concerning the making of an application to the Land and Environment Court is a question of fact. The relevant mind of the plaintiff is that of its sole director and secretary, Mr Walt Coulston. An affidavit he swore on 27 April 2016 was read, and Mr Coulston was cross-examined.

Summary of relevant evidence

  1. Mr Coulston has been in the business of the acquisition and development of land in Sydney and regional New South Wales since 2002. The business is conducted through companies (such as the plaintiff) that are controlled by Mr Coulston and created for the purpose of each project. Mr Coulston refers to the companies as the Coulston Group.

  2. Mr Coulston identified the property as a possible residential development opportunity in 2014. His investigations concerning the property included a review of the planning status and zoning of the property and other properties nearby. Mr Coulston ascertained that the relevant zoning was B7 (Business Park) under the Marrickville Local Environmental Plan 2011 (“the LEP”), and that the Marrickville Development Control Plan 2011 (“the DCP”) was also applicable. Mr Coulston considered, based on prior experience, that it was difficult to obtain approval for residential development in B7 zoned areas, and that there were many unfavourable provisions of the LEP and the DCP which, if applied strictly, made residential development financially unfeasible.

  3. Nevertheless, Mr Coulston continued to investigate the possibility of developing the property. In September 2014 he made contact with the directors of the defendant to express an interest in purchasing the property. In an email sent on 30 September 2014 to one of the directors of the defendant, Mr Adams, Mr Coulston noted that the B7 zoning added “a layer of complexity to any feasibility and/or future development of the site”. In an email sent on 22 October 2014 to Mr Adams, Mr Coulston again referred to the B7 zoning. He said that it was “a little tricky” to create residential accommodation in the zone but he believed it was achievable.

  4. In the course of his investigations, Mr Coulston became aware of a sale of a nearby property at 39 Phillip Street, Newtown. It had the same zoning as the property, and Mr Coulston considered it to be a comparable site. He made enquiries about a development application lodged in respect of the 39 Phillip Street site. He considered that the proposed development represented a significant departure from the requirements of the LEP and the DCP, and a much more financially viable alternative. Mr Coulston became interested in the outcome of the application.

  5. As it happened, a planning lawyer used by Mr Coulston (Mr Whealy of Gadens Lawyers) was acting in relation to the 39 Phillip Street application, and he spoke to Mr Coulston about its progress. In December 2014 he informed Mr Coulston that the Council had not seemed at all willing to approve the application; a decision was taken that “a deemed refusal was the only way to go”, and an application to “mediate” (under s 34 of the Land and Environment Court Act 1979 (NSW)) had since been lodged. Mr Coulston says that he told Mr Whealy that if he came to terms with the owners of the property, he intended to “take your lead here and seek the same process via the Courts”.

  6. Mr Coulston says that after receiving that information he considered that obtaining a satisfactory development approval for the property was a possibility, albeit in all likelihood one in which he would follow the precedent set in relation to 39 Phillip Street and be compelled to make an application for approval to the Land and Environment Court.

  7. In the meantime, discussions had continued between the plaintiff and the defendant. In December 2014 the plaintiff submitted a draft Call Option Deed to the defendant. It provided for an option period of 12 months commencing 43 days after the date of the Deed, and a right to extend the period for a further 6 months. The period (or extended period) within which the option could be exercised became the subject of further negotiation.

  8. In February 2015 Mr Whealy informed Mr Coulston that the development approval for 39 Phillip Street was “definitely getting there” and that the s 34 conciliation conference had been adjourned to enable some amended plans to be drawn up. He envisaged that an approval would issue by about 11 March 2015. It was observed by Mr Whealy that the matter was travelling so well because no Councillors were involved. Mr Coulston said that this news strengthened his view that if he was to obtain a development approval that would make purchase of the property viable, he would need to take a similar course of action in the Land and Environment Court.

