Peet Ltd v Richmond

[2011] VSCA 343

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2010 0004
PEET LIMITED (ACN 008 665 834) & ORS	Appellants
v
ELIZABETH AMELIA RICHMOND	Respondent

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JUDGES	NETTLE and NEAVE JJA and JUDD AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	10 October 2011
DATE OF JUDGMENT	16 November 2011
MEDIUM NEUTRAL CITATION	[2011] VSCA 343
JUDGMENT APPEALED FROM	[2009] VSC 585 (Hollingworth J)

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Restitution – Action for work and labour done – Recovery on a quantum meruit – Land development – Whether appellant entitled on a quantum meruit claim to 20% of the increase in land value the result of rezoning contributed to by appellant’s work – Whether judge erred in making specific deductions from claim for work and labour done.

Practice and procedure – Interest – Whether appellant entitled to pre-litigation interest in circumstances where no particularised claim made until first day of trial – Delay – Appellant’s expenses not detailed in a timely manner – s 60 Supreme Court Act 1986.

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Appearances:	Counsel	Solicitors
For the Appellants	Mr A J Myers QC with Ms C G Button	Mills Oakley
For the Respondent	Mr N J Young QC with Mr P H Solomon SC	Corrs

NETTLE JA:

1. This is an appeal from a judgment given in the Commercial and Equity Division.  The appellant (Peet), which was the plaintiff in the proceeding below, is a property development company.  The respondent (Mrs Richmond) who was the defendant below, owns land at Bulban Road, Werribee (the Richmond Land), which is some 3.5 kilometres from the Werribee town centre and borders on a number of new and established housing developments.  Until November 2005, the Richmond Land was outside the ‘urban growth boundary’ (UGB).  

1. Peet instituted the proceeding below by writ dated 16 January 2007.  By its statement of claim it alleged that:

a)    it had an agreement with Mrs Richmond under which (in general terms) she was to supply the Richmond Land;  Peet would procure the inclusion of the Richmond Land within the UGB, the inclusion of the Richmond Land in the Werribee Growth Area Map, and the re-zoning of the Richmond Land from Rural Use land to Residential land;  and Peet would fund and carry out the development of the Richmond Land (by way of subdivision for housing), with the profits from the development of the Richmond Land to be shared between Mrs Richmond and Peet according to pleaded percentages;

b)     Mrs Richmond repudiated the agreement (the Contract claim);

c)   Alternatively, Mrs Richmond was estopped from denying the agreement and that she had repudiated the agreement (the Estoppel claim);

d)     Alternatively, by virtue of work undertaken by Peet (from December 2002 to late 2005) to procure the inclusion of the Richmond Land within the UGB, the value of the Richmond Land was greatly increased, and to permit Mrs Richmond to retain the benefit of the increased value of the Richmond Land would unjustly enrich her (the Unjust Enrichment claim);

e)   Alternatively, Peet was entitled to compensation as upon a quantum meruit or quantum valebant for work and labour done and expenses incurred in procuring the inclusion of the Richmond Land in the UGB and the benefit thereof to Mrs Richmond (the quantum meruit claim).

1. By her Defence, Mrs Richmond denied the Contract claim, denied the Estoppel claim and denied the Unjust Enrichment claim, but admitted that Peet was entitled to remuneration upon a quantum meruit or quantum valebant for work and labour done and expenses incurred in relation to the Richmond Land.  She further averred, as was the fact, that she had on various occasions since September 2004 informed Peet that she was prepared to pay Peet remuneration on that basis and sought from Peet details of its work and labour and the costs and expenses incurred.

1. During the course of the proceeding, Mrs Richmond’s solicitors sought further particulars of Peet’s quantum meruit claim and, by further and better particulars dated 9 September 2008, Peet:

a)   quantified its Unjust Enrichment claim in the amount of $15.7m (being the amount of the increase in the value of the Richmond Land the result of its inclusion in the UGB);  and

b)     quantified its quantum meruit claim in the sum of $3,510,995.78 (based on out of pocket expenses plus 20% of the increase in the value of the Richmond Land the result of its inclusion in the UGB);  alternatively, in the sum of $1,279,709.73 (for out of pocket expenses plus an amount calculated by reference to the time spent by Peet’s staff).

Notably, that was the first occasion on which Peet made a claim based on 20% of the increase in the value of the Richmond Land (the 20% claim).

1. In the weeks leading up to the trial, Peet several times applied to amend its Statement of Claim.  Ultimately, however, the application was not pressed.  Instead, on the first day of the trial, Peet abandoned the Contract claim, the Estoppel claim and the Unjust Enrichment claim, and the trial proceeded on the basis of the quantum meruit claim alone.

1. At trial, there was no dispute that the value of the Richmond Land had increased from $13m to $28.7m (an increase of $15.7m) as a result of its inclusion in the UGB.  The dispute was as to the value of the work and labour done and expenses incurred by Peet in achieving that result.

1. Peet relied on a report (and supplementary report dated 26 August 2008) of a chartered accountant, Mr Dwyer (the Dwyer report), in which Peet’s claim was put on two alternative bases:

a)   First, a claim for recompense based on the time said to have been spent by Peet staff, and on expenses said to have been incurred by Peet, in achieving the inclusion of the Richmond Land in the UGB;  and

b)     Secondly, a claim for recompense based on a share of the profit (which was claimed to be 20% of the increased value of the Richmond Land the result of its inclusion in the UGB).

1. Peet also called six lay witnesses to substantiate the claim for time spent and expenses incurred, as detailed in the Dwyer report.  Mrs Richmond did not call any witnesses.

The judgment below

1. The judge handed down judgment on 8 April 2009.  She allowed Peet’s quantum meruit claim in a sum of $828,455.43 (which was the result arrived at after making specific deductions from the sums claimed in the Dwyer Report) but rejected Peet’s claim for a share of profit based on 20% of the increase in the value of the Richmond Land.  

1. On 16 June 2009, the judge heard argument on interest;  on 30 July 2009, she heard argument on GST;  on 11 and 12 August 2009, she heard argument on costs;  and on 17 December 2009, she handed down judgment on interest, GST and costs.  Her Honour refused to award any pre-litigation restitutionary interest, and confined the award of statutory interest to the period commencing on 16 November 2007, being the date on which the first version of the Dwyer Report was served.

1. The final award was, therefore, $828,455.43, plus GST and interest of $190,198.39 computed at the statutory rate from 16 November 2007 to judgment.

1. Peet later sought, and was refused, leave to appeal against the judge’s award of indemnity costs of the claims abandoned on the first day of trial.

Issues on Appeal

1. The issues in the appeal are:

1)    Grounds 1, 2, 3, 4 and 5 :  Whether the judge erred in rejecting Peet’s claim based on 20% of the increase in the value of the Richmond Land the result of its inclusion in the UGB (the 20% claim issue).

2)   Ground 8:[1]  Whether the judge erred in making specific deductions from the figures claimed in the Dwyer Report (the specific deductions issue).

3)   Grounds 9, 10 and 11:  Whether the judge erred in refusing to grant pre-litigation restitutionary interest and in confining the award of interest under statute to the period commencing on 16 November 2007 (the interest issue).

[1]Grounds 6 and 7 were abandoned.

The facts of the matter

1. The facts of the matter are essayed at length in the reasons for judgment.  For present purposes, they may be summarized as follows.

1. Peet is a Western Australia based development company which has developed numerous residential housing estates, including housing estates in Victoria.  It does not ordinarily charge on a hourly fee-for-service, but instead works on a percentage basis.  But the evidence in this case was insufficient to draw a conclusion as to any ‘usual’ percentage which Peet might charge, and there was no evidence of another project in which Peet had received 20% of the increase in value of land.

1. In July 2002, Peet was involved in negotiations with one Steven Carter to acquire an option to buy land adjoining the Richmond Land.  During those negotiations, Peet learned of the existence of the Richmond Land and, in or about August 2002, Peet representatives began discussions with members of the Richmond family (Richmond) about the Richmond Land.  Although the Richmond Land is in Mrs Richmond’s name, other family members, particularly her son, Colin Richmond, were involved in the negotiations and decisions concerning the Richmond Land.  Colin Richmond told Peet that Richmond would be interested in undertaking a joint venture for the development of the Richmond Land and that Richmond had already had some negotiations with other parties to that end.  He invited Peet to make a presentation to Richmond.

1. In the same month, the Minister for Planning gave a direction under the Planning and Environment Act 1987 for the establishment of the ‘Werribee Growth Area’ and the concept of the ‘Urban Growth Boundary’ (UGB).  The effect of the direction was that, in order for the Richmond Land to be developed as a housing estate, the boundaries of the UGB would have to be realigned and the Richmond Land would have to be re-zoned from rural use to residential.  The UGB was a new and unknown concept in Victorian planning law and, consequently, there was no established practice or guidelines for bringing land within it.

