Oaktwig Pty Ltd v Glenhaven Property Holdings Pty Ltd - [2007] NSWSC 1533

No judgment structure available for this case.

CITATION: Oaktwig Pty Ltd v Glenhaven Property Holdings Pty Ltd [2007] NSWSC 1533

HEARING DATE(S): 19/02/07-002/03/07, 07/05/07, 14/05/07-29/05/07

JUDGMENT DATE :
28 June 2007

JUDGMENT OF: James J

DECISION: Verdict in favour of the plaintiff on the claim and a verdict in favour of the cross-defendants on the cross-claim.

CATCHWORDS: Architect’s remuneration — architect’s professional negligence — State Environmental Planning Policy 5 — Corporations Act s 131

LEGISLATION CITED: Corporations Act
Environmental Planning and Assessment Act
Fair Trading Act

CASES CITED: Astley and Ors v Austrust Ltd (1998 –1999) 197 CLR 1
Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2005] NSWCA 319
DEM (Australia) Pty Ltd v Pittwater Council [2004] NSWCA 434
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Oliver v Lakeside Resort Property Trust Pty Ltd [2005] NSWSC 1040

PARTIES: Oaktwig Pty Ltd v Glenhaven Property Holdings Pty Ltd

FILE NUMBER(S): SC 11684/04

COUNSEL: S. Bell - Plaintiff
C.A. Freeman - Defendant

SOLICITORS: Webster O'Halloran & Associates - Plaintiff
Leonard Legal - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JAMES J

THURSDAY, 28 JUNE 2007

11684/04 OAKTWIG PTY LTD trading as HOMEPLAN PROJECT DESIGN RESOURCES v GLENHAVEN PROPERTY HOLDINGS PTY LTD & ANOR
JUDGMENT

1 HIS HONOUR: In these proceedings the plaintiff Oaktwig Pty Ltd sued the defendants Glenhaven Property Holdings Pty Ltd and Richard Walsh, claiming monies alleged to be due and unpaid under two agreements for performing architectural and design services for a proposed development on a property at 607 Old Northern Road Glenhaven (which I will sometimes refer to in this judgment simply as “the property”), which is within the Hornsby Shire. Later in this judgment I will consider the question of who were the parties to the two alleged agreements. An alternative claim by the plaintiff on a quantum meruit basis was ultimately not pressed. The defendants defended the plaintiff’s claim and brought a cross-claim claiming damages for alleged breaches of contract, in tort and pursuant to the Fair Trading Act.

2 Mr John Giles Bourke, an architect, conducted his practice through the plaintiff and other companies. The second defendant Richard Walsh was the sole shareholder and sole director of the first defendant.

3 Evidence in the plaintiff’s case in chief was given by Mr Bourke; Mr Christopher Blyth, a town planner; Mr Bruce Tamplin, a quantity surveyor; Mr Graham Murray, an architect; and Mr Mark Bullen, an architect. All of Mr Bourke, Mr Blyth, Mr Murray and Mr Bullen made an affidavit or report and also gave oral evidence. Mr Tamplin made an affidavit but was not required for cross-examination and did not give oral evidence. The evidence of Mr Tamplin, Mr Murray and Mr Bullen was largely concerned with the plaintiff’s original alternative claim based on a quantum meruit.

4 Evidence for the defendants/cross-claimants was given by Mr Walsh; Mr Ian Neal Joseph Glendinning, a town planner; Mr Neil Ingham, a town planner; Mr Martin Pickrell, an architect; Mr Mark Stephen Relf, an accessibility consultant; Mr Anthony Zantiotis, a valuer; Mr William Alexander, who had been a town planner employed by Hornsby Shire Council; and Mr Simon Maxwell, a developer. All of Mr Walsh, Mr Glendinning, Mr Ingham, Mr Pickrell, Mr Relf and Mr Zantiotis made affidavits and gave oral evidence. Mr Alexander and Mr Maxwell did not make affidavits but gave oral evidence.

5 In the plaintiff’s case in reply, evidence was given by Mr Christopher Young, a town planner, and Mr Noel John Bridger, a valuer, each of whom made an affidavit or report and gave oral evidence. Mr Bourke also gave some brief oral evidence in reply.

6 At the hearing there were a number of strongly contested issues of fact. A number of these issues arose because any agreements between the parties were made in conversations between Mr Bourke and Mr Walsh about which conflicting evidence was given. However, many facts were not disputed or were clearly established by the evidence and I will now set out a summary of some of those facts. In the summary it will be convenient, for the most part, to refer simply to Mr Bourke or Mr Walsh, although sometimes it might be more accurate to refer to Oaktwig Pty Ltd or Glenhaven Property Holdings Pty Ltd.

Undisputed or clearly established facts

7 As already indicated, Mr Bourke is an architect and has practiced architecture for many years.

8 Mr Walsh, who was born in Ireland, migrated to Australia in 1985. Since the early 1990s he has been engaged in property development in and around Sydney.

9 Mr Bourke and Mr Walsh first met in about 2000. Mr Walsh, as a result of a recommendation made by another architect, retained Mr Bourke to act as architect on a project by Mr Walsh for a high-rise residential and commercial building at Parramatta. The design prepared by Mr Bourke was granted development consent by the Parramatta City Council. Mr Walsh asked Mr Bourke to let him know, if Mr Bourke came across another potential development site.

10 In early 2001 Mr Bourke noticed a property for sale at 607 Old Northern Road Glenhaven, which was about 2.9 hectares in area. The property was almost entirely vacant land. The property was zoned Rural BA (small holdings—agricultural landscapes) under the Hornsby Local Environmental Plan.

11 In Mr Bourke’s opinion, the property was suitable for a development under “State Environmental Planning Policy No 5 — Housing for Older People or People with a Disability”. At the hearing this State Environmental Planning Policy was generally referred to as “SEPP 5” and I will so refer to it in this judgment.

12 The aims of SEPP 5 as stated in cl 3 were to increase the supply and diversity of housing that would meet the needs of older people or people with a disability, making efficient use of existing infrastructure and services and being of good design. These aims would be achieved by setting aside local planning controls that would prevent the development of housing for older people or people with a disability that met the development standards specified in SEPP 5.

13 Under cl 4 SEPP 5 applied to land zoned primarily for urban purposes or adjoining land zoned primarily for urban purposes. Although the property at 607 Old Northern Road Glenhaven was zoned rural, land on the other side of Old Northern Road was zoned residential and it was not disputed at the hearing that the property adjoined land zoned for urban purposes and was land to which SEPP 5 applied.

14 Later in this judgment I will set out the terms of a number of the provisions of SEPP 5.

15 Immediately to the north of 607 Old Northern Road was an area occupied by a commercial nursery known as “Flower Power”. To the south of 607 Old Northern Road was a property 599-601 Old Northern Road, which was acquired by another developer Mr Nolan.

16 Mr Bourke informed Mr Walsh that, in his opinion, the property was suitable for a SEPP 5 development. Mr Bourke and Mr Walsh inspected the property.

17 It was not disputed at the hearing that in about April 2001 Mr Bourke and Mr Walsh made an oral agreement that Mr Bourke would perform architectural and other services for an application to Hornsby Shire Council for consent to a development within SEPP 5 on the property. Nor was there any dispute that Mr Bourke would charge fees at the rate of $2,600 per unit in the development. However, some other alleged terms of the agreement were the subject of vigorous dispute. I will consider these alleged terms later in this judgment.

18 In 2001 the owners of 607 Old Northern Road were two persons named Moussa.

19 In about February 2001 Mr Walsh paid $5000 to the Moussas as a holding deposit to enable Mr Walsh to make enquiries of Sydney Water about the availability of water and sewerage services to the property. Satisfactory results to these enquiries were obtained in about April 2001.

20 No written agreement was made between Mr Walsh and the Moussas until 27 July 2001, when a put and call option deed was executed with a purchase price for the property of $1,950,000.

21 On 11 October 2001 the first defendant Glenhaven Property Holdings Pty Ltd (“Glenhaven”) was incorporated.

22 On 30 October 2001 the Moussas and Glenhaven entered into a contract for sale, whereby the Moussas sold the property to Glenhaven for a price of $1,950,000. A deposit of 10% of the purchase price was paid. Completion of the contract was not to take place until July 2002. The date for completion was later extended by three months.

23 By about the end of January 2002 the preparation by Mr Bourke of a development application for a SEPP 5 development on the property had been completed. The proposed development was for the erection of a retirement village comprising 140 self-contained dwellings (“units”).

24 On or about 31 January 2002 Mr Bourke forwarded an account dated 31 January 2002 for his architectural services on the proposed development. Mr Bourke charged $364,000 for the preparation of the development application documentation and plans on the basis of charging for 140 units at $2600 per unit, and also charged a further amount for plan printing and plotting, making a total amount, including GST, of $402,855.42.

25 On 8 February 2002 the development application, which was referred to at the hearing as “the first development application”, was lodged with Hornsby Shire Council, together with plans for the development and a statement of environmental effects.