  9. On 6 February 2015 the defendant’s solicitors informed the plaintiff’s solicitors that the defendant would not be prepared to agree to an option period of greater than 12 months. Mr Coulston deposed that at about that time he had a conversation with Mr Adams to the following effect:

Coulston:   “Phillip I am sure that I will need to go the Land and Environment Court in order to get my development for the Property approved. I will do that but I need longer than 12 months.”

Adams:   “How much longer is the minimum you feel you would need keeping in mind that my sisters do not want to extend any longer.”

Coulston:   “With planning it is always a case of how long is a piece of string type scenario. If I have to go to Land and Environment, which I will do, then perhaps a further 3 months might do.”

Adams:   “Thank you Walt. I know that you have been pulling out all stops on this one. I will come back to you soon.”

  1. On 9 February 2015 the plaintiff’s solicitors wrote to the defendant’s solicitors. The letter included the following:

Our client will agree to a twelve (12) month option period, subject to the inclusion of a special condition allowing for an extension of the option period for three (3) months, in the event our client is required to make an application to the Land and Environment Court. Our client will agree to provide a refundable extension fee of $16,250.00 in the event our client requires the three (3) month extension.

The was acceptable to the defendant. The Deed ultimately entered into on 26 March 2015 contained clause 3.5 in the form set out earlier.

  1. Mr Coulston says that at that time he thought that he would be required to go through a similar process to that undergone in relation to 39 Phillip Street if he was to obtain what he wanted for the property. He says that his preferred method of obtaining approval would be for the Council to issue it; however, he thought there was little chance of that occurring in a way that would yield a financially viable result. He says that he strongly believed that a development approval would be obtained as a result of the conciliation process conducted by the Land and Environment Court, or by decision of that Court.

  2. The plaintiff retained SJB Architects to obtain development approval for the property. The preparation of plans took longer than Mr Coulston expected. As was the case with 39 Phillip Street, the plans represented major departures from the requirements of the LEP and the DCP.

  3. By late April 2015 Mr Whealy had informed Mr Coulston that the Council had found the amended plans for 39 Phillip Street to be satisfactory and was agreeable to signing the approval, at which point the Land and Environment Court would issue it. Consent orders were in fact made by the Land and Environment Court on 14 May 2015. Mr Coulston says that this “once again proved” to him that plans that departed from the requirements of the LEP and the DCP were capable of being approved by following the precedent created by 39 Phillip Street.

  4. By early December 2015 the development application for the property was almost ready to be lodged. On 4 December 2015 Mr Coulston sent an email to his finance broker in relation to the project. The email contained the following:

Perhaps our prime concern is the approval process on this one. As discussed, it’s a tough zoning being B7 Business Park. 39 Phillip Street (down the road – smaller, same zone) was approved midyear via L&E Court process. Whilst we’re in final stages of lodging DA with Marrickville Council, we also intend to follow this path as its also likely to be our only avenue for approval too.

  1. The development application for the property was lodged on 14 December 2015. Mr Coulston deposed that it was his view:

to await Marrickville Council’s formal feedback to our submission and then decide on when to proceed with the Land & Environment Court action. I had that view because I felt it would have been unwise to proceed to a section 34 Land & Environment mediation process prior to learning of Council’s initial formal view of the application and wanted to try and keep the peace with Council staff.

  1. The Call Option Period was due to expire on 9 April 2016, subject to a possible three month extension pursuant to clause 3.5. On 15 March 2016 Mr Coulston sent an email to Mr Adams in which he canvassed the obtaining of a further three month extension. The email included the following:

Not wanting to bother you whilst you’re away and no need to reply until you’re back. However upon your return I’d like to discuss the possibility of a three month extension to help ensure we resolve our DA (and hence can buy the site!).

Whilst I may be well be jumping at shadows (as we genuinely do feel it’s a matter of “when” and not “if”), there has been a noticeable slowdown across the board with Councils here in Sydney – mainly related to the proposed Council amalgamations and the uncertainty this is creating. We also believe Council are likely to request some changes at our end relating to overshadowing, which will take some time to provide and negotiate.

