Rebenta Pty Ltd v Wise - [2007] NSWSC 1332

No judgment structure available for this case.

CITATION: Rebenta Pty Ltd v Wise [2007] NSWSC 1332

HEARING DATE(S): 19-30 March 2007; 2-11 April 2007; 27-30 August 2007

JUDGMENT DATE :
30 November 2007

JUDGMENT OF: James J

DECISION: Verdict for the defendant

CATCHWORDS: PROFESSIONAL NEGLIGENCE - solicitors - retainer - construction of commercial contracts - rectification of contract - estoppel by convention - election between inconsistent rights - negligence - causation of damage - damage for loss of opportunity

LEGISLATION CITED: Environmental Planning and Assessment Act

CASES CITED: Amalgamated Investment & Property Co Ltd v Texas Commercial International Bank Ltd (in liq) [1982] QB 84
Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Aust) Ltd (1985-1986) 160 CLR 226
Gwynvill Properties Pty Ltd v Commissioner for Main Roads (1983) 50 LGRA 322
Moratic Pty Ltd v Gordon [2007] NSWSC 5
Ryledar v Euphoric [2007] NSWCA 65
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
The Indian Grace (No 2) [1998] AC 878
Westpac v Tanzone (2000) NSWCA 77

PARTIES: Rebenta Pty Ltd v Peter Wise

FILE NUMBER(S): SC 20349/98

COUNSEL: JC Kelly SC (Plaintiff)
LS Foster SC / DR Pritchard (Defendant)

SOLICITORS: Cohen & Krass (Plaintiff)
Mallesons Stephen Jaques (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JAMES J

FRIDAY 30 NOVEMBER 2007

20349/98 REBENTA PTY LTD v PETER WISE
JUDGMENT

1 HIS HONOUR: These proceedings were brought by the plaintiff Rebenta Pty Ltd against the defendant Peter Wise claiming damages for alleged professional negligence by the defendant in acting as solicitor for the plaintiff in 1996. The plaintiff was the owner of a property at 107 MacPherson Street, Bronte on which a building known as the Bronte Inn was erected (“the Bronte Inn” or “the property”). On 18 December 1995 the plaintiff entered into an agreement described as a Project Management Agreement with a company named Dramwren Pty Limited, which later changed its name to Ocean View Apartments Pty Ltd (“Dramwren” or “Ocean View”) for the redevelopment of the property. In these proceedings the plaintiff alleged that by reason of the defendant’s negligence the plaintiff lost the opportunity of terminating the Project Management Agreement and of itself developing the property and thereby it suffered loss.

2 A very large amount of evidence was admitted in the proceedings. The common tender bundle of documents comprised 12 lever arch folders, some of which contained so many documents that they were divided into two separate folders. The plaintiff’s separate tender bundle and the defendant’s separate tender bundle each comprised two lever arch folders. Many witnesses, both lay and expert, gave oral evidence at the hearing. It is obviously impossible for me to refer in this judgment to all of the evidence which might have some relevance to one of more of the numerous issues which were raised. I propose first to set out a chronology of events and matters which were not disputed or which, in my opinion, were clearly established by the evidence. This chronology will, of course, not include many events and matters which one or other of the parties submitted were important and had been proved.

Chronology of undisputed or clearly established events and matters

3 The plaintiff was one of a number of companies controlled by Mrs Millie Phillips, which were sometimes referred to as the Milstern group. Mrs Phillips’ son, Mr Robert Phillips, was a director of the plaintiff and up until 5 April 1996 carried out most of the day-to-day management of the business of the plaintiff.

4 The principal financiers to Mrs Phillips’ companies were the Commonwealth Bank and the Hong Kong Bank of Australia. In the early 1990s companies in the group owed very substantial sums of money to the Commonwealth Bank and the Hong Kong Bank. Arrangements were entered into between companies in the group and the Banks, providing for the discharge of the indebtednesses by a series of payments to be made progressively and requiring companies in the group to endeavour to realise some of their assets. These assets included the property.