Initial negotiations leading to signing the Memorandum of Understanding

1. On 8 October 2002, Peet presented a ‘Proposed Joint Venture Structure’ to Richmond and, after the meeting, Mr Lennon of Peet sent a letter to Richmond enclosing a copy of a note of the presentation.  It set out that the ‘Richmond Family’ would receive 10% of lot sale prices representing the value of the Richmond Land;  Peet would receive management and sales fees of 9% of the total value of sales;  the remaining profit up to IRR[2] was to be shared with 80% of the profit to IRR up to 22.5% (and 60% of the profit to IRR greater than 22.5%) being paid to Richmond and the remaining 20% of the profit up to IRR (and 40% of profit to IRR greater than 22.5%) being paid to Peet;  and Peet would fund the development of the project.

   [2]Internal rate of return.

1. On 25 October 2002, Mr Liali provided Colin Richmond with a sample cashflow and explanation as to how the joint venture could be structured.  It provided for Peet to be paid a 9% project management fee and a selling fee;  payment of 10% of the gross sales of lots to Richmond (said to represent land value net of rebates);  an acknowledgement of the many items of expenses, costs, fees, taxes and commissions which would need to be accounted for;  payment of 80% of the Overall Quarterly Profit, and 60% of the Bonus Profit (over a specified threshold) to Richmond;  and payment of 20% of the Overall Quarterly Profit, and 40% of the Bonus Profit (over the specified threshold) to Peet.

1. On 18 December 2002, Mr Graham Candy (who was then Richmond’s solicitor) sent a first draft of a Memorandum of Understanding (MOU) to Peet and, late in December 2002, Mrs Richmond and Peet executed the MOU.  It provided for, among other things: a Planning Phase in which Peet would undertake steps to have the Richmond Land included in the UGB, either by Peet’s own staff or by engaging third parties with particular expertise;  those of the costs of the Planning Phase which each party would bear;  30 days for the parties to negotiate in good faith and on an exclusive basis with a view to executing a Heads of Agreement;[3] and the following terms to be included in the Heads of Agreement:

   [3]An extension of 30 days was granted by Mrs Richmond in January 2003 and negotiations continued during 2003-2005.

i.     an option for Peet to enter into a Development Agreement with Richmond within 90 days after successful completion of the Planning Phase (as well as options to purchase the Richmond Land or act as Richmond’s agent to sell the Richmond Land);

ii.     Peet to offer Richmond the opportunity to join it in carrying out the development;

iii.     if Richmond chose not to join Peet in carrying out the development, Peet to receive a development fee of 70% of the net proceeds of sale of each parcel of land;

iv.     if Richmond chose to participate with Peet in carrying out the development, the joint development to be structured in accordance with the principles set out in Schedule 3.

1. The principles set out in Schedule 3 included the formation of a ‘Development Entity’;  the payment of 90% of amounts paid by purchasers to the Development Entity;  Peet, as ‘Manager’ of the Development Entity, to be paid a fee of not more than 9% of the actual proceeds received from the sale of each lot;  Mrs Richmond (or her nominee) to receive 80% of the first 22.5% and 60% of any excess over 22.5% of ‘profit’ derived by the Development Entity (‘profit’ being defined as gross development fees less interest, costs, fees and commission);  and Peet’s nominee to be entitled to all remaining profits.

1. The various options for the development structure were included at the Richmonds’ request to address possible taxation concerns.  It was Peet’s intention, at the time of executing the MOU, to develop the Richmond Land in joint venture with Richmond and so to enter into a Development Agreement.

Ongoing negotiations to conclude formal documentation while work was being done on the project

1. Between January 2003 and December 2005, Peet undertook work[4] on the project by its contractors, and through Colin Richmond and consultants.  Regular project and planning meetings were held between Peet and Richmond representatives.  The parties and their solicitors were also involved in negotiating the draft Heads of Agreement and Development Agreement (which was to be annexed to the Heads of Agreement).  

   [4]Which is described in more detail below.

1. The first draft Heads of Agreement was prepared by Mr Candy and sent to Peet on 12 February 2003.  It provided for Peet to assist Richmond in achieving the re-zoning of the Richmond Land and obtaining planning approvals (the Planning Phase), and that, if the re-zoning and approvals were accomplished, Peet would assist Richmond in the subsequent disposal or development of the Richmond Land.  To that end, Peet was have the option of either entering into a Development Agreement with Richmond (in the form of the annexed Development Agreement, if not otherwise agreed) or purchasing the Richmond Land for a price not less than the proceeds Richmond would have received (after deduction of fees) if the Richmond Land had been developed.  If Richmond sold the land, Peet was to act as the selling agent to sell the land at a price not less than that to be specified (but as then still to be determined).  If Peet elected to develop the Richmond Land, Richmond was to have the option of joining Peet in carrying out the development.  Otherwise, Peet could elect to carry out the development alone.  If Peet elected to carry out the development alone, it was to receive a development fee of 70% of the net proceeds of each parcel of land.  If the joint development proceeded, it was to be ‘conducted in accordance with the Terms of Joint Development in Schedule Three’.

1. The terms in Schedule 3 (called ‘the Draft Terms of Joint Development’) included provision for the formation of a Development Entity;  90% of amounts payable by purchasers to be paid to the Development Entity as a fee to design, sub-divide, market and sell the Richmond Land;  payment to Peet or its nominee of a management fee of not more than 9% of the actual proceeds of sale of each lot;  Richmond’s nominee to be entitled to receive ‘80% of the first 22.5%’ and ‘60% of any excess over 22.5%’ of the profits of the Development Entity after interest, costs, fees, commissions, and statutory payments;  and Peet’s nominee to be entitled to all remaining profits and capital distributions, whether interim or when the Development Entity was wound up.

1. The first draft of the Development Agreement (to be annexed to the Heads of Agreement) was provided to Peet on 19 February 2003.  It provided that, if Richmond elected not to join with Peet in carrying out the development, Peet was to be paid 70% of the net proceeds of sale of each allotment (the ‘Proposed Development Fee’).  

1. On 18 March 2003, Peet wrote to Colin Richmond attaching copies of the draft Heads of Agreement and Development Agreement endorsed with hand-written comments and questions. They included how to determine the net present value of the Richmond Land (clause 6.1.2); the percentage of the gross sales price to which Peet would be entitled as commission (clause 6.2.2); and comments that clause 9 of the Terms of Joint Development needed to stipulate clearly that 22.5% was the IRR,[5] and not profit, and that other costs had to be allowed as a deduction for the purpose of defining ‘profit’ (Schedule Three, clauses 9 and 11).

   [5]Internal rate of return.

1. At trial, Mr Liali of Peet gave evidence that, on 26 March 2003, he spoke to Colin Richmond and that Mr Richmond said then that there were no problems with the drafting of the Heads of Agreement and that he anticipated signing it by the end of the following week.

1. On 31 March 2003, Mr Candy sent a third draft of the Development Agreement and a Second Draft of the Heads of Agreement to Mr Liali.  It included the Draft Terms of Joint Development with various comments inscribed to the effect that there was not yet agreement as to whether to base the profit share on ‘IRR’ or a fixed formula for profits (clause 9 of Schedule 3);  what expenses would be covered by the proposed management fee (clause 11 Schedule 3);  whether the special land tax would be treated as part of the development costs and, therefore, payable by Peet (clause 6.2);  and the consequences of termination (clause 11 of the Heads of Agreement).  The terms of the Third Draft of the Development Agreement contained the Proposed Development Fee.

1. On 5 May 2003, Mr Liali enquired of Mr Candy when Peet would receive a revised Heads of Agreement.  Mr Candy replied that he had received further instructions and would incorporate them into a revised draft ‘tomorrow’.

1. On 12 May 2003, Mr Candy informed Mr Liali that he had sought further instructions in relation to the Heads of Agreement and Development Agreement and expected to send updated drafts by Thursday of that week.

1. Mr Lennon of Peet gave evidence at trial that Colin Richmond told him on 12 May 2003 that the joint venture was going ahead and that documentary changes were the result of internal Richmond family matters.

1. Mr Liali said in his evidence that Colin Richmond told him on 16 May 2003 that the delay in finalising documentation was due to Richmond family matters and that Mr Richmond offered to sign a letter of comfort.  No letter of comfort was ever signed, however, and Richmond later rejected a draft letter prepared by Mr Liali.