Under the contract we have a right to extend the 3 months from early April. Whilst this may well be sufficient, in order to provide further insurance I would ideally like to provide for a further 3 month period (to be taken up only if required) and with $50,000.00 being released to you in return.

  1. On 22 March 2016 Marrickville Council sent a letter to Coulston Group concerning the development application. The letter stated that an initial assessment of the application had identified a need for certain information to be provided to Council. A concern was raised about overshadowing of nearby properties, particularly in Phillip Lane. New shadow diagrams were requested. The letter further stated that the bulk and scale of the site at the rear was considered excessive, and that some bulk should be removed. Various other issues were raised including in relation to tree removal, car parking layout, and recycling and waste management.

  2. At about the same time Mr Coulston was supplied with copies of a large number of objections to the proposal received by Council.

  3. Mr Coulston deposed that after considering the Council letter it was clear to him that a significant reduction in floor space ratio would be required in order to comply with the LEP and DCP, not impact the residents of Phillip Lane, and gain Council support. He says that this would have a hugely detrimental effect on the financial feasibility of the project. Mr Coulston further deposed that he was concerned about the impact which the objections may have upon the Council’s attitude. He deposed that:

Once again it was apparent that a section 34 mediation via the Land and Environment Court would be required, in line with the precedent exhibited by the earlier 39 [Phillip Street] process.

  1. Mr Coulston deposed that on about 26 March 2016 he had a conversation with Mr Whealy which included words to the following effect:

Coulston:   “…we are still battling along with 2C Gladstone Street Newtown. We recently received our assessment letter from Council in response to our development application. I am going to talk through it with SJB but it looks like the Council will do the same as they did on 39 Phillip Street and we will have to make an application to Land and Environment Court if we are going to get our development application approved.”

Whealy:   “That’s not a surprise.”

Coulston:   “Will you be able to help me with that?”

Whealy:   “Absolutely. When would you like me to commence?”

Coulston:   “I have a call option extension coming up and I am also in the process of seeking a further three month extension from the vendor, however I understand he’s currently overseas. Once our first call option has been extended I’ll be back in contact and we’ll start the process then.”

  1. On 30 March 2016 Mr Coulston sent a further email to Mr Adams. After referring to the recent formal feedback from the Council, Mr Coulston stated in the email:

In summary, we make of Councils notes the following:

(1) The Design Excellence Review Panel LOVES our design! This was apparent in our formal pre DA too and thankfully this has carried out over to the actual DA. This is a real plus and gives Council some real support in their justification to approve our plans.

(2) There have been a number of objectors, in particular along Phillip Lane. Their collective objection is primarily to our overshadowing of their back yard (and being terrace houses, this is their only private open space). This is an issue for us and we are technically over height (just) and over FSR (quite a bit) in our plans. Council are asking that we redesign the plans in order to reduce our height/impact on Phillip Lane. Whilst not insurmountable, this will take some time and will also add more time onto Councils process (as the new plans need to be resubmitted and reconsidered by everyone at Council and even the objectors). We also need to redesign our garbage area, which is a pain, but again not insurmountable (I can’t remember the last DA we did where garbage wasn’t an issue!).

I am meeting with our architects/planners at SJB next Tuesday to discuss further and ideally finalise our new revised plans. Sadly this will mean we’ll likely have to reduce the number of units and our overall size (affecting our gross realisation/profit), however as SJB have done such a good job overall, hopefully we can part recoup this as the project will be of such a high quality.

…

Overall we’re not overly worried about getting the DA and given we only lodged late Dec, we’re at a pretty good advanced stage (i.e. we genuinely feel it’s a matter of “when” not “if”). That said, the redesign will no doubt add further time to the approval process.

  1. On 31 March 2016 Mr Coulston and Mr Adams had a conversation in which Mr Adams said that the defendant was unhappy about the proposal for a further three month extension. On 1 April 2016 Mr Coulston sent an email to Mr Adams which included the following:

“…Should we require additional time to allow for DA approval, we’ll pay $2,000 per day for up to 3 months ($168,000 in total).”