5 Communications from real estate agents in the common tender bundle show that in 1994 the plaintiff was endeavouring to sell the property. On 28 November 1994 an estate agent conveyed to Mr Robert Phillips an offer by a company Leda Holdings Pty Limited (“Leda”) to purchase the property. On 14 June 1995 an agent communicated to the plaintiff another offer to purchase the property for a price of $6.8m under a managed contract. A draft contract was prepared for a sale of the property by the plaintiff to Leda but the sale did not proceed.

6 On 19 August 1995 a meeting took place. Those present at the meeting included Mrs Phillips, Robert Phillips, Mr Tibor Balog and Mr Richard Arnold, who was representing Mr Robin Wise (who is no relation to the defendant in these proceedings). At the meeting a redevelopment of the property by a joint venture, the effective parties to which would be Mrs Phillips, Tibor Balog and Robin Wise, was discussed.

7 On 28 August 1995 Robin Wise wrote a letter to the plaintiff. There are two versions of this letter. The two versions are similar, except that certain paragraphs appear in one version and not in the other. In both versions the terms of a proposed redevelopment of the property by Robin Wise were stated. This part of both letters included the following:-

““It is contemplated that the transaction would be effected by way of the granting of a Power of Attorney by Rebenta P/L in favour of our company in respect to the Bronte property allowing us to apply for and gain all appropriate approvals, undertake demolition and building works in accordance with those approvals and enter into and settle contracts for sale of the completed units.

It would further recite that all proceeds from sales up to a total of $7,000,000 would flow to you, with all monies thereafter being paid as we so direct.””

8 Some paragraphs included in one version, but not in the other version, of the letter of 28 August 1995 were as follows:-

““Finally, the Power of Attorney would also contain a provision that upon the giving of seven days notice by us any time after 60 days from the granting of the Power of Attorney and prior to 90 days you would have the right to elect to participate in the Joint Venture development of the property as to a one third share either in your own right or by way of a nominated associated entity upon terms and conditions that would be set out in an attached Joint Venture agreement.

Your right to on-sell your interest in such a Joint Venture to an unrelated party would however be specifically excluded.””

9 There is an overwhelming inference that the two versions of the letter were prepared, so that the version not including the paragraphs I have quoted, but not the other version, could be shown to the plaintiff’s financiers, concealing from the plaintiff’s financiers that the plaintiff would have the right to participate in a joint venture for the redevelopment of the property.

10 The task of drafting formal agreements was divided between the defendant as solicitor for the plaintiff and another solicitor Mr George Newhouse, who was acting for Robin Wise. The defendant undertook the task of drafting two agreements which were described as the Project Management Agreement and the Tripartite Deed. Mr Newhouse undertook the drafting of a Joint Venture Deed.

11 Between early September 1995 and mid-November 1995 the defendant prepared at least nine drafts of the Project Management Agreement. The drafts were submitted to Mr Newhouse and, from late September 1995, to Blake Dawson Waldron solicitors, who were acting for the Hong Kong Bank, which required to be satisfied with the terms of the Project Management Agreement. Later in this judgment, in determining some of the issues between the parties, it will be necessary to refer in detail to some of the communications which took place in the course of the drafting of the Project Management Agreement.

12 Meetings of the joint venturers took place at least from 10 November 1995. The minutes of the meeting held on 10 November 1995 recorded that Mrs Phillips, Robert Phillips, Robin Wise, Richard Arnold and Tibor Balog were present. The minutes disclosed the names of the entities which were to be the joint venturers, Simjack Pty Limited (Robin Wise), Progress & Securities Management Pty Ltd (Tibor Balog) and the Charlotte Trust (the plaintiff or Mrs Phillips).

13 The minutes of the meeting of 10 November 1995 also recorded that “Mr Jahn “presented his ideas to the meeting”. A Mr Peter Rommel, a consultant town planner, who had previously done work for Mrs Phillips, had on or about 23 October 1995 lodged with Waverley Council a development application for the conversion of the Property into residential units. I infer that it was agreed by the joint venturers that Mr Graham Jahn, an architect, should replace Mr Rommel in the redevelopment of the property. On 22 November 1995 Mr Rommel assigned to Dramwren the development application he had lodged. On 24 November 1995 Mr Jahn submitted an amended development application to Waverley Council, providing for 54 sole occupancy units on the property.