1. On 22 May 2003, Colin Richmond attended a meeting at Peet offices with Mr Liali, Mr Lennon and others.  He referred to unspecified problems with Mr Candy but stressed that there were otherwise no problems whatsoever.  He was focused on tax implications and asked for an accurate cash flow as opposed to one based on broad assumptions.  Mr Lennon said in his evidence that, later during May 2003, Colin Richmond told him (when they were in contact) that everything was going ahead and happening and that ‘my word is my bond’.

1. On 3 September 2003, Mr Liali emailed to Ms Janet Whiting of Corrs Chambers Westgarth, Richmond’s newly appointed solicitors, enclosing a copy of the hypothetical cashflow previously prepared for Richmond.  Mr Liali stated that a revised Cash Flow would be completed within the next few weeks.

1. On 9 September 2003, Mr Liali emailed to Ms Whiting a draft letter of comfort which he had earlier prepared and sent to Colin Richmond, and he asked that it be signed and returned to Peet.  In his evidence, Mr Lennon said that, thereafter in the context of project team meetings, Colin Richmond reassured him from time to time regarding the continuing involvement of Peet in the re-zoning and development of the Richmond Land.

1. On 23 September 2003, Ms Whiting wrote to Peet that the draft letter of comfort proposed by Mr Liali would not be forwarded to Peet, as it did not reflect the current situation between Richmond and Peet.  In particular, Ms Whiting stated that the draft letter purported to take matters from negotiations to a concluded agreement which was still to be reached.

1. On 7 October 2003, Mr Liali wrote to Ms Whiting in reply to her letter of 23 September 2003.  He stated that the general agreement between Peet and Richmond was to enter into a joint development project.  His letter also referred to matters concerning costs and development funds.  It stated that actual sale proceeds would be distributed as follows:  Richmond would receive 10% of the actual sale proceeds of each lot representing land content;  Peet (and Richmond, if relevant) would have pro rata planning and development costs reimbursed;  Peet would receive a management and marketing fee of 9% of the actual sale proceeds of each lot sold (including the selling fees);  the balance of proceeds would be retained until project profit statements were prepared;  and, up to the specified threshold of ‘IRR’, Richmond would receive 80% of the development profit and Peet would receive 20% (with Richmond to receive 60% of the profit over the threshold of IRR and Peet to receive 40% of the profit over the threshold of IRR).

1. On 2 April 2004, Peet gave a further presentation to Richmond.  It contemplated a joint venture between Peet and Richmond through a development entity with proceeds to be distributed as follows:  10% of land payments to Richmond;  and distribution of profits (after payment of development entity expenses including project management fees and selling and marketing fees) as follows:  80% of profits up to the threshold (and 60% of profits above the threshold) going to Richmond, and 20% of profits up to the threshold (and 40% of profits above the threshold) going to Peet.

1. The cashflow spreadsheet, which was based on various estimates and assumptions, reflected that proposal presented together with provision for 9% project management and selling fees and payment of various other costs, expenses, fees, and taxes.

1. On 9 September 2004, Mr Lennon attended a meeting with Colin Richmond and Ms Whiting.  Mr Lennon said in his evidence at trial that, at that meeting, Ms Whiting suggested the Richmonds wanted Peet to guarantee a return to Richmond.

1. Later, Colin Richmond expressed concerns to Mr Lennon as to the status of Peet as a listed company.  He also said that Ernst & Young had reviewed the presentation given on 2 April 2004 and considered that parts of it would not be a good deal for Richmond.  Mr Lennon requested that Colin Richmond tell Peet which parts would not be a good deal so that Peet could address Richmonds’ concerns.

1. On 10 January 2005, Peet sent a letter to Colin Richmond attaching a draft of the Heads of Agreement.  It included the Draft Terms of Joint Development.  In the letter, Peet noted that a number of items needed to be addressed in future discussions.  The draft terms of Joint Development stated that the basis for calculation of ‘profit’ was still subject to final review and agreement by the parties.

1. On 22 February 2005, Ms Whiting emailed Mr Lennon with comments on the proposed documentation.  She stated that there were still a number of issues that had not been addressed, including the value to be attributed to the Richmond Land at the commencement of the arrangement and definitions of all developments, advertising, marketing and selling costs to be paid to Peet or third parties.  Ms Whiting asked for more information concerning the proposed agreement and stated that, given the outstanding issues, and that she did not have instructions to negotiate, the meeting which was scheduled for the next day should be postponed.

1. Mr Lennon replied acknowledging the postponement.  He said that he would endeavour to attend to the matters raised in Ms Whiting’s letter and seek a meeting in March.  After that, however, the negotiations appear to have stalled because Colin Richmond was busy farming.

1. On 1 September 2005, Mr Mulder of Peet sent Version 5 of the draft Heads of Agreement to Colin Richmond.  It included the Draft Terms of Joint Development still endorsed with the comments detailed in the draft dated 10 January 2005 as to the items which needed to be addressed in future discussions and that the basis for calculation of ‘profit’ was still subject to final review and agreement by the parties. 

1. On the same day Mr Lennon of Peet emailed to Colin Richmond that he had sent a draft Heads of Agreement and Development Agreement ‘in early April to yourself and Corrs’. 

1. Ms Whiting replied by email on 7 September 2005.  She stated that neither she nor Colin Richmond had received any documentation in April and that Richmond would not be responding to the document provided on 1 September 2005.  She added that the Richmond landscape had changed considerably since negotiations began, not least by reason of Peet having become a public company, and that there needed to be some certainty going forward.  She proposed a meeting in order to provide Peet with Richmond’s position and stated that the Richmonds were considering their options;  one of which was to enter into a re-zoning agreement with a development agreement to be considered at a later time.

1. On 9 September 2005, Mr Lennon attended a meeting at Corrs Chambers Westgarth with Colin Richmond and Peet’s and Richmond’s solicitors.  In his evidence at trial, Mr Lennon said that, during the meeting, Ms Whitehead informed Peet that she did not believe an agreement was in place (which Peet disputed) and that Richmond were not prepared to continue.  Colin Richmond remarked upon how long the process was taking and said that Richmond might enter into an agreement with Peet simply to undertake the re-zoning, with a development agreement to be entered into afterwards.  Mr Lennon replied that Peet was not in the business of simply re-zoning land;  it was a development company.  Ms Whiting stated that, within about a week, she would provide Peet with a written summary outlining the basis upon which Richmond were prepared to continue negotiations.

1. On 22 September 2005, Corrs Chambers Westgarth wrote a letter to Peet’s solicitors, Mills Oakley, stating that Richmond were no longer prepared to continue with the negotiations for a Development Agreement.  Instead, they wished to approach the exploitation of their land holding in two stages:  first the re-zoning;  and, secondly, to be considered at a later time, issues relating to development of the Richmond Land.  To that end, Richmond wished to engage a third party to achieve inclusion of the Richmond Land within the Urban Growth Boundary and Werribee Growth Area.  

1. In the letter, Corrs also observed that, given Peet’s previous advice that it did not undertake re-zoning programmes in isolation from developments, Peet would need to consider whether it wished to be involved in the re-zoning.  The letter attached a draft ‘Key terms of proposed re-zoning agreement for the Richmond Family Land’ which detailed the key matters that would be required to be addressed.

1. Peet’s solicitors responded by letter on 30 September 2005, referring to work that had been done throughout 2003, 2004 and in 2005 (to date).  They stated that Peet had commenced work on the Planning Phase of the transaction and undertaken that work with the full knowledge and approval of Richmond, and with Richmond’s assurances that what was agreed in principle in December 2002 continued to be the basis upon which the transaction would proceed;  that practical performance of the contemplated transaction had advanced too far for Richmond now to be able to select just the initial (planning) component of the entire transaction as outlined in the MOU, and to limit Richmond’s commitment to that extent;  that Peet required implementation of the whole transaction contemplated by the parties (and outlined in the MOU);  and thus that Peet required Richmond to provide reasonable constructive comments on Version 5 of the Heads of Agreement.

1. On 4 October 2005, Mr Lennon had another meeting with Colin Richmond.  In his evidence, Mr Lennon said that Colin Richmond stated that there was no binding agreement in force, and that he, Mr Lennon, stated that he disagreed.  Colin Richmond again expressed concerns about the status of Peet as a public company and Mr Lennon replied that his family was the largest shareholder in the company.  Colin Richmond stated that Richmond would still be willing to do a re-zoning agreement with Peet, to be followed by a later development agreement.  He then said that he needed further information on the costs and assumptions in the cashflow.  When Mr Lennon asked Colin Richmond to specify the areas where he was not happy, so that Peet could consider them, Colin Richmond said he was not able to do that.  Mr Lennon and Colin Richmond had a second similar discussion on 11 November 2005.