  1. On 4 April 2016 Mr Coulston gave instructions to Kemp Strang Lawyers that the plaintiff wished to extend the Call Option Period pursuant to clause 3.5 of the Deed. By that time the plaintiff had spent in excess of $400,000 on the project. Mr Coulston deposed that at the time he gave those instructions he was committed to the commencement of an application to the Land and Environment Court for approval, and it was only a question of when the application would be lodged.

  2. On 5 April 2016, the day before the notice of extension was served upon the defendant, Mr Coulston met with SJB Architects. He deposed that this meeting again underlined to him that Council was not sufficiently supportive of the development application and that it was most likely that Council would not provide a financially viable development approval. He deposed that, in his mind, the only real option left was to make an application to the Land and Environment Court for development approval.

  3. It was put to Mr Coulston in cross-examination that following his meeting with the architects on 5 April 2016 he was prepared to continue with negotiations with the Council to see if such negotiations would produce a satisfactory result. Mr Coulston maintained that he was going to engage in a “conciliation mediation process” in the Land and Environment Court “under a deemed refusal”. He said that this was something that he had been “contemplating since day one”.

  4. It was also put to Mr Coulston that he was merely contemplating making a Land and Environment Court application should it become necessary. Mr Coulston said:

Let’s say on or before the date of 6 April, I did receive a determination, then that would mean if it was a successful determination, i.e. it was approved, of course I wouldn’t have an intention to go to the Land and Environment Court. I wouldn’t need to. I had an approval. If the determination was negative, I would definitely therefore most certainly have the intention to go to the Land and Environment Court because I would need to.

  1. Mr Coulston rejected the proposition that because he had no determination of the development application by 4 or 6 April 2016 he could not have formed an intention to file an application with the Land and Environment Court. When pressed about whether he intended to make an application only if an approval was not obtained within a reasonable time or if an approval was obtained that contained unreasonable conditions, Mr Coulston said:

The fact of the matter is if I didn’t have a determination, I would need to go to the Land and Environment Court which I always had the intention to do.

Mr Coulston further stated that the Council’s letter of 22 March 2016 proved that he was not going to get an approval through the Council.

Submissions

  1. As noted earlier, the plaintiff ultimately seemed to accept that in order to extend the Call Option Period under clause 3.5 of the Deed, the plaintiff had to hold an intention to make an application to the Land and Environment Court. I would in any event have held that to be the case. I agree with the submission made by the defendant that it is clear from the language used in the first sentence of clause 3.5 that the period may be extended only in the event the Grantee intends to make an application to the Land and Environment Court.

  2. The plaintiff, for whom Mr Coles QC appeared with Mr Docker of counsel, submitted that “intends” within clause 3.5 should be given its ordinary meaning. I was referred to the Macquarie Dictionary definition of “intend”, which commences with “to have in mind as something to be done or brought about”. Mr Coles further submitted that “intends” in clause 3.5 is not accompanied by any intensifiers such as definitely, firmly or clearly; it would thus be sufficient if an intention of the requisite kind is held, and the intention need not be unconditional. It was put that this construction was consistent with the purpose, context and subject matter of the Deed, which did not support the giving of a narrow meaning to the word. Moreover, in circumstances where making an application to the Land and Environment Court is but one way to achieve an acceptable development approval, it was argued that it would defy business common sense to require a definite or firm intention to solely pursue that course.

  3. Mr Coles submitted that the evidence given by Mr Coulston concerning his intention should be accepted. He submitted that it was not inherently improbable, and was supported by the history of the progress of the plaintiff’s pursuit of development approval, including by following the example set by the 39 Phillip Street development. Mr Coles submitted that Mr Coulston’s evidence sufficiently established the existence of an intention on the part of the plaintiff of the kind described in clause 3.5.