26 On 28 May 2002 an amount of $50,000 was paid by Mr Walsh to Mr Bourke. This payment of $50,000 was the only payment Mr Walsh ever made to Mr Bourke.

27 The first development application was considered by employees of Hornsby Shire Council. An executive manager’s planning report was prepared. One of the officers of the Council responsible for the report was Mr William Alexander.

28 The executive manager’s planning report is undated but refers to a meeting on 17 July 2002. It is clear that the reference to a meeting on 17 July 2002 was a reference to a meeting to be held on that date, and not to a meeting which had already been held, and that the report had been completed and had been made available to Mr Bourke a number of days before 17 July 2002.

29 The report recommended that the first development application be refused on a large number of grounds, including the loss of agricultural land, the potential for land use conflict, inadequate building setbacks, a potential that the site was contaminated, unsatisfactory arrangement for waste collection and unsatisfactory traffic access and pedestrian safety. A further ground (ground 7) was:-

“The proposed development fails to comply with State Environmental Planning Policy No 5 in the following areas:

…

(d) Units in Buildings B and D are sited too close to each other, resulting in Units in Buildings B and D are too close to each other, resulting in internal overlooking into living areas and courtyards and overshadowing thus not complying with clauses 25(b) and (c).”

30 On 15 July 2002 Mr Bourke sent a facsimile transmission to Mr Walsh commenting on the Council’s planning report. He said inter alia:-

“7. Bulk and Scale: Council’s criticism of bulk and scale should have regard to requirements of SEPP 5 which prohibit criticism on these grounds where the FSR is less than 0.5:1 as is the case of this proposed development. Building heights also comply with the strict requirements of SEPP 5 Council has not interpreted the height correctly.”

31 On 17 July 2002 there was a meeting of Hornsby Council. Both Mr Walsh and Mr Bourke addressed the meeting. Mr Walsh asked the Council to have another look at the development application “but, if not, this will be taken all the way”, that is, to the Land and Environment Court. A councillor said that the development application did not comply with SEPP 5 in a number of respects. Further consideration by Council of the development application was adjourned for two weeks.

32 A town planner, Mr Blyth was retained on behalf of Mr Walsh.

33 On 29 July 2002 Mr Bourke made a formal written reply to the issues raised in the Council’s planning report. In this reply Mr Bourke dealt inter alia with the subjects of “Setting, siting and design”, “Solar access and design for climate”, “Solar access”, “Streetscape”, and “Visual impact”. In “A conclusion” commencing near the end of the reply Mr Bourke replied to the grounds on which it had been asserted in the planning report that the proposed development failed to comply with SEPP 5. In reply to ground 7 Mr Bourke said in part:-

“(b) Buildings B and D do comply with the 2 storey requirements pursuant to clauses 6A and 13(2).

Size and scale should not be criticised by Council. [refer” standards which cannot be used as grounds for refusal – clause 14 SEPP 5 – Annexure “A”].

…

(d) Units in buildings B and D are well designed to allow for solar access and screening appropriate to minimise overlooking.”

34 Further consideration by the Council of the development application was again deferred. A further executive manager’s planning report was prepared for the meeting of Council to be held on 4 September 2002. The report again recommended that the development application be refused. On 4 September 2002 the first development application was formally refused.

35 In its formal refusal of the first development application the Council stated that the development application had been refused on the same grounds (apart from ground 7) as the grounds in the executive manager’s report which I summarised earlier (apart from a potential of the site being contaminated) and on the ground that the proposed development failed to comply with SEPP 5 in many areas, including:-

“…

(e) Units in Group B and D buildings are sited too close to each other, with less than 7m to balcony/terrace in some instance resulting in internal overlooking into living areas and private courtyards. The open common walkways between the buildings in Groups B and D will have privacy and noise impacts on the residents especially on the private courtyards. The proposal, therefore, does not comply with the design requirements to clause 25(b).

(f) The shadow diagrams indicate unacceptable internal overshadowing especially of ground units of the middle and southern row of units in Groups B and D. The proposal, therefore, does not comply with the design requirements pursuant to clause 25(c).”

36 An appeal was brought to the Land and Environment Court by an application dated 5 July 2002. The appeal was brought, prior to the development application actually being refused on 4 September 2002, on the basis that by 5 July 2002 there had been a deemed refusal of the development application.

37 On 9 July 2002 Mr J E Hannaford the solicitor acting for the applicant on the appeal made an affidavit in support of an application that the hearing of the appeal be expedited. A copy of the executive manager’s planning report for the meeting to be held on 17 July 2002 was annexed to the affidavit, showing that the report had already been received by Mr Bourke.

38 In his affidavit Mr Hannaford referred to the costs already incurred by Mr Walsh on the development application, including “architect’s fees $400,000”.

39 The application for an expedited hearing of the appeal was refused and the hearing of the appeal was listed for 4-8 November 2002. After the application for an expedited hearing of the appeal was refused, an affidavit by Mr Walsh dated 25 July 2002 was sworn and filed in support of a further application that the hearing of the appeal be expedited, on the grounds that Mr Walsh had incurred or expended large amounts of money on the proposed development, including Mr Bourke’s fees, and the hearing dates which had been fixed were after the last date on which the contract for the purchase of the property could be completed.

40 A draft statement by Council of the issues to be determined on the appeal was prepared on or about 12 September 2002 and a final statement was prepared on or about 19 September 2002. A response to the statement of issues dated 14 October 2002 was prepared by Mr Bourke and forwarded to Mr Hannaford.

41 On or about 17 or 18 October 2002 the contract for the purchase of the property was completed, the balance of the purchase price being paid with borrowed money.

42 Two issues of law arising on the appeal were argued on 31 October 2002 before a judge of the Land and Environment Court and determined, favourably to the applicant, in a judgment delivered on 1 November 2002.

43 Some of the remaining issues on the appeal were heard in the Land and Environment Court by a Senior Commissioner and a Commissioner over five days between 4 November 2002 and 8 November 2002. During the hearing the number of units in the design was reduced from 140 to 132, on the advice of the barrister appearing for the applicant on the appeal. On 8 November 2002 the Court reserved its decision on the appeal.

44 On 10 December 2002 the Land and Environment Court gave its reserved judgment. The appeal was dismissed and the development application was determined by its being refused. Later in this judgment I will quote parts of the judgment of the Land and Environment Court.

45 After the Land and Environment Court gave its decision there was a conversation between Mr Bourke and Mr Walsh. It was not disputed at the hearing of the present proceedings that it was agreed between them that Mr Bourke would prepare a new design for a retirement village, with fewer units. There was, however, a serious dispute about the terms on which the new design would be prepared, including whether Mr Bourke was to make any further charge for his work.

46 Mr Bourke prepared a further development application for a retirement village comprising 57 units. At the hearing this development application was referred to as “the second development application”.

47 By a contract for sale dated 27 February 2003, which was settled the same day, Glenhaven sold the property to Simon William Maxwell and his wife for a price of $3 million.

48 On the same day Glenhaven and Mr and Mrs Maxwell entered into a deed of agreement. The deed of agreement referred to both “the second development application”, that is the development application being prepared by Mr Bourke, and “the third development application” being a development application to be lodged by Mr and Mrs Maxwell. In this judgment I will refer to the latter development application as “the third development application”. The third development application was being prepared by an architect Mr Pickrell. The deed of agreement provided inter alia that, if development consent was received to either the second development application or the third development application, Mr and Mrs Maxwell would re-sell the property and, on completion of the re-sale, pay to Glenhaven half of the amount by which the sale price on the re-sale exceeded $3 million.

49 The second development application and the third development application were both lodged with Hornsby Shire Council on the same day 21 March 2003. A statement of environmental effects was lodged for each application. The third development application was for a retirement village comprising 39 units.

50 Mr Bourke sent an invoice to Mr Walsh dated 6 May 2003 charging $148,200 calculated at $2600 per unit for 57 units and a further amount for plan printing and plotting, making a total amount, with GST, of $166,472.68. A claim was made for interest, which was later abandoned.

51 On 22 May 2003 an appeal was brought to the Land and Environment Court against the deemed refusal of the third development application. Certain amendments were made to the third development application including a reduction in the number of units to 38. In October 2003 development consent was granted to the third development application and the proceedings in the Land and Environment Court were discontinued.

52 In February 2004 the second development application was refused.

53 In late 2005 the property 607 Old Northern Road, with the third development application consented to, was sold by Mr and Mrs Maxwell for a price of $5,840,000. Glenhaven, in addition to the amount of $3 million it had received in February 2003, received half of the amount by which the sale price exceeded $3 million.

State Environmental Planning Policy 5 (SEPP 5)

54 Earlier in this judgment I referred to clauses 3 and 4 of SEPP 5. I will now set out verbatim some of the clauses of SEPP 5. I have, of course, taken all of the provisions of SEPP 5 into account.

“ 2 Commencement

This Policy commences on 14 February 1998.