1. Meanwhile, on 5 October 2005, Ms Whiting replied to Peet’s solicitors’ letter of 30 September 2005.  She stated that the allegations made in the letter of 30 September 2005 were incorrect.  She reiterated that Richmond were still prepared to negotiate in good faith with Peet to enter into a re-zoning agreement, but she added that, if an appropriate agreement were not able to be reached within six weeks, Richmond would withdraw from all negotiations with Peet as at 18 November 2005.  She invited Peet to respond to the proposal set out in her letter of 22 September 2005.

1. On 24 October 2005, Daniel Mulder of Peet sent an email to Colin Richmond attaching a document headed ‘Key terms of an agreement for re-zoning and development of land owned by [the] Richmond family’.  The draft terms sheet provided for Peet to have power to require Richmond to enter into a Development Agreement with Peet, with Peet to receive 35.5% of the profits to the Development Entity.

1. Ms Whiting replied on 26 October 2005 stating that the proposal was uncommercial in that it contemplated payments far in excess of those sought by Peet’s competitors for similar services.  Ms Whiting invited Peet to revisit the proposal and to submit an amended proposal prior to 2 November 2005.

1. On 17 November 2005, Mr Lennon sent an email to Colin Richmond[6] suggesting some options on which to base the Heads of Agreement for the re-zoning and development of the project.  The two men discussed them at a meeting on 23 November 2005.  Mr Lennon said in his evidence that Colin Richmond said that he believed the agreement was uncommercial.

   [6]The email in evidence is a draft sent by Mr Mulder to Mr Lennon for review prior to dispatch to Richmond.

1. On 28 November 2005, the Richmond Land was gazetted for inclusion within the UGB.

1. On 3 January 2006, Colin Richmond emailed to Mr Lennon that he did not want any further work done until matters were resolved.

Nature of work done between January 2003 and late 2005

1. Between January 2003 and late 2005 (as the negotiations proceeded), Peet, Colin Richmond and third party consultants worked towards the inclusion of the Richmond Land in the UGB.  Peet organised or undertook steps either by its own staff or by engaging third parties with particular expertise.  One of the major issues which had to be dealt with was drainage which affected the development potential of the land.

1. There was no dispute that the work done by Peet, or by third parties at its request, was done at the express or implied request of Richmond.  It included preparation of concept plans, general infrastructure design, a business case for the development of the Richmond Land, briefing papers, project evaluation, economic modelling and political/governmental liaison.  Peet was involved in the selection, appointment and briefing of consultants in all disciplines pertinent to the project, including archaeology, ecology, vegetation, geotechnology (comprising drilling, road and rail transport and public transport infrastructure), traffic modelling, aerial topography, water supply and water recycling, sewage reticulation, drainage infrastructure, town planning, land surveying, site analysis, flora and fauna description and drainage.

1. The project included the preparation of plans for the Richmond Land and its environs, concepts for redevelopment, statement of existing conditions, hydrology, environmental features, schools, general site analysis, pipeline alignment, railways, traffic conditions and population growth and projections.  It included attendances on local council members, participation in community meetings, workshops, forums and presentations, and lobbying (by external lobbyists, representatives of Peet and Colin Richmond).  Submissions and lobbying were also made to various government departments, including V/Line, City West Water, the Wyndham Smart Growth Committee, the Department of Sustainability and Environment, and to the Wyndham City Council concerning a proposed amendment to the Wyndham planning scheme relating to flood control.

Decision as to UGB

1. A realignment of the UGB to include the majority of the Richmond land was gazetted in November 2005.  There was no dispute that the inclusion of the Richmond Land in the UGB increased its value, by $15.7 million, from $13 million to $28.7 million.  At trial, an expert valuer, Mr Dudakov, called by Peet, gave evidence that the base figure of $13m (as at October 2005) reflected the market effect of speculation that the Richmond Land would be included in the UGB and that, if the Richmond Land not been included in the UGB when the boundary was revised, its value would have fallen relative to its October 2005 value.

Correspondence concerning the provision of detail of costs incurred by Peet

1. Peet did not keep records of the time which its staff spent on tasks relating to the Richmond Land.  That was said to be explained by the fact that it was not its practice to charge on a fee-for-service basis.  In order, therefore, to calculate its quantum meruit claim (on the time and expense basis), Peet retained Mr Dwyer to provide an estimate of the hours of work undertaken by Peet employees and the costs of their suppliers and consultants in relation to the work.

1. Mr Dwyer reviewed the discovered documents, estimated the time spent by Peet’s staff and attributed an hourly rate to that time;  and thereby (in combination with amounts paid by Peet to third parties) assessed the total value of Peet’s work.  As has been noted, however, although the writ was issued on 16 January 2007 the first version of the Dwyer Report was not served on Richmond until 16 November 2007.

1. Before the issue of the writ, there was a volume of correspondence between the parties as to the costs incurred by Peet.  On 7 February 2005, Ms Whiting sent an email to Mr Lennon in which she requested that Peet send ‘details of the costs that have been incurred by Peet’s to date’. 

1. On 14 February 2005 Peet responded with a spreadsheet which showed payments to third parties totalling $232,151.97. 

1. In her reasons for judgment, the judge described that correspondence as appearing to relate to the allocation of expenses under the MOU.

1. As has also been seen, on 7 September 2005, Ms Whiting sent an email to Mr Lennon stating that Richmond would seek to come to a satisfactory arrangement for reimbursing Peet for costs incurred which were of benefit to the Richmond Land.

1. On 25 October 2005, Peet provided Colin Richmond with a further spreadsheet showing third party payments made to date.

1. The judge described that correspondence as appearing to have nothing to do with any offer by Richmond to pay expenses on a quantum meruit basis, but rather as a manifestation of the parties honouring the spirit of the cost allocation in the MOU, even though it was non-binding.

1. On 14 November 2005, Ms Whiting wrote to Peet’s solicitors in response to the Peet’s proposal for re-zoning and the claim for compensation included in that proposal.  She stated that ‘Our client wishes your client to be remunerated for the work undertaken in a re-zoning project’. ..

1. On 6 February 2006, Peet wrote to Colin Richmond stating that it had incurred costs in excess of $250,000 in pursuing the inclusion of the Richmond Land within the UGB.

1. On 30 March 2006, Colin Richmond wrote to Mr Lennon inviting Peet to put forward a re-zoning proposal.  Richmond stated that, if the process [of agreeing to a re-zoning agreement] were unsuccessful, or if Peet did not wish to submit a re-zoning proposal, ‘you should forward details of your costs to date for our review’.

1. On 2 May 2006, Colin Richmond wrote to Mr Hemsley (Managing Director of Peet) that ‘The Richmonds have always advised that, in the event a deal was not concluded, that we would pay all appropriate costs that had been incurred to date.  In the absence of a concluded agreement, I suggest that you forward to us details of the costs for our consideration.’

1. On 7 July 2006, Ms Whiting wrote to Peet’s solicitors that ‘in the absence of the concluded agreement, your client should forward details of the costs that it has incurred for consideration by our client’ and ‘As has been advised on numerous occasions, our client is prepared to compensate your client for all work undertaken in relation to our client’s property’.

1. On 27 July 2006, Peet’s solicitors wrote to Ms Whiting that ‘To pay Peet for its work to date, as if it had merely been hired to act as a Richmond contractor, rather than as a co-principal, does not adequately address Peet’s interests’.

1. On 16 January 2007, in response to advice that Peet were considering issuing proceedings, Ms Whiting wrote to Peet’s solicitors that ‘Our client has, at all times, maintained the position that it owes your client money in relation to the work it has undertaken.  For this reason, numerous requests have been made for details of these amounts.  Our client remains ready to compensate your client properly for the work undertaken by it on behalf of our client.’

1. On 3 September 2007, Ms Whiting wrote to Peet’s solicitors that ‘Over a number of years, we have requested details as to the quantum your client says it is entitled to be paid by our client.  To date, this information has never been provided.  We are writing to you to again to seek particulars of your client’s quantum meruit claim’.

1. On 4 September 2007, Peet’s solicitors wrote to Ms Whiting that ‘The Plaintiff’s position is and remains that a claim for quantum meruit is indeed its fall back position’ and that, since Richmond had Peet’s discovery, Richmond could make any offer it deemed appropriate.

1. Ms Whiting replied on 23 October 2007 that ‘Your reply of 4 September 2007 is obstructive.  Your client’s discovery does not provide details of your client’s loss and damage and it is not articulated in the Statement of Claim.  … It is now over 9 months since the Writ was issued and your client has:  (1) failed to provide particulars of loss and damage;  and (2) failed to provide details of the evidence it intends to rely upon at the trial’.