  4. The defendant, for whom Mr Drew of counsel appeared, submitted that a definite rather than a merely provisional intention was required by clause 3.5. It was put that the Grantee must do more than merely contemplate the making of an application to the Land and Environment Court, it must have made a decision to do so. In this regard, Mr Drew cited various observations concerning the meaning of intention made in Cunliffe v Goodman [1950] 2 KB 237, especially at 252 (Cohen LJ), 253-4 (Asquith LJ) and 255 (Singleton LJ).

  5. Mr Drew submitted that the plaintiff had failed to establish that it held the intention required by clause 3.5. He emphasised three aspects of the evidence as showing that the plaintiff’s intention concerning the making of an application to the Land and Environment Court was merely provisional and that the plaintiff had not gone beyond mere contemplation and made a decision: first, the contents of Mr Coulston’s communications with Mr Adams on 15 March 2016 and 30 March 2016 concerning the prospects of obtaining development approval; secondly, the absence of written evidence of communications between the plaintiff and any solicitors prior to 6 April 2016 evidencing an intention to make an application to the Land and Environment Court; and thirdly, the statement in the notice of extension to the effect that unless a satisfactory development approval was obtained within a reasonable time, instructions would be sought to lodge an application with the Land and Environment Court.

  6. Mr Drew submitted that the Court should not accept Mr Coulston’s evidence in various respects, including his evidence that when he gave instructions to extend the option period he was committed to the commencement of an application to the Land and Environment Court. It was submitted that the real intention of the plaintiff was to obtain additional time to resolve with the Council the objections to its development application and/or to sell its rights under the Deed to another party.

Determination

  1. The meaning to be given to the terms of a commercial contract is to be determined by what a reasonable business person would have understood it to mean. That determination requires consideration of the language used, the surrounding circumstances known to the parties, and the commercial purpose or objects to be secured by the contract (Electricity Commission Corporation v Woodside Energy Limited [2014] HCA 7; (2014) 251 CLR 640 at [35]).

  2. In the present case the contract concerns the grant of an option to the plaintiff to purchase a property. The parties were aware that the plaintiff would be seeking to obtain a development approval for the property. The provisions of clause 6 of the Deed expressly contemplate the making of such an application. The parties were also aware that the plaintiff might not be able to obtain a development approval within the twelve month Call Option Period during which the option was required to be exercised. The parties also knew that, in the course of seeking a development approval, the plaintiff might need to make an application to the Land and Environment Court. The parties should be taken to have been generally aware of the planning and legislative regime that provides for development applications to be made to consent authorities (in this case Marrickville Council), and for various applications to be made to the Land and Environment Court (for example, pursuant to ss 96 and 97 of the Environmental Planning and Assessment Act 1979 (NSW)) in respect of development applications.

  3. The language of clause 3.5 provides a right to the plaintiff to extend the Call Option Period by three months, but only in the event that the plaintiff intends to make an application to the Land and Environment Court. The parties agreed that, in those circumstances, the plaintiff could have more time in which to exercise the option to purchase the property; equally, the parties agreed that, absent those circumstances, the plaintiff would not be entitled to more time in which to exercise the option. It is implicit that the right to extend the Call Option Period arises only in circumstances where the plaintiff is not satisfied of the position reached in respect of obtaining development approval to the point that it intends to make an application to the Land and Environment Court.

  4. I agree with the submission made by Mr Coles that “intends” within clause 3.5 should be given its ordinary meaning, and should not be read so as to import notions of a definite, firm or clear intention. Similarly, it is not necessary that the intention be unconditional. A suggested intention may, of course, be so embryonic, tentative, provisional, conditional or remote in time that it cannot be regarded as a sufficient intention for the purposes of clause 3.5. The observations made in Cunliffe v Goodman (supra) concerning the meaning of intention are useful to bear in mind in this regard, even though those observations were made in the context of a statute that required proof that a certain event (the pulling down of premises) would have occurred.

  5. The clause calls for the existence of an intention of a certain kind. Whether that intention exists is a question to be determined based on a consideration of all the relevant circumstances.