14 On 24 November 1995 the Hong Kong Bank of Australia wrote a letter to Robert Phillips referring to a request made by Mr Phillips that the Bank consider an extension of the time for repayment of the group’s indebtedness to the Bank. In the letter the Bank stated:-

““HKBA’s requirement is that the loan is fully repaid on or before the maturity date – 30 June 1996. This position will not change unless you are formally advised to the contrary””.

15 The minutes of a meeting of the joint venturers held on 8 December 1995 included the following items:

““1A…Mr Wise to produce a budget to BA (building application) stage in March 1996 early next week

…

5 We would aim to have the DA (development approval) at the first Council meeting in February

…

7 Wise Group to have management of the project to BA stage

…””

16 On 17 December 1995 the Trust Deed of the Charlotte Trust was executed with Robert Phillips as trustee of the Trust. The beneficiaries under the Trust were members of the “Phillips Group”, which included Mrs Phillips, her relatives and corporations in which she held a relevant interest.

17 Four formal agreements were entered into, which were all dated 18 December 1995. These formal agreements were the Project Management Agreement, the Tripartite Deed, the Joint Venture Deed and an Option Deed.

18 The parties to the Project Management Agreement were the plaintiff (described in the Project Management Agreement as “the Owner”) and Dramwren (described in the Project Management Agreement as “the Project Manager”). Many of the provisions of the Project Management Agreement are relevant to a determination of issues between the parties in the present proceedings. I will, however, set out, or refer to, only some of the provisions of the Agreement.

19 Clause 1.1 included the following definitions:-

““(c) “Building Consent” means written consent from the Council to the Building Application.

(g) “Development Application” means an application or applications to the Council by the Project Manager on behalf of the Owner seeking Development Consent to:-

(i) the use of the Land and Building for the purposes of not less than 45 nor more than 56 residential units, a licensed bottle shop and a retail store, and

(ii) the strata sub-division of the Land and Building so as to provide separate strata titles for the units, licensed bottle shop and retail store referred to in sub-(i) above.

(h) “Development Consent” means written consent from the Council to the Development Application (whether or not subject to terms and conditions).””

20 Clause 5 of the Project Management Agreement included the following provisions:-

““5.1 The Project Manager will on behalf of the Owner but at the Project Manager’s own expense:-

…………………………

5.1.2 submit the Development Application, draft Strata Plan and Building Application to the Council, which Building Application must be lodged with the Council as soon as practicable but not later than six (6) weeks after Council’s approval of the Development Application.

5.4 In the event that Council refuses to grant Development Consent or has not granted Development Consent and Building Consent by 28th February 1996 either party may by notice in writing to the other terminate this Agreement and neither party shall have any right or action or claim for damages or specific performance against the other.

…………………………

5.7 In the event that the Project Manager has not obtained the Development Consent approval by 28th February 1996 (and in this regard time shall be of the essence) the Owner shall have the right to terminate this Agreement without any claim against it by the Project Manager for any costs, charges or expenses incurred by the Project Manager whatsoever.””

21 The Project Management Agreement provided for the payment of the proceeds of sales of lots to the plaintiff, until “the settlement sum ($7m)” had been paid and thereafter the Project Manager would be entitled to the proceeds of sale of any lot sold.

22 Clause 20 of the Project Management Agreement provided:-

““In the case of a breach of any of the covenants and conditions contained in this Agreement (except in respect of the payment of moneys or the exercise of options) by one of the parties (“the defaulting party”) the other party shall serve upon the defaulting party written notice of such default pursuant to which the defaulting party shall be granted a period of 21 days within which to remedy the default.””