1. The first Dwyer Report was served on 16 November 2007.

Grounds 1, 2, 3, 4 and 5:  the 20% claim issue

1. In her reasons for judgment, the judge stated her conclusion that the 20% claim should be rejected, as follows:

Where parties have agreed in principle upon a price for certain services, the court may have regard to the agreed price as evidence of the value that the parties themselves put on the services performed.[7]  For that reason, it is certainly appropriate for the court to have regard to the terms of the MOU, which reflected an in principle agreement in late 2002 and early 2003.  And, even though the draft heads of agreement and development agreement were never finalised, they may also provide some evidence as to what the parties regarded as the value of the services.

However, as the preceding discussion[8] clearly establishes, the respective risks and rewards for the parties could vary significantly, depending on which option, if any, Peet exercised at the end of the planning phase.  None of the possible options reflected a flat rate return to Peet of 20%, particularly not 20% of the net increase in value of the land simply as a result of its inclusion in the UGB.

Nor did the actual or draft agreements envisage that Peet could recover more than a small portion of its actual expenditure on consultants and third parties during the planning phase;  and they certainly did not envisage that Peet could recover its actual expenditure plus a percentage of profits.

No evidence has been led of any relevant industry practice.  Nor is Peet’s evidence sufficient to make any finding as to what percentage return Peet might have expected to recover in respect of a comparable project.

The 20% claim was only raised for the first time in the month before trial.  At that time, Peet was still pursuing its claim that there was a binding contract to develop the land.  That may explain, at least in part, why Peet’s witness statements did not address the 20% claim.  But it does not excuse Peet from not calling evidence at trial sufficient to establish the 20% claim.

In respect of the work relating to the inclusion of the land in the UGB, none of the actual or proposed agreements, or the evidence, suggests that Peet’s role was anything more than a project manager.  The MOU envisaged that Peet would bear most of the costs of inclusion in the UGB and re-zoning the land.  After the MOU expired, Peet chose to continue that work for several years, without having secured any binding contract, and at some risk that it would never achieve one.  Even though not contractually obliged to do so, Mrs Richmond has at least since 2005, and arguably since 2004, indicated a preparedness to recompense Peet for its actual expenditure in relation to the UGB work.

In all the circumstances, it would not be fair and reasonable to remunerate based on a percentage of the increased value of the Richmond land.

[7]Her Honour here referred to observations of Byrne J in Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221, as to the principles to be applied in assessing a quantum meruit claim.

[8]Her Honour here referred to her earlier discussion of the terms proposed during negotiations as to the manner in which Peet might be rewarded under the Development Agreement.

1. The appellant contends that the judge erred in reaching that conclusion, in four ways:

a)   First, in reasoning that the 20% claim could not succeed unless it were shown that the parties proceeded on the basis that Peet would be paid a ‘flat rate of return’ of 20% of some fixed amount or the net value of the increase in the value of the land;

b)     Secondly, by regarding the existence of options under the MOU (to develop the Richmond Land, purchase the Richmond Land or act as Richmond’s agent in selling the land) as antithetical to the appellant’s claim to an entitlement to an award on the 20% basis;

c)   Thirdly, in assuming that it was necessary for Peet’s witnesses to give evidence that they undertook the work to achieve the inclusion of the Richmond Land in the UGB ‘because of what was in the MOU (or even in the other draft agreements);’  and

d)     Fourthly, in treating as significant the fact that ‘Peet’s witness statements did not address the 20% claim’.

(i)  The flat rate of return

1. Counsel for the appellant argued that there was no need for the judge to be satisfied that the parties proceeded on the basis that Peet would be paid a ‘flat rate of return’.  What was important, he said, was that the dealings between the parties were conducted on a basis that Peet would receive a share in the profit of the venture howsoever calculated.

1. Nor was it to the point, he contended, that the documentation did not provide for a rate of return on the net increase in the value of the land.  What was important was that the parties contemplated that Peet would be rewarded by carrying out a development and receiving therefor a share in the profit of the venture.  It followed, he said, that only an award based on the fruits of Peet’s labour (whether or not curtailed) was capable of constituting ‘reasonable remuneration or compensation’.[9]  And, he said, it was clear from Brenner vFirst Artists’ Management Pty Ltd[10] that, where a percentage or commission-based award is appropriate, either the percentage or the base to which it is applied may be adjusted if the scope of work is curtailed.

   [9]Pavey & Matthew Pty Ltd v Paul (1986) 162 CLR 221, 256–7.

   [10][1993] 2 VR 221, 264–265.

1. Nor was it was not necessary for Peet to establish the percentage rate of return it might have recovered in a comparable project, counsel argued, because the court will have regard to the range of the parties’ bargaining as the indicia of what is just and reasonable.[11]  And here, according to counsel, one can see from the range of the parties’ bargaining that a 20% share of the profit was the minimum return which Peet would have received if the MOU had been implemented by the binding agreement which it contemplated.  Hence, it followed that a 20% share of net increase in the value of the Richmond Land upon its inclusion in the UGB represented a reasonable minimum award. 

   [11]Way v Latilla [1937] 3 All ER 759, 763–764.

1. Counsel for the respondent opposed those submissions at several levels.  The first was to say that they did not accord with the way in which the appellant put its case below.

1. I do not think that is so.  Among other bases on which the appellant put its claim below was that:

The course of negotiations apparent on the evidence in this case makes it clear beyond doubt that the value placed by both Richmond and Peet on Peet’s development services was 20% of the final profit.  As Byrne J noted in Brenner, ‘it would be to affront rather than to satisfy the requirements of good justice for the law to ignore, in the case of a commission agent or manager whose services have been provided at the request of an employer in circumstances entitling the former to restitution, the commission which might have accrued had the relationship not been terminated’.  Although Richmond terminated her relationship with Peet before the development was complete, it would (in Byrne J’s language) be an ‘affront’ to good justice to deny it a recovery on any lesser basis than the 20% share of profit upon which the parties dealt and upon which Peet undertook work over a period of years that resulted in Richmond being benefited to the sum of $15.7 million, at least.[12]

[12]Closing [written] submissions of the Plaintiff, [32].

1. Secondly, counsel for the respondent contended that there is no sound basis for equating the contemplated share of profit derived from the development of the Richmond Land with a share of profit computed on the uplift in the value of the Richmond Land upon inclusion in the UGB.

1. In my view, there is more force in that contention.  There are at least three problems in the way of the appellant’s argument.  The first is that Peet never reached an agreement or understanding with Richmond that Peet would be remunerated by way of a share of profits for its work in bringing the land under the UGB and having it re-zoned.

1. Where parties have contracted for the performance of services at an agreed price, but the contract proves to be unenforceable, the court may have regard to the agreed price as some evidence of what the services are worth.[13]  The agreed price may also set an outer limit on the amount which can be recovered (and so result in recovery of something less than the services are worth).[14]  But the fact is that Peet did not reach an agreement or understanding with Richmond as to the price payable for the services provided by Peet in bringing the land within the UGB and achieving the re-zoning of the land.  Still less was there any thought given to the idea of Peet receiving a share of profits for its work in bringing the land within the UGB and achieving the re-zoning of the land.  To the contrary, all of the communings between Richmond and Peet drew a bright line distinction between the Planning Phase (comprised of bringing the Richmond Land within the UGB and having it re-zoned) and the Development Phase (comprised of Peet at its own cost and risk, designing, subdividing, marketing and selling the land), and made plain that Peet’s only entitlement to a share of profits was to be to a share of profits realised upon development and sale of the land in implementation of the Development Phase.  As to the Planning Stage, as the judge said, it seems never to have been contemplated that Peet would recover any more than a portion of its actual expenditure on consultants and third parties during that phase.[15]

   [13]Horton v Jones [No 1] (1934) 34 SR(NSW) 359, 367–8 (Jordan CJ); Pavey & Matthews Pty Ltd, (1987) 162 CLR 221, 250 (Deane J);  Benedetti v Sawaris [2010] EWCA 1427, [85] (Arden LJ).

   [14]Pavey & Matthews Pty Ltd v Paul, ibid; Goff & Jones, The Law of Restitution, 6^th Ed, [1036].

   [15]MOU, clause 4.

1. The second problem is a lack of precedent or other rational basis for transposing the parties’ understanding as to how Peet might be remunerated for the Development Phase to the very different situation which obtained once it emerged that there would be no Development Phase.