3 Aims

(1) This Policy aims to encourage the provision of housing that will:

(a) increase the supply and diversity of housing that meets the needs of older people or people with a disability, and

(b) make efficient use of existing infrastructure and services, and

(a) setting aside local planning controls that would prevent the development of housing for older people or people with a disability that meets the development standards specified in this Policy, and

(b) ensuring that applicants and councils take into consideration the level of additional demand for support services for older people or people with a disability in the council’s area to be generated by the development when preparing and assessing development applications that are affected by this Policy, and

4 Where this Policy applies

(1) This Policy applies to land within New South Wales:

(a) that is zoned primarily for urban purposes, or that adjoins land zoned primarily for urban purposes, and

(i) dwelling-houses,

(ii) residential flat buildings,

(iv) development of a kind identified in respect of land zoned for special uses, including (but not limited to) churches, convents, educational establishments, schools and seminaries.

5 Relationships to other environmental planning instruments

(2) If this Policy is inconsistent with any environmental planning instrument, made before or after this Policy, this Policy prevails to the extent of the inconsistency.

10 What this Part does

This Part allows development for the purpose of any form of housing for older people or people with a disability, despite the provisions of any other environmental planning instrument, if the development is carried out in accordance with this Policy.

14 Standards which cannot be used as grounds for refusal

The consent authority must not refuse consent to a development application under this Part on the grounds of:

(a) building height: if all proposed buildings are 8 metres or less in height, or

(i) 0.5:1 or less, …

25 Design of residential development

Consent must not be granted for development to which this Part applies unless the consent authority is satisfied that the proposed development demonstrates that adequate regard has been given to the following principles:

(a) Neighbourhood amenity and streetscape

(i) contribute to an attractive residential environment with clear character and identity, and

(ii) where possible, retain, complement and sensitively harmonise with any heritage conservation areas in the vicinity and any relevant heritage items that are identified in a local environmental plan, and

(iv) where possible, maintain reasonable neighbour amenity and appropriate residential character by using building form and siting that relates to the site’s land form, and

(v) where possible, maintain reasonable neighbour amenity and appropriate residential character by adopting building heights at the street frontage that are compatible in scale with adjacent development, and

(vii) be designed so that the front building of the development is set back in sympathy with, but not necessarily the same as, the existing building line, and

(b) Visual and acoustic privacy

(i) appropriate site planning, the location and design of windows and balconies, the use of screening devices and landscaping, and

Note

(c) Solar access and design for climate

(i) ensure adequate daylight to the main living areas of neighbours in the vicinity and residents and adequate sunlight to substantial areas of private open space, and

Note

………………….”

55 Counsel for the plaintiff referred to a decision of the Court of Appeal in DEM (Australia) Pty Ltd v Pittwater Council [2004] NSWCA 434, a decision on SEPP 5. The actual decision in DEM, that certain land was land to which SEPP 5 applied, is not relevant to present proceedings. However, in her judgment McColl JA, with whom the other members of the Court agreed, made the following comments about SEPP 5:-

“ [47] SEPP No 5 is also in the category of remedial or beneficial provisions which should be construed to afford “the fullest relief which the fair meaning of its language will allow”…

[48] Where a beneficial statute is expressed in general terms, so far as possible within the text, decision-makers will construe the legislation to advance and achieve those beneficial purposes — not to frustrate and defeat their attainment …

[51]

Judgment of the Land and Environment Court

“3. Across the road, on the west side of Old Northern Road is a low-density residential area, which is part of Baulkham Hills Shire. The east (Hornsby) side of the road is rural in zoning and character. The Flower Power site is the exception. While rural by definition, it is densely built and visually prominent. Despite its name, it has virtually no landscaping.

………………….

9. The applicant proposes to demolish the existing buildings on the site and to erect a development for older people or people with a disability containing 132 apartments and parking for 272 cars. The housing is laid out in three groups. The first group is close to the road and is in the form of two rows of buildings at right angles to each other, each row containing four dwellings on each of two levels. The second group is in the centre of the site and is in the form of three rows parallel to each other, containing 12, 10 and 8 dwellings respectively on each of two levels. The third group is towards the northeast end of the site and is in the form of three rows parallel to each other, containing 7, 9 and 13 dwellings respectively on each of two levels. Parking is at basement level. Apartments are single level. The access to the first floor apartments is through external lift towers, staircases and walkways, from which entrance bridges lead to front doors. Since the walkways and bridges go directly above and past the ground floor courtyards, there is an opaque glass screen along one side.

………………….

§ Is the impact on the rural environment acceptable?

§ Is the internal amenity acceptable?

§ Does the site analysis comply with the requirements of SEPP 5? ·

§ Is the access to public transport and facilities safe and convenient? ·

§ Will residents have reasonable access to home delivered services?

§ Is the loss of agricultural land a reason for refusal?

§ Is there likely significant effect on the Blue Gum High Forest on adjoining land? ·

§ Is there adequate information on water and sewer services?

14. LEP 94, the Rural DCP and the Rural Lands Study contain objectives and principles relating to the Shire’s rural areas. These may be summed up as the maintenance of rural character. SEPP 5, under which this application is made, permits medium density housing on rural land, provided the occupants are old or disabled people. Thus, while the local controls permit one dwelling on this site, SEPP 5 permits in the order of 130 dwellings. We do not think therefore that it is valid to criticise this proposal on the basis that it is not rural in character. If it had only half as many dwellings as it does, it would still not appear rural in character.

rural

Environmental Planning and Assessment Act 1979

17. Dr R Lamb, a visual analyst retained by the council gave evidence on visual impact. The applicant’s expert was Mr C Blyth, a consultant planner. Dr Lamb and Mr Blyth differed in their assessment of the character of the surrounding area. Mr Blyth took his cue from the adjoining Flower Power site and the residential development across the road, while Dr Lamb considered that the majority of the surrounding area was rural in character. We agree with Mr Blyth that the Flower Power site is a hard and dominant development. However, this is the only development of its kind visible from the subject site. Its existence is not a reason to extend the un-rural character further.

18. Dr Lamb recognised that a development under SEPP 5 is unlikely to be rural in character. On page 11 of his statement he said:

While I generally consider that development such as the proposed cannot realistically look like detached housing, nor should it have to, I am of the opinion that such development should be attentive to prevalent character elements within the locality. In particular, the building size and styles have virtually no relevance to the rural landscape or the site conditions and have no local precedent within the rural setting. The siting of residences appears to take no special heed of site conditions and the treatment of the street frontage expunges sight lines through the site. There is minimal variety in building forms and little relationship between them and rural dwelling character. As such, the contrast between the existing character of the locality generally and that which would result from the construction of the proposed development would be extreme. In my opinion, the change in the character of the site would be so great as to adversely affect the existing and desired rural character of the surrounding properties to an unacceptable degree.

19. Dr Lamb agreed that the appearance of the proposal from Old Northern Road was acceptable. He considered the worst feature of the design to be the length of the rows of dwellings. The most northern row had an uninterrupted length of over 120m. He considered this to be unsuitable even in a residential zone, let alone in a rural environment.

21. Mr Blyth, on page 19 of his statement, commented on the issue of rural character, amenity and streetscape:

The built form is typically residential in its design appearance and proposes high quality generous floor plans with variety in size and style, in a two-storey built form. The form of the development enhances amenity through having well separated building enabling large landscaped separations between buildings and to the streetscape reducing scale and enhancing the landscaped setting of the development. The development will in my opinion undoubtedly have character and identity and will provide an attractive residential environment for future occupants.

22. We do not accept this evidence. The fact that the built form is residential in appearance, or that the floor plans are high quality and generous, says nothing about the impact on the rural environment. Moreover, it is not correct to say that the buildings in the proposal are well separated. Elevated walkways, bridges, lift towers and staircases fill in whatever separation exists.

24. We note that, while in most residential flat buildings the circulation space is internal, in this case the lifts, stairs and corridors are placed outside the buildings. As a result they are not included in the calculation of floor space. The exclusion from floor space calculations does not mean, however, that these built elements do not add to the apparent bulk of the building. The device may be effective in placing more dwellings on the site without exceeding the FSR of 0.5:1, but it is not effective in lessening the bulk and scale of the proposal.

Internal amenity

26. According to the council’s Statement of Issues, the design of the dwellings will not promote amenity, sense of identity and community for residents. The statement singles out the effect of the elevated walkways on the outlook from dwellings.

28. The council’s expert on internal amenity was Mr Newbold. In effect, Mr Newbold criticised the proposal on three counts. First, the living areas and courtyards did not receive adequate sunlight. Second, the courtyards did not enjoy adequate privacy. Third, the long parallel rows of buildings with near-identical architectural expression created an unattractive residential environment. The reason for the lack of sunlight and privacy was the tight spacing of adjacent buildings and the proximity of overhead walkways to living rooms and courtyards.

29. The proposal was defended by Mr Blyth and by the proposal’s designer, Mr J Bourke, an architect. They pointed out that all the dwellings have northern orientation. According to Mr Bourke, four of the dwellings fail to meet AMCORD standards for solar access, while another 16 may or may not meet it. He responded to the criticism of overlooking from the elevated walkways by placing an obscure glass screen along one side.