  6. The evidence given by Mr Coulston is of central significance. He presented as a witness with a confident manner. He struck me as someone who, in his business dealings, was more concerned with the broad issues than with the finer details. Overall, I found him to be a satisfactory witness, and I generally accept his evidence as truthful. Most of his evidence was not subject to challenge.

  7. Mr Coulston is an experienced property developer. The evidence establishes that at the outset he was conscious that the applicable zoning meant that obtaining approval for the residential development of the property he envisaged would not be a simple matter. It is clear that Mr Coulston became interested in the progress of the development application for the 39 Phillip Street site which he regarded as comparable to the property. He became aware that the proposed development for that site involved significant departures from the requirements of the local planning instruments. He further became aware that the developer of that site managed to achieve an approval after lodging an application with the Land and Environment Court (following a “deemed refusal” of his application) and undertaking a conciliation process under the auspices of the Court.

  8. I accept Mr Coulston’s evidence to the effect that he considered, in February 2015, that in order to obtain a satisfactory development approval for the property he would need to go through a similar process, and that there was little chance of the Council giving such an approval outside that process. Mr Coulston plainly stated, in his email of 4 December 2015 to his finance broker, that the plaintiff intended to follow the same path as taken by 39 Phillip Street, and that this was likely to be the plaintiff’s only avenue for approval. I also accept Mr Coulston’s evidence that it was then his view that the plaintiff would await the formal feedback form the Council before deciding when to proceed with the Land and Environment Court action.

  9. The formal feedback from the Council was given by the letter of 22 March 2016. The letter stated that the bulk and scale of the proposed development at the rear of the site was considered excessive, and that some bulk would need to be removed. Mr Coulston gave evidence that after considering the Council letter it was clear to him that, in order to gain Council support, changes would have to be made that would have a hugely detrimental impact upon the financial feasibility of the project. He further gave evidence that it was once again apparent to him that a s 34 mediation via the Land and Environment Court would be required (presumably in order to obtain an approval that was satisfactory to the plaintiff). I accept that evidence, which was not directly challenged. It had been Mr Coulston’s intention that the plaintiff would follow the same path as was taken in relation to 39 Phillip Street, and the terms of the Council’s letter do not suggest that a satisfactory development approval was likely to be obtained otherwise. Moreover, as Mr Coulston stated, he was concerned about the impact upon the Council of the many objections made by nearby residents.

  10. Mr Coulston spoke to Mr Whealy on about 26 March 2016. I accept that a conversation took place along the lines of that deposed to by Mr Coulston. Mr Coulston spoke to Mr Whealy about assisting with the making of an application to the Land and Environment Court. Mr Coulston said that such an application would have to be made, although he noted that he had not yet “talked through” the Council’s response to the development application with SJB Architects. Mr Coulston said that he would be back in contact with Mr Whealy once the Call Option Period had been extended, and once the question of a further three month period had been dealt with.

  11. On 4 April 2016 Mr Coulston proceeded to give instructions to Kemp Strang Lawyers to extend the Call Option Period, and on 5 April 2016 he met with SJB Architects. I accept Mr Coulston’s evidence to the effect that following this meeting he was of the mind that an application to the Land and Environment Court was the only real option left for obtaining a financially viable development approval.

  12. I have not overlooked the three aspects of the evidence upon which Mr Drew placed particular emphasis.

  13. It is true that Mr Coulston’s emails to Mr Adams of 15 March 2016 and 30 March 2016 project confidence that ultimately a development approval (I infer an acceptable development approval) would be obtained. However, Mr Coulston explained in cross-examination that in the context in which these emails were written (namely, the seeking of a further three month extension of the option period), he would generally take an “upbeat” approach. I found that evidence to be credible. It is also true that no mention is made in the emails of any application to the Land and Environment Court. The emails (which straddle the receipt of the Council’s letter of 22 March 2016) merely indicate an expectation that negotiations with the Council will be required concerning the design of the development, and that the drawing of revised plans and the undertaking of such negotiations will take some time. Nonetheless, those indications are not inconsistent with an expectation that such negotiations will take place in the context of a Land and Environment Court proceeding.