1. Counsel for Peet invoked the decision of the House of Lords in Way v Latilla.[16]In that case, a principal engaged an agent to source mining prospects on terms that the agent would receive an unspecified share of any concession so sourced and acquired by the principal.In time, the agent identified a concession and the principal acquired it, but the principal did not give the agent a share of it.  The agent made a claim for work and labour done and, evidently, there was evidence, or it otherwise appeared clear, that services of the kind which the agent had rendered to the principal were normally remunerated by way of a finding commission rather than an hourly fee for service.  In those circumstances, it was said that it would be an affront to common sense to quantify the agent’s entitlement on a fee for service basis.  The best evidence of what his services were worth were what the parties had agreed.  It followed that the agent should be awarded a sum equal to a share of the mine.  Since, however, the principal had ventured and expended large sums of money over time in developing the mine, the agent was only entitled to a very small share of it.  He was awarded £5,000.

   [16][1937] 3 All ER 759.

1. I do not consider that Way v Latilla assists Peet’s argument.  There is no evidence here that services of the kind which Peet provided during the Planning Phase are normally remunerated by a percentage of the increase in the value of the land achieved as result of the Planning Phase, or on any other percentage basis.  As the judge said, there was no evidence led of any relevant industry practice.  All that Peet could say was that it did not keep time sheets because its practice was to seek its reward by acting as development company after planning was complete. 

1. Way v Latilla is also distinguishable on the basis that the agent in that case actually achieved the result (the principal’s acquisition of a concession) for which it was agreed or contemplated that the agent would be remunerated by a share of the concession.  As Lord Wright observed:

This evidence seems to me to show quite clearly that the appellant was employed on the basis of receiving a remuneration depending on results.  If he had been unsuccessful, he would have been entitled to no more than his expenses, but the respondent led him to believe that, if the concessions he obtained were valuable, his remuneration would be on the basis of some proportion of their value.[17]

[17][1937] 3 All ER 759, 766.

1. In this case, Peet did not achieve a result for which it was agreed that Peet would be remunerated.  The only understanding as to Peet’s remuneration by profit share was that it would be entitled to a share of the profits to be derived from development of the land when and if the land was developed.  The fact is that the land was not developed. 

1. Counsel for Peet sought support in the decision of Byrne J in Brenner v First Artists’ Management Pty Ltd[18] that it is permissible to extend the reasoning in Way v Latilla to a claim on a quantum meruit for remuneration for management services performed under an unenforceable management agreement in circumstances where the event on which it was agreed commission would be payable had not come to pass before the unenforceable agreement was terminated.  Byrne J so proceeded on the basis that he found it to be ‘virtually unheard of’ in the entertainment industry for a manager to be rewarded otherwise than by a percentage commission on earnings of the principal.  His Honour considered that, in those circumstances:

[I]t would be to affront rather than to satisfy the requirements of good justice for the law to ignore, in the case of commission agent or manager whose services have been provided at the request of an employer in circumstances entitling the former to restitution, the commission which might have accrued had the relationship not been terminated.[19]

[18][1993] 2 VR 221.

[19] Ibid 264. It is to be noted, however, that despite Byrne J finding it to be ‘virtually unheard of’ for a manager to be rewarded otherwise than by commission, his Honour nevertheless assessed the claim on the conventional basis of a reasonable fee for hours actually worked and used the commission basis only as a cross-check on the hourly fee figures.

1. That does not assist Peet either.  In Brenner there was an agreement that commission would be payable on income when derived, and in fact it was derived;  albeit after the agreement had been terminated.  In contrast, in this case, there was no agreement that commission would be payable upon any uplift in the value of the land resulting from re-zoning.  The limit of the understanding concerning profit share was that Peet would be paid a percentage of such if any profits as might be derived from development and sale of the property in the Development Phase, after completion of the Planning Phase.  In the event, there never was a development of the property after the Planning Phase, and so there were no profits from development.

1. It follows, in my view, that the judge was right that Peet’s claim for 20% of the uplift in the value of the land could not succeed, because it was not shown that the parties proceeded on the basis that Peet would be paid a ‘flat rate of return’ of 20% of some fixed amount or the net value of the increase in the value of the land for the work which Peet performed in the Planning Phase.

1. Counsel for Peet contended that it follows logically from Brenner that, where a percentage or commission based award is appropriate but the scope of the work is curtailed, the percentage or the base to which it is applied may be adjusted to ensure that ‘deprivation of the opportunity to complete the work does not deprive the plaintiff of the benefit of a percentage-based award’.

1. I do not accept that contention either.  Byrne J’s reasoning does not support the idea of selecting a base for the computation of percentage return which is different to the base which the parties envisaged, still less doing so for the purpose of ensuring that ‘deprivation of the opportunity to complete the work does not derive the plaintiff of the benefit of a percentage-based award’.  The whole thrust of his Honour’s analysis is that the method of calculating reasonable compensation should accord to the basis of calculation agreed by the parties or, as he put it, ‘the expectation of the parties at the time of request [for services]’.  All that his Honour ever said about modifying percentages was that, in a case of the kind in question (which is to say, where a replacement manager had taken over from the plaintiff after termination of the management agreement), it might be necessary to reduce the commission otherwise payable on income once derived in order to allow for such contribution to the derivation of that income as was made by the replacement manager.  In effect, that paralleled the approach of the House of Lords in Way v Latilla of awarding only a small percentage of the value of the mine in question in light of the contribution made to its value by the moneys spent and adventured by the principal in its development.

1. There is also no logical basis for applying the parties’ understanding as to Peet’s share of development profits from the Development Phase to the calculation of fair and reasonable remuneration for work and labour done and expenses incurred by Peet in the Planning Phase.  For, as counsel for Richmond submitted, it is apparent from all of the parties’ communings that the intention to award Peet a share of development profits was based on the understanding that Peet would wear all of the risks and costs of the Development Phase and bring to bear all of the many skills required to plan, subdivide and sell the land in the course of the Development Phase.  By comparison, the sort of work and skills required to bring the Richmond Land within the UGB and to achieve its re-zoning appear to have been regarded as relatively slight and such as might be obtained from a range of competent professionals under a conventionally remunerated project manager.[20]

   [20]See the MOU, clause 4, and compare the Terms of Joint Development set out in Schedule 3 to the Heads of Agreement.

1. It is not fair and just that the sort of profit share which might have been allowed for wearing the costs and risks of the Development Phase should be allowed for a relatively riskless and low cost exercise of the kind entailed in the Planning Phase.  To do so would be to allow more than the services were worth and so would be unjust and unfair.  

1. The third and fundamental problem with the appellant’s argument is that it assumes that an action for work and labour done lies to recover expectation losses for work which a plaintiff may have assumed it would be called upon to perform but which in the end is not required.  Plainly, that kind of relief is not available on a quantum meruit.  The accepted juridical basis of a work and labour done claim is the existence of an obligation implied by or arising at law to pay reasonable remuneration for work done which is freely accepted.[21]  Historically, and as a matter of contemporary resitutionary theory,[22] the action lies to recover remuneration tantum quantum meruit (which is to say, to the extent of the amount which the work is worth to the defendant).  The whole point of the action is to recover just compensation for work which has been done (which is to say, what a reasonable person in the defendant’s position would be prepared to pay for the work which has been done);  not to recover damages for the loss of the opportunity to undertake work which, had an agreement been reached, might have been done but in the events which occur is not done.[23]  

   [21]Craven-Ellis v Canons Ltd [1936] 2 KB 403, 412 (Greer LJ);  William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932, 936; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 267 (Dawson J).

   [22]Stoljar, The Law of Quasi-Contract, 2^nd Ed, 187–196; Pavey & Matthews Pty Ltd v Paul, ibid; Roxborough v Rothmans of Pall Mall (2001) 208 CLR 516, 550 [87].

   [23]Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752, 1773 [40]–[42] (Lord Scott of Foscote);  Benedetti v Sawaris [2010] EWCA 1427, [85], [140] and [153].

Options under the MOU

1. For the same reasons, the judge was not in error in taking into account that the only options contemplated under the MOU were for Peet to develop the Richmond Land, purchase the Richmond Land or act as Richmond’s agent in selling the land.  The fact that the parties’ only contemplation of the manner in which Peet would be rewarded for the Planning Phase work was by a share of development profits, when and if development proceeded, or by a sales commission if it did not, was antithetical to Peet’s claim that it was entitled to 20% of the uplift in the value of the land notwithstanding that development did not proceed.  It strengthened the conclusion, already clear, that the parties did not contemplate that Peet would be remunerated for Planning Phase work by way of profit share.

Need for evidence of a 20% understanding

1. Nor was the judge in error in treating as significant that none of Peet’s witnesses gave evidence that they undertook the work to achieve the inclusion of the Richmond Land in the UGB ‘because of what was in the MOU (or even in the other draft agreements)’.  For, absent evidence of an understanding that work would be remunerated in a particular fashion, there was no basis to award restitution for the work and labour done otherwise than by reference to appropriate hourly rates. 