31. In relation to solar access, we find Mr Newbold’s evidence more persuasive than Mr Bourke’s. The reason is that Mr Bourke appears to have left out numerous elements that would produce shadows. While it is true that the vast majority of apartments face north, the benefit of north orientation is cancelled by the placing of the elevated walkways and entrance bridges to the north of about two-thirds of the apartments. We agree with Mr Newbold that in the context of this site, the non-compliance of 25% of apartments with AMCORD guidelines indicates a very poor performance on solar access.

this

33. We also accept Mr Newbold’s evidence that the proposal performs poorly on the privacy and amenity of courtyards. It is true that the applicant intends to provide obscure glass screens on one side of the elevated walkways. This may prevent people looking down from the walkway to the courtyards, but it will present a bulky element to the courtyard. It will eliminate all the pleasure a resident might otherwise experience in a north-facing courtyard in a rural area. In fact, in most of the apartments there will be no sense of living in a rural area. The outlook will be confined to walkways, bridges, stairs, lift towers and the rear of the row in front.

34. In our opinion, the internal amenity of the proposal is unacceptable. The application does not meet cl 25(b) and (c) of SEPP 5.”

56 The Court proceeded to decide the remaining three issues which had been argued in favour of the applicant, that is, site analysis, access to public transport and facilities and access to home delivered services. The Court decided that loss of agricultural land was not a genuine issue.

57 The Court concluded:-

“We have concluded that the proposal’s impact on the rural environment and its internal amenity are unacceptable. Our finding on the other four issues is that they would not be reasons for refusal if the proposal were otherwise acceptable.”

Issues

58 In his written submissions counsel for the defendants conveniently identified a number of issues to be determined, as follows (rearranging and paraphrasing slightly):-

(i) was there a duty in tort, independently of the contract, to use reasonable care and skill and, if so, whether the duty was breached

was there a duty in tort, independently of the contract, to use reasonable care and skill and, if so, whether the duty was breached

(i) what representations were made by the cross-defendants to the cross-claimants

(ii) were such representations as were made relied on by the cross-claimants

(8) What damages would the cross-claimants be entitled to for breach of contract, in tort or under the Fair Trading Act .

Credibility of Mr Bourke and Mr Walsh

59 It was not in dispute at the hearing that some agreement had been made for the preparation of the first development application and some agreement had been made for the preparation of the second development application. However, as I previously noted, both agreements were made in conversations between Mr Bourke and Mr Walsh, about which conflicting evidence was given by Mr Bourke and Mr Walsh, and neither agreement was reduced to writing. Some assistance in determining what were the terms of each agreement can be derived from evidence of objective circumstances and from a consideration of which version of a conversation is the more inherently probable. However, some recourse must be had to an assessment of the general credibility of Mr Bourke and Mr Walsh. Mr Walsh’s credibility was the subject of a separate section of the plaintiff’s written submissions and I will deal first with Mr Walsh’s credibility.

60 Mr Walsh lied to the estate agent acting for the Moussas about his purposes in seeking to acquire the property. He told the estate agent that he wished to build a house and run some horses on the property. I am prepared to regard this lie as venial. Disclosure by Mr Walsh of his true purpose would have forced the price up. I would not infer from the telling of this lie that Mr Walsh would lie on other occasions.

61 However, much more serious in my opinion were parts of the affidavit sworn on 25 July 2002 in the Land and Environment Court proceedings, in support of the further application for an expedited hearing of the appeal.

62 In para 10 of the affidavit Mr Walsh said that in the preparation of the first development application Glenhaven had incurred considerable expenses. A summary was then given of those expenses. After the listing of a number of items, it was asserted in para 10:-

“Glenhaven properties has also expended considerable financial sums in respect of the following matters in support of the development application”.

63 Under this heading a number of items were listed, including “architects fees $406,700”. This item clearly referred to the invoices the plaintiff had rendered, including the principal invoice for $402,855.42.

64 Copies of the two invoices rendered by the plaintiff formed annexure D to the affidavit. On each invoice there is a stamp “PAID” followed by the stamped words or abbreviations “Date”, “Ref” and “Amt”, with handwritten entries alongside these words or abbreviations.

65 In oral evidence at the hearing Mr Walsh said that he had read the affidavit before swearing it. He denied that he had put the stamps on the plaintiff’s invoices or that the handwriting on the plaintiff’s invoices was his. He did not know whose handwriting it was.

66 Mr Walsh said in evidence that the handwriting alongside similar “PAID” stamps on some other invoices, copies of which were annexed to the affidavit, was the handwriting of a bookkeeper he had once employed, who had returned to Ireland. He accepted that the bookkeeper would not have placed “PAID” stamps on the invoices, without his instructions.

67 As to the stamps and handwriting on the invoices from the plaintiff, Mr Walsh agreed with questions put to him in cross-examination that “it couldn’t have been (the bookkeeper), it wasn’t yourself” and “it doesn’t leave anybody (else)”.

68 I am satisfied that the stamps and the handwriting indicating that the invoices from the plaintiff had been paid were placed on the invoices by Mr Walsh himself or by someone else on Mr Walsh’s instructions, Mr Walsh well knowing that the invoices had not been paid (apart from $50,000). Mr Walsh saw an advantage to himself in untruthfully representing to the Land and Environment Court that he had paid the amounts charged in the invoices.

69 Mr Walsh’s affidavit of 25 July 2002 has the further significance that there is no suggestion in the affidavit that the plaintiff had not earned the amounts it had charged or that its right to be paid was in any way conditional.

70 As noted earlier in this judgment, Mr Hannaford in his affidavit in support of the application for an expedited hearing of the appeal referred to the costs already incurred on the development application, including “architect’s fees $400,000”. I am satisfied that Mr Hannaford would not have included this matter in his affidavit, without receiving instructions from Mr Walsh.

71 Mr Hannaford had difficulty in collecting his costs of acting for Mr Walsh on the application to the Land and Environment Court. In a facsimile transmission of 21 April 2003 demanding payment, Mr Hannaford said in part:-

“In our telephone discussion you said “you can sue Glenhaven Properties if you like---it’s a $2 company and I can fuck you around for 3 years”. We are fully aware as to how the land at Glenhaven is legally held. We are also aware that other consultants retained by you in relation to this project remain unpaid. In fact it has been the cause of much embarrassment to us that consultants that we recommended to you have repeatedly contacted us since January requesting payment.”

72 I have concluded that I should have serious reservations about Mr Walsh’s credibility.

73 As regards the credibility of Mr Bourke, I do not accept every part of Mr Bourke’s evidence.

74 An attack was made on Mr Bourke’s credibility on the following basis:-

1. Mr Bourke said in his first affidavit that the town planner Mr Glendinning had said of the second development application that it was a reasonable proposal which was likely to be approved.

2. Mr Walsh in his affidavit had disputed this evidence, saying that at a meeting on 3 February 2003 between Mr Bourke, Mr Walsh and Mr Glendinning, Mr Glendinning had said that the second development application would not be approved and at a meeting on 25 February 2003 also between Mr Bourke, Mr Walsh and Mr Glendinning, Mr Glendinning had said to Mr Bourke that the second development application was basically the same as the first development application, “you just pulled little sections out here and there” and had said to Mr Walsh “get yourself another architect, who understands SEPP 5 and who will listen to what I have to say…”

3. Mr Glendinning in his affidavit had corroborated Mr Walsh’s evidence by saying that he had told Mr Bourke that the second development application would not be approved, and that at a meeting on 25 February 2003 he had told Mr Bourke that the second development application was basically the same as the first development application, that the modifications proposed were minor and that the second development application would not be approved and had told Mr Walsh “get yourself another architect who understands SEPP 5 and who will listen to what I have to say”.

75 If I accepted Mr Glendinning’s evidence, his evidence would corroborate Mr Walsh’s evidence and weaken Mr Bourke’s credibility. I have, however, concluded that there are serious doubts about the accuracy of Mr Glendinning’s recollection of events in early 2003.

76 Mr Glendinning’s affidavit, which was sworn on 8 December 2005, was based on a statement he had made a short time before. He had prepared the statement “just going from memory—I didn’t go back and review history when I wrote this”.

77 In para 37 of his affidavit Mr Glendinning said that, apart from the conversations with Mr Bourke and Mr Walsh of which he had given evidence, he had had nothing more to do with the second development application. This assertion was incorrect. As was shown by two facsimile transmissions from Mr Glendinning to Mr Bourke dated 20 March 2003 and 26 March 2003, Mr Glendinning had reviewed a draft statement of environmental effects for the second development application prepared by Mr Bourke and had given Mr Bourke his comments and Mr Glendinning had then reviewed a further draft by Mr Bourke of the statement of environmental effects.

78 Furthermore, it is difficult to reconcile the terms of these facsimile transmissions, fairly brief as they are, with the comments Mr Walsh and Mr Glendinning claim Mr Glendinning made about the second development application and Mr Bourke. In the second facsimile transmission Mr Glendinning made one comment and then commended Mr Bourke for his work, saying “otherwise well done”.