  14. There is no written evidence of communications between the plaintiff and any solicitors prior to 6 April 2016 evidencing an intention to make an application to the Land and Environment Court. The likely explanation for that is that Mr Coulston had not yet reached the point of formally giving such instructions. His discussion with Mr Whealy on about 26 March 2016 was of a somewhat preliminary nature and it was made known that further contact would be made after the issues concerning extension of the option period had been dealt with.

  15. The notice of extension sent by Kemp Strang Lawyers speaks only of seeking instructions to lodge an application with the Land and Environment Court if an approval was not obtained within a reasonable time or unreasonable development conditions were imposed. In cross-examination, Mr Coulston said that it was always his intention to retain Mr Whealy, a planning lawyer, for any Land and Environment Court proceedings, not Kemp Strang Lawyers. It is thus curious that Mr Coulston approved the terms of the notice of extension in this respect, but I place little weight on this matter of detail which was not further pursued in cross examination. The likelihood is that Mr Coulston did not pay particular attention to those terms. Further, Kemp Strang Lawyers might not have been fully apprised of the position in relation to the making of an application to the Land and Environment Court.

  16. It seems to me that by 6 April 2016 Mr Coulston, and hence the plaintiff, did intend, within the meaning of clause 3.5 of the Deed, to make an application to the Land and Environment Court. Mr Coulston envisaged that the making of such an application, following the “deemed refusal” of the plaintiff’s development application, would enable the plaintiff to seek to engage the conciliation process envisaged by s 34 of the Land and Environment Court Act. Mr Coulston considered that such an application to the Land and Environment Court was the only real option left for obtaining a financially viable development approval.

  17. It appears that it was in fact open to the plaintiff to then make such an application. It was common ground that a “deemed refusal” of its development application would have occurred by that time (see s 82(1) of the Environmental Planning and Assessment Act and clause 113 of Environmental Planning and Assessment Regulation 2000 (NSW)). As the development application was lodged on 14 December 2015, there would have been a deemed refusal after 40 days – that is, by 24 January 2016. Subject to the intervention of periods where time ceases to run whilst information is provided to the consent authority, the plaintiff would then have six months in which to make an application under s 97(1) of the Environmental Planning and Assessment Act.

  18. By 6 April 2016 Mr Coulston had not decided when the application would be made to the Land and Environment Court. It is also the case that Mr Coulston was not irrevocably committed at that time to the making of such an application. No such application would be made in the event (considered most unlikely by Mr Coulston) that outside Land and Environment Court proceedings the Council would give a development approval that was acceptable to the plaintiff. However, subject to that qualification (or condition) I think that Mr Coulston was, as he said, committed to the making of an application, and it was only a question of when it would be made. I do not think that Mr Coulston was only committed to taking that course in the event that a process of negotiation with the Council, outside Land and Environment Court proceedings, proved to be unsuccessful – given the very slim perceived likelihood of success.

  19. Taking all of the circumstances into account, I do not think it would be accurate to describe Mr Coulston’s intention to take Land and Environment Court proceedings as merely provisional, or that the taking of such proceedings was merely something he had contemplated. His intention as at 6 April 2016 was not so conditional or remote in time that it should not be regarded as an intention that satisfies the requirements of clause 3.5.

  1. For these reasons, I have concluded that the plaintiff validly extended the Call Option Period in accordance with clause 3.5 of the Deed. A declaration to that effect will be made. The defendant should pay the plaintiff’s costs of the proceedings.

  2. The Orders of the Court are:

  1. Declare that by notice served on 6 April 2016 the plaintiff validly extended the Call Option Period in accordance with clause 3.5 of the Call Option Deed entered into by the plaintiff as Grantee and the defendant as Owner on 26 March 2015.

  2. Order that the defendant pay the plaintiff’s costs of the proceedings.

**********

Decision last updated: 09 June 2016

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0