1. It is true that there was nothing in the MOU or draft agreements about remunerating Peet for planning stage work in the event that the development did not proceed.  It is unsurprising, therefore, that none of the Peet’s witnesses would give evidence that they undertook the work because of what was in the MOU or other draft agreements.  But that does not invalidate the judge’s taking into account of what the parties had in mind.  So to do served to confirm, as her Honour concluded, that there was no basis to depart from an objectively reasonable amount of remuneration calculated on an hourly basis.

1. Possibly, her Honour’s reference to Peet’s subjective state of mind was meant to convey that it was necessary for Peet to prove reliance.  But I doubt her Honour thought that to be so.  Although there is some authority to the effect that reliance is relevant in an action for work and labour done,[24] the better view is that the obligation which the law implies to pay reasonable remuneration for work and labour done is informed by an objective assessment of the circumstances in which the work is done, and that there is no room for subjective intentions.[25]  And even if her Honour thought otherwise, I do not regard it as a material part of her chain of reasoning.

   [24]Countrywide Communications Ltd v ICL Pathway Ltd [1999] All ER (D) 1192.

   [25]See The Hon K M Hayne, Anticipated Contracts that Fail to Materialise, in Degeling and Edelman, Unjust Enrichment in Commercial Law, 237, 241–244.

Failure of Peet’s witness’s to address the 20% claim

1. There is also no error in the judge’s reference to the failure of Peet’s witness statements to address the 20% claim.  Her Honour was simply making the point, as she went on in the next sentence to explain, that it was incumbent on Peet to adduce evidence at trial sufficient to establish the 20% claim.  Possibly, the observation was intended also to convey that her Honour regarded the 20% claim as something that seemed to her to have occurred to counsel only after the trial began.  If so, however, I am inclined to agree with her.  Based on the pleadings, the absence of any evidence as to the basis of the 20% claim and the fact that it did not emerge until the trial began, it is difficult to resist that conclusion.

Grounds 6 and 7

1. Grounds 6 and 7 were abandoned.

Ground 8:  10% deduction

1. In assessing Peet’s claim on an hourly fee basis, the judge concluded that she should deduct a total of $295,217.50 from the amount of $815,965 which was sought by Peet.  That deduction, as her Honour explained, was made up as follows: 

·    $25,940.00 for pre-November 2002 work;

·    $16,940.00 for 2006 work;

·    $50,000.00 other work done for Peet’s personal benefit;

·    $71,737.50 for administrative staff;

·    $125,000.00 for emails;

·    $5,600.00 for Mr Lennon’s attendance at meetings;

leaving a total of $520,747.50.

1. No complaint is made about those deductions.  The judge then went on, however, to reduce the claim by a further 10%, which her Honour explained thus:

I accept that, because Peet does not ordinarily charge on an hourly basis, that has presented it with problems in substantiating its claim for internal work.  That is not an uncommon problem in a case such as this, as Byrne J acknowledged in Brenner.  A party in Peet’s position must do the best it can to enable the court to determine what is fair and reasonable compensation for services it has rendered.

I have already mentioned a number of respects in which the general accuracy of Mr Dwyer’s calculations must be doubted, including:

(a) The (mostly) formulaic verification of Mr Dwyer’s calculations by the relevant Peet witnesses;

(b) The failure of Mr Dwyer to speak to any of the witnesses except Mr Mulder;

(c) Mr Dwyer’s apparently uncritical acceptance that all documents provided to him related to work done for the benefit of the Richmond land;

(d) The lack of any evidence as to the selection process adopted by Peet or its solicitors in determining the relevance of documents provided to Mr Dwyer; and

(e) The paucity of comparative information obtained by Mr Dwyer as to hourly rates and industry practice.

I am not satisfied, as Peet asserts, that Mr Dwyer has probably underestimated the true amount of time Peet spent on work done for the benefit of Mrs Richmond.  On the contrary, I am satisfied that he has almost certainly overestimated that work, in a number of respects.  Of particular concern in that regard are the following:

(a) The failure to identify and remove work done for Peet’s personal benefit in attempting to secure and document an appropriate commercial deal with Mrs Richmond;  and

(b) The failure to identify and remove all work done by Peet for the benefit of the Carter land, not the Richmond land.

I have given Peet the benefit of the doubt in respect of a number of issues where Mrs Richmond’s counsel could have put specific matters to relevant lay witnesses in cross-examination.

Nevertheless, it remains the fact that Peet bears the onus of persuading the court as to what is a fair and reasonable amount to allow on the quantum meruit.  Having regard to the matters described in the preceding paragraphs, and assessing as best I can, I have concluded that there should be a further reduction of 10% applied to the total of $520,747.50.

Conclusion: The amount recoverable by Peet in respect of its internal costs claim will be $468,672.75.

1. Peet contends that, given that the judge carefully considered each of the criticisms made by Richmond of the several amounts comprising Peet’s claim, and allowed for them in the five specific deductions totaling $295,217.50, there was not a proper basis for the further deduction of 10%;  especially given that counsel for Richmond did not cross-examine Peet’s witnesses on a number of matters relevant to that deduction.

1. I do not accept that contention.  At trial, Richmond contended for 13 distinct reductions from the amounts claimed by Peet, and the thirteenth of those urged that the judge make an overall percentage reduction, of between 5% and 25% in respect of Peet’s internal costs claim, on the basis that Mr Dwyer’s methodology tended to exaggerate time spent by Peet staff for the benefit of Richmond in relation to the inclusion of the Richmond land in the UGB.  Peet did not suggest at trial that it was not open to make such an overall further reduction.  

1. The judge’s reasons for making a 10% overall further reduction, which I have set out above, are consistent with Richmond’s contentions and I see no error in them.  It is not suggested that her factual findings are inaccurate or that it was not open to her to conclude on the basis of the facts that Mr Dwyer was very likely to have overestimated the amount of Peet’s work for the benefit of Richmond;  and, given that Peet failed to provide precise records of time spent, and the general formulaic nature of the lay evidence offered in support of Mr Dwyer’s assessment, the judge was in effect compelled to adopt a broad brush approach of the kind she essayed.  Her conclusion that a general deduction of 10% was necessary was open to be made. 

Grounds 9, 10 and 11:  Claim to interest

1. In separate reasons for judgment delivered on 17 December 2009, the judge dealt with Peet’s claim for ‘pre-litigation interest … based on restitutionary principles, as part of its claim to recover on a quantum meruit’.  In those reasons, her Honour noted that the claim for interest as finally framed differed from the way in which it was put in the pleadings, in that in the further and better particulars filed on 20 October 2008 (being the first day of trial) Peet sought ‘pre-litigation interest and interest pursuant to statute in the amounts as determined by the court’.  Up until then, there had been no claim for interest on a quantum meruit basis.  

1. The next step, as the judge observed, was that in the course of trial counsel for Peet handed up a document headed ‘Particularised paragraphs of statement of claim relied upon at trial’ which showed paragraphs of the statement of claim on which Peet no longer relied (as a result of abandoning its claims in contract and estoppel).  That document also showed the total amounts sought by way of quantum meruit in respect of the third party claim, and the internal claim, and added for the first time the following claim for interest:

plus interest on these disbursements, running for each from the date of payment of each consultants invoice, totalling $207,566.70 (to 20 October 2008), and as detailed on the schedule attached, and interest pursuant to statute on the sum of $815,965 [which was the amount sought by Peet in respect of internal costs], or such sum as is awarded by the court.

1. As the judge then further explained, the schedule was contained in a folder marked ‘interest calculations’ which set forth a series of calculations of simple (not compound) interest, at the penalty rate, calculated from either the date of payment of the relevant invoice, or the date of the invoice, until the first day of trial.  The schedule totalled $208,593.66 (GST inclusive) or $186,485.72 (GST exclusive) and it was confined to interest on items which formed part of the third party claim (costs and outgoings paid to third parties).  There was thus never a pleaded or particularised claim for pre-litigation interest in respect of the costs of Peet’s own work and labour done.

1. Finally, as the judge recorded, Peet argued that it should be compensated for being kept out of its money, both for amounts it paid to third parties and for its own time.  It contended that Richmond had received the benefit of not having to pay for the services at the time they were provided, and had been able to use the money in the meantime.  It followed, Peet submitted, that, unless Richmond were compelled to pay interest, Richmond would be unjustly enriched;  and, therefore, that the final award would not be fair and reasonable unless it included pre-litigation interest.

1. The judge rejected the claim, as follows:

In summary, when it was becoming apparent to Mrs Richmond that she and Peet were unlikely to be able to reach any agreement beyond the inclusion of the Richmond land in the UGB, Mrs Richmond offered to pay Peet’s actual costs for the work done in relation to UGB inclusion.  Over a period of several years, she repeatedly sought details of the amount of those costs.