79 Mr Walsh and Mr Glendinning both said in identical words in their evidence that at the meeting on 25 February 2003 Mr Glendinning said to Mr Walsh “get yourself another architect who understands SEPP 5 and who will listen to what I have to say….”. In my opinion, it is improbable that these words were said. Mr Walsh himself gave evidence, which is confirmed by other evidence, that by 25 February 2003 Mr Walsh had reached an agreement with Mr Maxwell which was formalised in the contract for sale and the deed of agreement of 27 February 2003, that in January 2003 Mr Maxwell had engaged another architect Mr Pickrell to prepare a development application for the property and that Mr Pickrell had retained Mr Glendinning as a town planner on the application and by 25 February 2003, when the words were allegedly said, Mr Glendinning would have known that Mr Walsh had, in effect, got another architect and that he, Mr Glendinning was advising that other architect.

80 I do not accept that there were only minor changes between the first development application and the second development application. The number of dwellings had been greatly reduced from 140 (or 132) to 57. The defendants’ principal town planning witness, Mr Ingham, considered the second development application “a significant improvement” on the first development application.

81 If Mr Glendinning had made such trenchant criticisms of the second development application, it is difficult to understand why Glenhaven proceeded to enter into the deed of agreement of 27 February 2003, whereby it covenanted to lodge the second development application and, in the event of it not being approved by the Council within 42 days of the date of lodgement, to appeal to the Land and Environment Court, paying all the costs of the appeal. Mr Walsh lodged the second development application, paying a substantial lodgement fee.

82 Mr Walsh, in his oral evidence about what Mr Glendinning had said in February 2003, retreated from saying that Mr Glendinning had said words to the effect that the second development application would not be approved, to saying that “he (Mr Glendinning) would have said that we would have some issues with it”.

83 Mr Glendinning in his oral evidence said that the second development application was “substantially different” and “substantially better” than the first development application.

84 The conclusion I have reached, after assessing the credibility of Mr Walsh and Mr Bourke is that, while I would not accept every part of Mr Bourke’s evidence, his general credibility is substantially higher than Mr Walsh’s.

Issues as to the first development application agreement

(i) Who were the parties

85 In the amended statement of claim filed on 10 September 2004, which was the most recent statement of claim throughout most of the hearing, it was alleged that Mr Walsh had retained the plaintiff Oaktwig Pty Ltd on behalf of himself and (after its incorporation in October 2001) Glenhaven.

86 It was accepted by counsel for the defendants that Oaktwig Pty Ltd was the proper plaintiff.

87 However, in final written submissions on behalf of the defendants it was submitted, for the first time, that, within the terms of s 131 of the Corporations Act, Mr Walsh had entered into the agreement for the first development application on behalf of Glenhaven before it was registered and that Glenhaven had subsequently been registered and had ratified the agreement, with the consequences that Glenhaven became bound by the agreement and entitled to its benefit and Mr Walsh, subject to the possible operation of s 131(4) of the Corporations Act, ceased to be subject to any liability.

88 Section 131(1) of the Corporations Act provides:-

“If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies that contract:

(a) within the time agreed to by the parties to the contract; or

(b) if there is no agreed time — within a reasonable time after the contract is entered into”

89 Counsel for the plaintiff was taken by surprise by this submission and I expressed a view that, if it had been intended by the defendants to allege that the first development application agreement was a pre-registration contract within s 131 of the Corporations Act, the matters relied on to support this allegation should have been pleaded by the defendants.

90 Counsel for the defendants pointed to para 2 of the defence which had been filed on 17 December 2004, in which it was alleged that the first development application agreement had been made in about April 2001 between the plaintiff and the first defendant, that is Glenhaven. However, in my opinion, this allegation did not sufficiently plead the matters sought to be relied on (See Supreme Court Rules Pt 15 r 13, which was in force at the time the defence was filed).

91 Before I reserved my decision, I did not make any grant of leave to the defendants to amend the defence so as to rely on s 131 of the Corporations Act. A relevant matter in deciding whether to grant leave to amend would be whether further evidence might have been led or elicited by the plaintiff, if any amendment had appeared in the defence of 17 December 2004, for example further evidence relevant to any application of s 131(4) of the Corporations Act.

92 Notwithstanding that I had not granted leave to amend, I received, after I had reserved my decision, an amended defence in which it was alleged that Mr Walsh entered into the first development application agreement on behalf of Glenhaven and in which the various matters required for s 131 of the Corporations Act to be operative were expressly pleaded.

93 I do not consider that I should grant leave to amend. Nevertheless, I will consider on their merits counsel for the defendants’ submissions based on s 131 of the Corporations Act.

94 Section 131 applies only if a person enters into or purports to enter into a contract on behalf of or for the benefit of a company before it is registered.

95 In support of his contention that s 131 was applicable, counsel for the defendants referred to a paragraph in Mr Bourke’s first affidavit (para 21), in which Mr Bourke said that in one of the conversations in early 2001, Mr Walsh had said “I’m forming a new shelf company for this project so that I can sell the company if necessary”.

96 My attention was not directed to anything else in Mr Bourke’s affidavit or Mr Walsh’s affidavit which might support a submission that Mr Walsh had entered into the first development application agreement on behalf of a company to be registered.

97 In my opinion, the statement set out in para 21 of Mr Bourke’s affidavit that Mr Walsh said he would be forming a new shelf company, so that he could sell the company, if necessary, falls far short of establishing that Mr Walsh was entering into an agreement on behalf of a company before it was registered.

98 Counsel for the defendants referred to the decision of the Court of Appeal in Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2005] NSWCA 319. However, the facts in that case were very substantially different from the present case. In Aztech the contract was in writing, in the written contract an individual Mr Azzi was identified as “the promoter”, a recital in the contract referred by name to the company to be incorporated, which was identified as “the principal” and the first operative clause in the agreement provided that the promoter intended to enter into the agreement on behalf of the principal before it was registered.

99 In my opinion, the first development application agreement was made between Oaktwig Pty Ltd and Mr Walsh, and remained an agreement between Oaktwig Pty Ltd and Mr Walsh, notwithstanding the incorporation of Glenhaven approximately six months afterwards.

(ii) When was it entered into

100 In the amended statement of claim of 10 September 2004 it was alleged that the agreement was made in about June 2001.

101 In the defendants’ written submissions it was submitted that, having regard to a number of pieces of evidence, I should find that the agreement had been entered into in about April 2001.

102 I granted leave to the plaintiff to amend the statement of claim so as to allege that the agreement had been entered into in about April 2001.

103 I find that the agreement was entered into in about April 2001.

(iii) Its scope

104 In the statement of claim the plaintiff alleged that the agreement was to perform certain architectural and design services in respect of the property.

105 In his evidence Mr Bourke agreed that the services to be performed extended to planning and landscape design services.

106 Counsel for the defendants submitted, and counsel for the plaintiff disputed, that the services to be performed included advising Mr Walsh about the requirements of SEPP 5. Counsel for the defendants pointed to various pieces of evidence, including evidence that Mr Walsh had never previously done a SEPP 5 development, whereas Mr Bourke was an architect with previous experience in SEPP 5 developments.

107 In my opinion, it was implicit in the relationship between the parties and the services the plaintiff expressly agreed would be provided, that the plaintiff (Mr Bourke) would advise Mr Walsh about the requirements of SEPP 5.

(iv) Its terms as to remuneration

108 There was no dispute that Mr Walsh agreed to pay at the rate of $2600 per unit. However, it was pleaded in the defence (para 2(b)(iv)) that the $2600 per unit would be paid “upon approval of the development application by Council and the sale of the Glenhaven property”. In his affidavit Mr Walsh gave evidence to that effect. Mr Bourke in his affidavit in reply disputed that payment was conditional upon the development application being approved by Council and the property being sold.

109 An argument can be made for each of the parties that it or he would be unlikely to have agreed to what the opponent alleges was the term of the agreement.

110 On behalf of Mr Bourke, it can be argued that it is unlikely that Mr Bourke would have agreed to undertake the substantial amount of work required to prepare the development application, if any remuneration for the work was to be conditional upon the Council approving the development application and the property being sold.

111 On the other hand, it can be argued on behalf of Mr Walsh that it is unlikely that Mr Walsh would have agreed to pay Mr Bourke at the rate of $2600 per unit, irrespective of whether any development approval was granted and, if some development approval was granted, irrespective of the number of units which were approved.

112 Arguments each way can also be made based on the remuneration of $2600 per unit. For Mr Bourke, it can be argued that in the absence of any remuneration in addition to his professional fees, for example a share of profits, it is unlikely that he would have agreed that payment of his professional fees would be conditional. For Mr Walsh, it can be argued that the agreed remuneration of $2600 per unit was a high figure, rendering it more likely that Mr Bourke would have agreed to his remuneration being subject to conditions.