23 Clause 21.1 of the Project Management Agreement provided in part:-

““The Owner will be entitled to forthwith terminate this Agreement and recover damages for breach of this Agreement from the Project Manager:-

21.1.1 as provided for in clauses 5.7…””

24 Clause 28 of the Project Management Agreement contained provisions relating to the giving of notices to a party to the agreement. Clause 28.4 provided:-

““In the event of any default by any party in the due compliance with any obligation of that party (not being an obligation in relation to which time is expressed to be of the essence) either within a time period stipulated under this Agreement or in the absence of any such time period within a reasonable time, then any other party will be entitled to serve a notice on the defaulting party making time of the essence of this Agreement in relation to the performance of the particular obligation in respect of which there has been default. In those circumstances the parties agree that such notice may require performance of the particular obligation in respect of which there has been default within twenty one days from the date upon which the notice is served and such period of twenty one (21) days will be deemed to be sufficient and reasonable for all purposes both at law and in equity.””

25 Clause 30.1 of the Project Management Agreement provided:-

““The failure by any party at any time or times to require performance by any other party of any provision of this Agreement will not affect the right to enforce the same. The waiver by any party of any breach of any one or more of the provisions contained in this Agreement will not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision in itself by such party. No waiver by any party of any of that party’s rights powers or remedies will be of any effect unless in writing.””

26 The parties to the Tripartite Deed were the Hong Kong Bank of Australia Limited, the plaintiff (described in the Deed as “the Customer”) and Dramwren. The Tripartite Deed referred to the Project Management Agreement, which was described in the Tripartite Deed as “the Agreement”.

27 Clause 2 of the Tripartite Deed, which contained covenants by the plaintiff and Dramwren, provided in part as follows:-

““2.1 The Customer and Dramwren covenant and agree with Hong Kong Bank as follows:-

2.1.1 The Customer and Dramwren shall duly punctually observe their obligations under the Agreement for the benefit of each other and Hong Kong Bank;

……………………………….

2.1.5 Neither the Customer nor Dramwren shall terminate rescind or vary the Agreement by agreement with each other without the prior written consent of Hong Kong Bank.”

28 Clause 2.3 of the Tripartite Deed provided in part as follows:-

“2.3 The Customer covenants and agrees with Hong Kong Bank as follows:-

………………………………

2.3.2 The Customer shall not waive any of its rights against Dramwren under the Agreement or exercise an election under clause 6.5(a) of the Agreement or issue a notice to Dramwren without the previous written consent of Hong Kong Bank.””

29 The parties to the Joint Venture Deed were Simjack Pty Ltd, Progress and Securities Management Pty Ltd and Robert Phillips as the trustee for the Charlotte Trust (these parties being described as “the Joint Venturers”) and Dramwren (“the Project Manager”). The Joint Venture Deed referred to the Project Management Agreement and the Tripartite Deed.

30 Clause 2.1 of the Joint Venture Deed provided in part as follows:-

““2.1 This Deed and its operative provisions shall continue until the earlier of the following events (the “Termination Event”):

……………………………

2.1.3 the date that the Project Management Agreement is validly terminated; or

2.1.4 upon written notice from Charlotte served on the Project Manager terminating this joint venture (the “Termination Notice”) but only if such notice is served on the Project Manager by the later of

(a) 60 days from the date of this Deed; or

(b) seven days from the date of hand delivery of written notice by the Project Manager to Charlotte of the Development Consent as defined in the Project Management Agreement.””

31 By cl 4 of the Joint Venture Deed the Joint Venturers appointed the Project Manager to conduct the project of developing and selling the property and the Project Manager accepted the appointment.

32 Under cl 6 of the Joint Venture Deed the net profits and losses of the project were to be divided and borne between the Joint Venturers in equal one-third shares.

33 Clause 14 of the Joint Venture Deed provided:-

““14 Confidentiality

14.1 All of the parties hereto agree and acknowledge that it is in the interests of the joint venture Project that knowledge of their involvement in the Project be limited.