Peet steadfastly refused to provide those details, arguing instead that there was a binding joint venture agreement for the development of the land.Peet said it did not want to be paid for its actual costs, because it was a joint venturer and should be entitled to proceed on that basis.  Indeed, it was not until the first day of the trial that Peet finally abandoned its primary contention that there was such a binding contract.  Importantly, Peet never demanded payment of any sum prior to the commencement of this proceeding, despite all the correspondence between the parties about costs.

In submissions, Peet argued that it was not clear from Mrs Richmond’s letters whether she was offering to pay Peet’s internal costs or only third party expenses, therefore I should not be satisfied that Mrs Richmond’s offer went far enough.  I reject that argument.  On its face, the offers in the correspondence seem to be wide enough to cover both internal and external costs.  Furthermore, Peet’s argument might have had some validity had Peet shown the slightest interest in accepting payment, and (unsuccessfully) sought clarification as to the extent of Mrs Richmond’s offer.

In these rather unusual circumstances, I am not persuaded that it would be fair and reasonable to award Peet interest (at any rate or on any basis) in respect of money that it was not claiming – indeed, was rejecting offers of payment of – prior to the commencement of the proceeding.  In so far as Mrs Richmond has received the benefit of having the use of the money, between the times when the work was done and the commencement of the proceeding, there is no unjust enrichment in her retaining that benefit.  She made reasonable offers, and took reasonable steps to obtain sufficient information to enable her, to pay Peet for what it had done for her benefit, even though she was under no contractual obligation to do so.

1. Peet says that is wrong.  It argues that, because it did not keep time records (as the judge found), the quantification of its quantum meruit claim on a time and expense basis depended upon a detailed reconstruction to determine which of Peet’s staff worked on the Richmond Land;  how much time they spent;  and the rate at which each individual’s time should be valued.  Thus, it was not until Mr Dwyer completed the assessment exercise on 16 November 2007 that Peet was able to inform Richmond of the amount of its claim.  In those circumstances, Peet says, the judge was in error in concluding that Peet ‘steadfastly refused’ to provide details of its costs to Richmond, exhibited ‘continued resistance’ to provision of the details or responded to Richmond’s enquiries with ‘delay’ or ‘obfuscation’.

1. I do not accept that contention.  The fact is that Peet repeatedly thumbed its corporate nose to Richmond’s repeated offers to pay Peet a quantum meruit for work and labour done;  instead insisting that there was a binding agreement for the development of the Richmond Land of which it alleged that Richmond was in breach.  Evidently, for that reason, Peet did not even begin to attempt to quantify its claim for work and labour done until some nine moths after it instituted proceedings and even then possibly only after it dawned on Peet that its contractual and estoppel claims were likely to fail.  In those circumstances, it is palpably disingenuous for Peet to suggest that it was prevented from providing the details of its claim much sooner that it did.

1. Peet also contends that, whether or not it delayed in the formulation of its quantum meruit claim, the award of pre-litigation interest is not discretionary, in the sense that it is not something which the court may refuse in order to signal disapproval of a litigant’s conduct.  As Peet would have it, a litigant is not to be deprived of its rights to recover under restitutionary causes of action by reason of conduct (in the course of a dispute) which may be regarded as rude or uncooperative.  Rather, it says, recovery in restitution reflects an obligation on the part of a defendant to make fair and just restitution for a benefit derived;  idiosyncratic notions of what is fair and just having no role to play.

1. I do not accept that submission either.  It faces difficulties at several levels.  First, the claim to pre-litigation interest was based on the decision of the House of Lords in Sempra Metals Ltd v Inland Revenue Commissioners[26] that the court had jurisdiction to award compound interest, where a claimant was seeking restitution of money paid under a mistake, in order to take account of the value of the use of the money over the time during which it had been retained by the defendant.  It is not clear that the High Court would follow that decision.  It represented a departure from the earlier decision of the House of Lords in Westdeutsche Landesbank Girozentrale v Islington London Borough Council[27] that, where statutory provisions like s 60 of the Supreme Court Act 1986 provide for orders for the payment of simple interest, not compound interest, upon common law claims, equity will not supplement the statute by providing for an award of compound interest.  In The Commonwealth v SCI Operations Pty Ltd[28] Gummow and McHugh JJ referred to Westdeutsche in terms which appear to me to cast doubt on the existence of a ‘free-standing’ right to recovery of interest where a defendant has had the use of a plaintiff’s money in circumstances which indicate an unjust enrichment at the expense of the plaintiff.

   [26][2008] 1 AC 561.

   [27][1996] AC 669.

   [28](1998) 192 CLR 285, 316 [72]–[76].

1. Secondly, although the so-called free-standing right to recovery of interest has been recognised in New South Wales[29] and in South Australia[30] and, until and unless the High Court says to the contrary, it may be that this court is bound to follow those decisions,[31] they were concerned with restitutionary claims for moneys had and received.  It is not clear that the same reasoning applies to restitutionary claims for work and labour done.  For as was explained in Roxborough v Rothmans of Pall Mall[32] the action for money had and received, although a common count, is based in equitable principles.  The raison d’etre of the action for work and labour done is different.[33]

   [29]Heydon v NRMA Ltd (No 2) (2001) 53 NSWLR 600.

   [30]Chow v Yang [2010] SASC 96.

   [31]Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, 492; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 151 [135].

   [32](2001) 208 CLR 516, 545 [76]–[89] (Gummow J).

   [33]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 267 (Dawson J).

1. Thirdly, interest under the ‘free standing right’ to interest on a plaintiff’s claim for money had and received does not begin to run until and unless retention by the defendant of the plaintiff’s money becomes unjust[34] and, even assuming there is a free standing right to interest on a plaintiff’s claim for work and labour done, there is no reason to think that interest would begin to accrue until and unless the defendant’s failure to pay the quantum meruit became unjust.

   [34]State Bank of New South Wales Ltd v FCT (1995) 132 ALR 653, 659–661; Lahoud v Lahoud [2010] NSWSC 1297, [157] (Ward J).

1. In Lahoud v Lahoud,[35] moneys were paid by the plaintiff to the defendant under terms of settlement in satisfaction of the defendant’s claim for a share of profits from a development but in the knowledge that some or all of the moneys might not ultimately be found to represent part of that share, and thus subject to a contractual obligation on the part of the defendant to repay the difference upon an audit indicating that the profit was less that the figure originally assumed.  According to the contract, there was no obligation to repay the difference until the outcome of the audit was known.  In those circumstances, it was held retention of the excess profit share was not unjust until the outcome of the audit was known and, therefore, that interest under the free standing right to restitutionary interest did not begin to accrue until then.

   [35]Ibid.

1. Parity of reasoning dictates that where, as here, a claim is for work and labour done, and that, until the institution of proceedings the plaintiff has repeatedly repudiated any entitlement to a quantum merit, insisting instead that the defendant enter into or give effect to an contract by which the defendant is not bound, it is not unjust for the defendant not to pay a quantum meruit until its obligations have been established in the proceedings.

1. Counsel for Peet argued that inasmuch as the judge did not refer in her reasons to the fact that Richmond had the benefit of the quantum meruit until payment to Peet and Peet had been kept out of its money for that time, it was to be concluded that her Honour failed to take into account a relevant consideration and thus that her exercise of discretion miscarried.  

1. I do not accept that contention.  Granted, the judge did not refer specifically to the detriment suffered by Peet in being kept out of its money, or to such if any

benefit to Richmond as there may have been in that.  But there is no reason to suppose that her Honour did not take either of those considerations into account.  In effect, it was so obvious as to go without saying.  Implicitly, it was the starting point for her Honour’s consideration of why it was not unjust for Richmond not to pay until provided with particulars.

1. Finally, counsel for Peet argued that, whatever may have been the position in relation to its restitutionary claim for interest, Peet was entitled to interest under s 60 of the Supreme Court Act 1986 from the date of issue of the writ, unless there were good reason to the contrary, and that there was no good reason to the contrary.

1. I do not accept that contention either.  If a tradesman or a professional person failed to get around to working out his or her bill until the best part of a year after instituting proceedings to recover the amount of it from a customer or client, there would be very good reason to refuse a claim for interest on the bill in respect of the period up to the date on which the customer or client was informed of the amount of it.  A fortiori in circumstance where the customer or client had repeatedly requested a bill so that it could be paid.  Why should not the same rules apply to property developers?    

Conclusion

1. It follows that I would dismiss the appeal.

NEAVE JA:

1. I have had the advantage of reading the draft reasons for judgment of Nettle JA and I agree with his Honour, for the reasons he gives, that the appeal should be dismissed. 

JUDD AJA:

1. I also agree.

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