113 I have concluded that the promise to pay remuneration at the rate of $2600 per unit was not conditional on approval of the development application by Hornsby Shire Council and sale of the Glenhaven property.

114 Mr Bourke was a professional person agreeing to render professional services and professional persons do not usually enter into speculative agreements under which their right to remuneration for their services is conditional upon a particular result being achieved. I am satisfied that another case sought to be relied on by counsel for the defendants as an instance of Mr Bourke entering into a speculative costs agreement was very different from the present case.

115 It would have been highly speculative for Mr Bourke to have agreed to a term of the kind alleged by Mr Walsh. Mr Bourke knew that Hornsby Shire Council was opposed to SEPP 5 developments within the Shire and there was a real possibility that a SEPP 5 development application would be refused by the Council. Even if the development application was approved by the Council, there could be a long delay in finding a purchaser for the property.

116 I am satisfied that Mr Walsh was aware that the Council was opposed to SEPP 5 developments, that a SEPP 5 development application might be refused by the Council and that it might be necessary to appeal to the Land and Environment Court.

117 Mr Walsh was a property developer who demonstrated at a number of stages that he was willing to take risks. For example, he entered into the agreement with the plaintiff before he had any written agreement with the Moussas and he entered into the put and call option with the Moussas under which he could have been obliged to acquire the property, before obtaining any finance.

118 I accept evidence by Mr Bourke that Mr Walsh told Mr Bourke that he, Mr Walsh, had made his own calculations and believed he could fit 140 dwellings into the design for the site. Accordingly, Mr Walsh believed that he could make a large profit out of the venture.

119 In accordance with his contention that payment of his fees was not subject to any condition, Mr Bourke caused the plaintiff to render an invoice on 31 January 2002, upon preparation of the development application being completed. There is no evidence of any complaint by Mr Walsh that the rendering of the invoice was premature.

120 In May 2002 Mr Walsh made a part payment to the plaintiff of $50,000. I do not accept Mr Walsh’s explanation that he made this payment gratuitously.

121 As previously noted, Mr Walsh represented in his affidavit of 25 July 2002 that the plaintiff’s fees had been incurred and paid. There is no suggestion in Mr Walsh’s affidavit that payment of the plaintiff’s fees was subject to any condition.

122 I also rely on my finding that Mr Bourke’s general credibility is greater than Mr Walsh’s.

(v) Its other terms

123 It was accepted by counsel for the defendants that the plaintiff did not agree to guarantee a result, that is to say, the plaintiff did not promise that development approval would be obtained.

124 This concession was properly made. In general, a professional person does not guarantee to a client that the aimed for result will be achieved. See Jackson & Powell on Professional Liability 6th ed at 2-001 to 2-012.

125 In the present case the result aimed for was a decision to be made by a third party the Council, (or the Land and Environment Court), applying criteria some of which were imprecise and subjective. I am satisfied that it was appreciated by both Mr Bourke and Mr Walsh that the Council, at least, might not grant development consent.

126 Any alleged terms of the agreement which would be tantamount to a term that development approval would be granted were likewise not terms of the agreement, for example an alleged term that the plaintiff promised “to ensure that the development application would be approved”.

127 As regards an alleged term that the development application would “comply with SEPP 5”, I consider that the agreement did include a term that the development application would comply with the “development standards” in SEPP 5, that is the standards in SEPP 5 which were precisely stated and in respect of which it could be objectively determined whether they had been complied with, but did not include a term that the development application would comply with the “performance standards” in SEPP 5, that is the standards in SEPP 5 in respect of which it was a matter of subjective judgment whether they had been complied with.

128 It was common ground that the agreement, as being an agreement for the performing of services, included an implied term that the plaintiff exercise reasonable care and skill in performing the services it had agreed to provide. Astley and Ors v Austrust Ltd (1998 –1999) 197 CLR 1 at 22.

129 It was alleged in the defence and in the cross-claim that the agreement included a term that the services would be provided within 10 weeks. Mr Walsh gave evidence that Mr Bourke had said to him in April 2001 “I can do the plans in about 10 weeks”. In his affidavit in reply Mr Bourke denied that he had said this, giving, as one reason why he would not have said this, that time would have been required to obtain a survey of the property and to obtain necessary reports from external consultants.

130 I do not consider that I should find that it was a term of the agreement that the services would be provided within 10 weeks.

131 It was common ground that, if there was no express term as to the time within which the services were to be performed, it was an implied term of the agreement that the services would be performed within whatever in all the circumstances was a reasonable time.

132 I have already noted that it was common ground that there was an implied term in the first development application agreement that the plaintiff in performing the services it had agreed to provide, including the giving of advice, would exercise reasonable care and skill. Although the plaintiff is Oaktwig Pty Ltd, it will be convenient to refer to the person obliged to exercise reasonable care and skill as being Mr Bourke.

(vi) Was it an entire contract

133 The contract was an entire contract. However, the case of Oliver v Lakeside Resort Property Trust Pty Ltd [2005] NSWSC 1040 (Barrett J) referred to by counsel for Mr Walsh is readily distinguishable from the present case. In Oliver the plaintiffs withdrew their services before the project had been completed, with the consequence that the plaintiffs’ performance was neither complete nor sufficiently substantial to qualify for remuneration under the contract. In the present case Oaktwig Pty Ltd completed the agreed project.

2(i) Was there a breach of a term to exercise reasonable care and skill

134 In para 20 of the cross-claim very extensive particulars were provided of alleged breaches of this implied term of the first development application agreement. Many of these particulars were not really particulars of breaches of an implied term to exercise reasonable care and skill but particulars of alleged breaches of other terms, for example a term that the plaintiff would prepare and lodge a development application which would be approved by the Council. As the cross-claimants’ claim was ultimately put, the respects in which it was submitted that Mr Bourke had failed to exercise reasonable care and skill were:-

(1) he had prepared and lodged a development application which had no reasonable prospect of being approved by the Council or by the Land and Environment Court (see the defendants/cross-claimants’ written submissions para 70—“never going to be approved”) and which a reasonably competent architect would have realised had no reasonable prospect of being approved by the Council or by the Court.

135 As part of (1) it was submitted that Mr Bourke had failed to respond or had failed to respond reasonably to issues which had been raised by Council and which were the issues on which development approval had subsequently been refused by the Council and by the Land and Environment Court.

136 It is apparent that particular (2) is dependent on particular (1), that is, that Mr Bourke had prepared and lodged a development application which had no reasonable prospect of being approved and which a reasonably competent architect would have realised had no reasonable prospect of being approved.

137 It is important to note that the particulars extend to alleging that there was no reasonable prospect of the development application being approved by the Court. As I have already stated, both Mr Bourke and Mr Walsh appreciated that approval might be refused by the Council.

138 Both the Council and the Land and Environment Court refused to approve the first development application. However, it could not be inferred simply from the fact that the development application was refused by both the Council and the Land and Environment Court that Mr Bourke was negligent in preparing and lodging the first development application.

139 As far as the Council is concerned, there was much evidence that in 2002 Hornsby Shire Council, or at least a majority of councillors including the Mayor, were strongly opposed to SEPP 5 developments in the Shire.

140 As far as both the Council and the Court are concerned, a distinction was drawn by a number of witnesses between those requirements in SEPP 5 which were “development standards”, that is standards in respect of which it could be objectively ascertained whether they had been complied with, and those requirements which were “performance standards”, that is standards in respect of which it would be a matter of subjective judgment whether they had been complied with.

141 In his report Mr Ingham said at p 15:-

“I’m constantly being asked to provide advice as to the probability of success of development applications which proceed to appeal. I’m always very careful to ensure that I do not give specific advice in relation to this matter. The people who hear appeals are people with particular opinions and biases, as we all are, and the possibility of success at appeal depends very often on the individual who hears the appeal”.

142 It was sometimes suggested by counsel for the plaintiff in his submissions that the decisions of the Council and the Land and Environment Court refusing to approve the first development application were wrong, in that the Council and the Court had not faithfully applied the provisions of SEPP 5. However, the principal submission made by counsel for the plaintiff on this subject was that it was not necessary that I should find that the Council and the Court were wrong in refusing to approve the first development application; it would be sufficient for me to find that an opinion that the first development application had at least a reasonable prospect of being approved by the Court, if not the Council, could reasonably have been held by a competent architect. Counsel for Mr Walsh submitted that I should be very cautious in making any finding that the Land and Environment Court was wrong and, even if I were to conclude that the Council was wrong, a reasonably competent architect would nevertheless have accepted that he had to respond to the issues which the Council had raised. I do not consider that I should enter upon any consideration of whether the decisions of the Council and of the Court should be regarded as wrong.

The number of units

143 It is clear that an important factor in both the Council and the Court refusing to approve the first development application was the number of units in the development application (140, reduced to 132 during the hearing of the appeal). The number of units was directly related to the size of the development and had ramifications for such matters as solar access and privacy.

144 It was in the interests of both Mr Bourke and Mr Walsh that the number of units in the development should be maximised, provided, of course, that development approval could be obtained. The amount of Mr Bourke’s remuneration was directly linked to the number of units. Mr Walsh’s profit would be likely to be greater, the greater the number of units.

145 Conflicting evidence was given by Mr Bourke and Mr Walsh about which of them was responsible or primarily responsible for the development application containing as many as 140 units.

146 In his evidence Mr Bourke accepted that Mr Walsh had asked him, at a time which was not fixed in Mr Bourke’s affidavit but which would have been in about April 2001, “how many units can we get on the site”, to which Mr Bourke had replied: “I can do some preliminary plans and calculations” (Mr Bourke’s first affidavit para 22). Mr Bourke prepared some preliminary concept plans, which indicated to Mr Bourke that about 100 units would be possible, although no survey report had yet been obtained (Mr Bourke’s first affidavit para 26).

147 Mr Bourke gave a copy of the preliminary concept plans to Mr Walsh, who said: “We need to get as many units as possible on the site” (Mr Bourke’s first affidavit para 27).

148 After a survey report was obtained, Mr Bourke had a conversation with Mr Walsh. Paragraph 36 of Mr Bourke’s affidavit was in the following terms:-

“Richard Walsh visited my office and inspected the plans as they were being prepared.

He said How many units have we got.

I said We have about 108, 3-bedroom units

He said We should be able to get more than that on 7 acres.

I said Some of this land is steep and we have a large water feature, we do not want to crowd the site too much or council won’t like it.

He said We need to start with as many units as possible. We can always take units out, if they don’t like them.

I said Well the density is OK, below 0.5FSR, but some of our site is steep and we have a large water feature and several trees in the middle of the site. We need to have substantial setbacks from our boundaries because it is a rural zoned area on this side of the road. Council have requirements for setbacks in rural areas to be increased.

He said The Council may not like it but we need to get about 140 units on the site to get the best return we can. I have been looking at the site and we can easily get 140 units and stay under the 0.5FSR. If the Council don’t like it, we will take them to Court. We are entitled to build a retirement village on the land. That’s the law.

I said You will not find much support at Hornsby Council for SEPP5 developments, the Mayor does not like them. He has even sent a letter out to ratepayers about his objection to SEPP 5. I have a property at Normanhurst and I received a letter. I wrote back to him to say he should realize that older people need somewhere decent to retire and should support housing for aged persons.

He said The whole thing is political but I have checked on SEPP5 and we are allowed to develop the land to 0.5FSR that is what I want to do, so proceed with the design on the basis of 140 units with double car garages, because that is what the market requires. All the experts say that units in this area should be 3 bedrooms with double garages.

I said I will proceed with the design, as you say we can take out some units if we need to. We should have a prelodgement meeting with Council as soon as we have a full design layout which should be next week.

He said I have looked at the building setbacks along Old Northern Road, they seem to vary considerably, the buildings and car park at Flower Power are right near the front boundary.

286 The two reasons given by Mr Ingham for his opinion that the second development application had little prospect of being approved by the Council were the distance some residents would have to travel from their car parking spaces to their units and the foliage of the willow trees which could have affected the location of the access road or driveway.

287 These reasons were the same as the first and sixth reasons given by Mr Ingham for his opinion that the first development application had no reasonable prospect of being approved. In dealing with the first development application I have concluded that, when Mr Relf’s evidence and the report by the arborist are taken into account, little weight should be given to these reasons. Consequently, the basis for Mr Ingham’s opinion that the second development application had little prospect of being approved by the Council, is removed.

288 In his report Mr Young said that he had not had the opportunity to study the second development application in detail and had seen only the plans attached to Mr Ingham’s report. On the basis of Mr Ingham’s report Mr Young concluded:-

“It is my view that the second application had a strong chance of success at Court with access issues amended as outlined by Mr Ingham and appears to have addressed the issues raised in the Commissioners’ LEC decision”.

289 Mr Young gave oral evidence that, after making his report he had looked at the plans for the second development application. After looking at the plans he was of the opinion that the second development application had little chance of being approved by the Council (as distinct from the Land and Environment Court) but this opinion was not based on the merits of the second application but “my reading of the Council resolutions at that particular time was that Council was trying to test the waters over SEPP 5 developments in rural areas from a political point of view”.

290 In his report for these proceedings Mr Blyth expressed the opinion that the second development application was a proposal that should have received consent.

291 I do not consider that any inference can be drawn from the fact that the second development application was ultimately refused by the Council. It was the third development application, and not the second development application, which was actively pursued, after both applications had been lodged on the same day. An appeal was brought against the deemed refusal of the third development application and it was approved by the Council in October 2003. The second development application was refused by the Council in February 2004. It was never adjudicated on by the Land and Environment Court.

292 I conclude that the defendants have not established that the second development application had no reasonable prospect of being approved by the Land and Environment Court and, accordingly, there was no obligation to advise Mr Walsh that the second development application had no reasonable prospect of being approved by the Court. I find that there was no breach of the term to use reasonable care and skill.

293 There was no breach of this term.

294 No breach of any other term has been shown.

295 There was such a duty in tort but it was not breached.

Fair Trading Act

296 The claim under the Fair Trading Act was brought by Glenhaven and Mr Walsh against Oaktwig Pty Ltd and also Mr Bourke personally.

297 The claim under the Fair Trading Act, as ultimately put, was limited to the first development application and can be summarised as follows:-

Fair Trading Act

298 I will now consider the parts of issue 7.

299 The alleged representations which were ultimately pressed by the cross-claimants were the representations pleaded in parts of para 5 of the cross-claim, that:-

(e) the development application would be prepared and lodged within 10 weeks

(f) the development application would be prepared within a reasonable time

300 As to alleged representation (e), I have already concluded that I should not find that it was a term of the first development application agreement that the services would be provided within 10 weeks. For similar reasons, I do not accept that Mr Bourke made a representation to Mr Walsh that he could do the plans in about 10 weeks.

301 As to alleged representation (f), Mr Bourke did not make any express representation to Mr Walsh that the services would be performed within a reasonable time. However, I find that such a representation was made impliedly by Mr Bourke to Mr Walsh. Mr Bourke held himself out as being a competent architect, with previous experience in preparing SEPP 5 developments.

302 As to alleged representation (g):-

303 I note that none of the dwellings were to be double storey dwellings. The first development application was for 140 single storey dwellings in double storey buildings.

304 For similar reasons to those I gave for holding that it was not a term of the first development application agreement that the first development application comprising 140 units would be approved, I hold that no representation was made that a development application for up to 140 units would be approved by either the Council or the Court. Both Mr Bourke and Mr Walsh appreciated that a development application for up to 140 units would not necessarily be approved.

305 The issue with regard to alleged representation (g) is whether a representation, that a development application with as many as 140 units had a reasonable prospect of being approved by the Court, if not the Council, was made.

306 Mr Bourke disputed having made such a representation. However, Mr Bourke accepted when giving oral evidence that, if he had been of the opinion that a development with 140 units was not “feasible”, he would have been obliged to so advise his client Mr Walsh and he should not have proceeded to prepare a development application with 140 units. I consider that by not advising Mr Walsh that a development with 140 units was not “feasible” and by proceeding to prepare a development application with 140 units, Mr Bourke did impliedly represent to his client that a development application with 140 units, or at least a development application with only a few units taken away from 140 units, had at least a reasonable prospect of being approved by the Court, if not the Council.

307 I consider that Mr Walsh, and therefore Glenhaven as well, relied on the representations which I have found were made.

308 It is true that I have found that the idea of having as many as 140 units originated with Mr Walsh and was strongly pressed by Mr Walsh. Nevertheless, I consider that Mr Walsh, as someone who had never previously done a SEPP 5 development, should be regarded as having relied, at least to some extent, on what he had been told (and not told) by Mr Bourke, after he communicated to Mr Bourke that he wanted 140 units, as indicating that a development application with as many as 140 units, or with only a few units taken out from 140 units, had a reasonable prospect of being approved.

309 As to representation (f), I find that Mr Bourke, as an experienced architect with previous experience in SEPP 5 developments, had reasonable grounds for representing, impliedly, that he would be able to perform the agreed services within a reasonable time.

310 As to representation (g), for reasons similar to those I gave for holding that there was no breach of the term to use reasonable care and skill, I hold that Mr Bourke had reasonable grounds for making representation (g). These grounds included the terms of some of the provisions of SEPP 5 including clauses 3, 4, 5, 10 and 14; the effect on any rural character of the property and surrounding properties of the existing Flower Power development and the residential development on the other side of Old Northern Road; and the AMCORD guidelines referred to in SEPP 5.

311 I conclude that such representations as were made were not misleading and accordingly the claim under the Fair Trading Act fails.

Fair Trading Act

312 I have held that the cross-claimants Mr Walsh and Glenhaven are not entitled to succeed on any of their causes of action for breach of contract, in tort and under the Fair Trading Act. Accordingly, it is not necessary for me to consider what amount of damages the cross-claimants would have been entitled to, if they had succeeded on one or more of their causes of action. I will, however, deal, fairly succinctly, with the question of damages.

313 Relevant to the question of what damages the cross-claimants would have been entitled to is what actually happened. As stated earlier in this judgment, Glenhaven sold the property on 27 February 2003 to Mr Maxwell and his wife for a price of $3 million. On the same day Glenhaven entered into the deed of agreement with Mr and Mrs Maxwell, which provided inter alia that if either the second development application or the third development application was approved Mr and Mrs Maxwell would re-sell the property and on completion of the re-sale pay to Glenhaven half of the amount by which the sale price on the re-sale exceeded $3 million. The third development application was approved in October 2003. In about October 2005 the property with the development approval was sold by Mr and Mrs Maxwell for a price of $5,840,000. Glenhaven, in addition to the amount of $3 million it had received in February 2003, received half of the amount by which the sale price exceeded $3 million (this amount was variously stated as $1,376,500 and $1,376,200. I will adopt $1,376,200).

314 Accordingly, Glenhaven made a profit out of the total transaction of nearly $2 million, consisting of a difference between the amounts it received ($3 million plus $1,376,200) and its total costs (the cost of purchasing the property and other expenses) of approximately $2,440,000. A major reason for the profit was the appreciation in property values which occurred before the property was re-sold in 2005.

315 The cross-claimants claimed damages for breach of contract, in tort and under the Fair Trading Act. Counsel for the cross-claimants informed the Court in oral submissions that he relied principally on the claim for damages for breach of contract. The amount of any damages which could be awarded in tort or under the Fair Trading Act would be no higher, and arguably lower, than the amount of damages which could be awarded for breach of contract.

316 As damages for breach of contract the cross-claimants claimed damages for reliance losses and expectation losses. Counsel referred to Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 11-12.

317 A summary of the amounts claimed as reliance losses was set out in a document which is under tab 67 in exhibit 1 at the hearing. The amounts in the summary totalled $376,980.01. Copies of the invoices for the amounts claimed were collected under tab 68 in exhibit 1.

318 In the document under tab 67 a total amount of $114,737 was claimed as being costs charged by Hannafords Lawyers. However, counsel for the cross-claimants acknowledged that the invoices under tab 68 came to a lesser total. Counsel for the cross-defendants said that an even lesser amount was actually paid. I would have allowed as damages only the actual amounts paid.

319 I also disallow an amount claimed for the preparation of a model being $5,940.

320 It seems to me that, even if there had been a breach or breaches of contract, some benefit would have been gained by the cross-claimants from some of the expenditure, for example fees paid to a firm of surveyors for a survey of the property.

321 The claim for damages for expectation losses was put in three alternative ways, with descending amounts of money claimed, as follows:-

322 In my opinion, this method of assessing damages would be clearly inappropriate. Mr Walsh had borrowed the full amount of the purchase price and his holding costs were heavy. It is highly improbable that, if Glenhaven had remained the sole owner of the property, it would have continued to hold the property until October 2005, when property values had appreciated. Glenhaven would have sold the property much earlier than 2005, at a lower price.

323 In the cross-claimants’ written submissions a range of dates at three monthly intervals between 30 June 2002 and 30 June 2003 were selected as being possible dates for the development aproval and sale, with a calculation of the damages for each date.

324 The cross-claimants’ preferred date was 30 June 2002. This date was sought to be justified, by reference to when Mr Bourke and Mr Walsh had made their agreement and to the period of nine months which had elapsed between Mr Pickrell first receiving instructions to prepare the third development application and the granting of approval to the third development application and allowing a couple of extra months for contingencies.

325 It is apparent that critical to this method of assessing damages would be the value attributed to the property with the development approval, at the selected date.

326 The valuer retained by the cross-claimants, Mr Zantiotis, valued the property with a development approval, as at 30 June 2002, at $7,200,000. If the value of $7,200,000 is adopted, then the amount of damages calculated in accordance with the method I have outlined would be approximately $587,252.

327 The valuer retained by the cross-defendants, Mr Bridger, valued the property with a development approval at June 2002 at $3,800,000. If this value was adopted, then no damages would be payable.

328 Damages would be payable under this method of calculating damages, only if the value of the property with a development approval was not less then a figure exceeding 6.6 million, that is a figure fairly close to Mr Zantiotis’s valuation and much higher than Mr Bridger’s valuation.

329 At the hearing there was a considerable amount of cross-examination of both valuers and some criticisms can validly be made of both valuers. I have, however, concluded that Mr Zantiotis’s valuation was too high and too high by an amount which would prevent any damages being awarded under this method of assessing damages.

330 The sales used by Mr Zantiotis as comparable sales or at least sales providing some assistance were all sales of properties in the Kuring-gai Municipality, in which, it was common ground, property values are generally much higher than in the Hornsby Shire. Mr Zantiotis did apply discounts to the figures for sales of properties in the Kuring-gai Municipality but the amounts of the discounts appeared to me to be fairly arbitrary.

331 Mr Zantiotis attempted to check his valuation by doing a hypothetical development valuation of the property. However, there were a number of dubious features in his use of this alternative method, including the amount of the allowance made for profit and risk, the amount allowed for building costs, the omission of certain items and the sales figures assumed.

332 I do not consider that I should give any weight to some evidence given by Mr Maxwell of a telephone offer to buy the property at a certain price which Mr Maxwell said had been made in 2003.

333 Credit was given for the amount of $1,376,000 or thereabouts received by Glenhaven in October 2005, by applying it first to extinguish the loss of profit of $1,182,000 and then applying the balance so as to reduce the interest debt from $284,748.66 to $90,748.66.

334 I do not consider that damages should be assessed in this manner. Mr Walsh made a decision in February 2003, not to simply sell the property for whatever Glenhaven could get for it, but to enter into the complex arrangement with Mr and Mrs Maxwell, which, apart from relieving the financial pressure on him, offered the prospect of considerable, if uncertain, profits.

The amount of the plaintiff’s claim

335 Copies of invoices rendered by the plaintiff appear at tab 12 in exhibit 1. Disregarding the invoices and parts of invoices which I was informed during the hearing were not pressed by the plaintiff, I understand the plaintiff’s claim to be made up as follows:-

Invoices at p 34 of tab 12	402,855.42
Invoice at p 35 of tab 12	2,076.00
Invoice at p 38 of tab 12	1,768.58
Part of invoice at p 39 of tab 12, being a charge for 7,006.80 plus GST thereon	777.48
Part of invoice at p 40 of tab 12, being a charge for 5,077.60 plus GST thereon	635.36
Invoice at p 41 of tab 12	166,472.68

336 Credit would have to be given for the amount of $50,000 paid in May 2002. I have not attempted to calculate interest on the amounts claimed.

337 I have decided that there should be a verdict in favour of the plaintiff on the claim and a verdict in favour of the cross-defendants on the cross-claim. I will not at this stage enter any verdicts or make any orders.

338 I would ask the parties to seek to agree on the amount of the verdict which should be entered, consistently with my judgment, in favour of the plaintiff. If the parties are unable to agree on what verdicts and orders should be made to give effect to my judgment, the matter will have to come back before me.

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Citations

Oaktwig Pty Ltd v Glenhaven Property Holdings Pty Ltd [2007] NSWSC 1533

Most Recent Citation

Glenhaven Property Holdings Pty Ltd v Oaktwig Pty Ltd [2008] NSWCA 154

Cases Citing This Decision

1

Glenhaven Property Holdings Pty Ltd v Oaktwig Pty Ltd [2008] NSWCA 154

Cases Cited

4

Statutory Material Cited

3

DEM (Aust) Pty Ltd v Pittwater Council [2004] NSWCA 434

Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2005] NSWCA 319

Oliver v Lakeside Property Trust Pty Ltd [2005] NSWSC 1040

CITATION:	Oaktwig Pty Ltd v Glenhaven Property Holdings Pty Ltd [2007] NSWSC 1533
HEARING DATE(S):	19/02/07-002/03/07, 07/05/07, 14/05/07-29/05/07
JUDGMENT DATE :	28 June 2007
JUDGMENT OF:	James J
DECISION:	Verdict in favour of the plaintiff on the claim and a verdict in favour of the cross-defendants on the cross-claim.
CATCHWORDS:	Architect’s remuneration — architect’s professional negligence — State Environmental Planning Policy 5 — Corporations Act s 131
LEGISLATION CITED:	Corporations Act Environmental Planning and Assessment Act Fair Trading Act
CASES CITED:	Astley and Ors v Austrust Ltd (1998 –1999) 197 CLR 1 Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2005] NSWCA 319 DEM (Australia) Pty Ltd v Pittwater Council [2004] NSWCA 434 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Oliver v Lakeside Resort Property Trust Pty Ltd [2005] NSWSC 1040
PARTIES:	Oaktwig Pty Ltd v Glenhaven Property Holdings Pty Ltd
FILE NUMBER(S):	SC 11684/04
COUNSEL:	S. Bell - Plaintiff C.A. Freeman - Defendant
SOLICITORS:	Webster O'Halloran & Associates - Plaintiff Leonard Legal - Defendant