14.2 Each of the parties for themselves, their officers and representatives covenant not to disclose to or for the benefit of any other person or corporation, except to the Joint Venturers’ respective professional and financial advisers, and only for the purpose of furthering the Project:-

14.1.1 that they, or any of them, have purchased or otherwise acquired (either in whole or in part) the Property;

14.1.2 that they, or any of them, have or will have an interest in the Property;

14.1.3 the existence of any of the terms of this joint venture including, but not limited to, the financial arrangements or profits of the joint venture except as may be required for taxation purposes

without the unanimous consent of all the Joint Venturers being first had and obtained.

14.2 The provisions of clause 14.1 shall not merge on completion or termination of this Deed.””

34 By the Option Deed Dramwren granted to the plaintiff a put option exercisable at any time between 30 August 1996 and 14 October 1996, whereby the plaintiff could require Dramwren to purchase the property at a price calculated in accordance with the provisions of the Option Deed.

35 On 30 December 1995 Tibor Balog sent a memorandum to Robin Wise, Mrs Phillips, Robert Phillips and Richard Arnold, complaining about Mr Jahn. In this memorandum Mr Balog said inter alia:-

““Ever since the design of Bronte was handed over to Graham Jahn, Architect, I have been agonising non-stop at the way this development is progressing.

…………………………..

Certainly I am now convinced that we could have obtained much greater benefits within a much shorter time frame – more than was originally presented in the Peter Rommel plans – by improving his plans instead of a complete change.

…………………………

It appears that we have a firm of architects with absolutely no practical experience in multi-storey development and therefore no consciousness of cost and/or return nor any practical concerns. They seem completely misguided on what our (Bronte) market demand will be – comparing it to Surrey Hills and other new emerging fashionable but different areas.””

36 On 8 January 1996 Robert Phillips sent a memorandum to the other joint venturers saying that the ongoing dispute between Mr Balog, Mr Wise and Mr Jahn needed urgent resolution. In the memorandum Robert Phillips said:-

““Our main objective is to see the sale of the property at the earliest opportunity and by 30 June 1996 at the latest. For this to take place a DA is required prior to February 28.””

37 On 8 January 1996 Mr Balog sent a further memorandum, saying inter alia:-

““I hate to say it, but the result of Graham Jahn’s involvement so far is just short of a disaster, one would have to be blind not to see that.

…

Let’s hand back the BA to Peter Rommel, or if for some unknown reason you resent Peter Rommel, then to others with experience.””

38 In this memorandum Mr Balog pressed Mr Wise “to hand back (that is to Mr Balog) the chief executive control” (of the development).

39 It would appear that this memorandum of 8 January 1996, although sent to Mrs Phillips and Robert Phillips, was not in fact sent to Robin Wise.

40 Mrs Phillips and Robert Phillips replied to Mr Balog’s memorandum of 8 January 1996 in a joint letter of 10 January 1996. In this letter Mrs Phillips and Robert Phillips said inter alia:-

““The work we have seen from Jahn to date seems to be of good quality but to go to the BA stage with him we would want to see some more evidence of his appropriateness. We do not believe at this stage that it is correct to say ‘the result of Graham Jahn’s involvement so far is just short of a disaster, one would have to be blind not to see that’.

…………………………..

Our position is very simple. The Management Agreement is with a Robin Wise Company and a Robin Wise Company is the Project Manager according to the Joint Venture Agreement. If the Phillips Group is forced to choose between Balog and Wise, it will therefore have to choose Wise. However, we will do what we can to bring the parties together as we believe the commercial best interests of all parties is served by their co-operation.””

41 The minutes of a meeting of the joint venturers held on 12 January 1996 noted “DA on track for 28 February 1996 deadline” and that “Mr Wise and Mr Balog propose to meet weekly, probably with the architect, to ensure proper communication and input by the joint managers”.

42 On 30 January 1996 Mrs Phillips provided to the Commonwealth Bank a report on steps taken by the Milstern group to refinance indebtedness. The report stated in part:-

““The Commonwealth Bank of Australia has made it very clear that it wishes to be paid out on or before 30 June, 1996, being the expiry date of the current arrangements. Hong Kong Bank has indicated that it would prefer to be paid out on that date but if this proves not to be possible, it would consider extending its loans to the group, subject to amortisation payments being met.””

43 In the report of 30 January 1996 options to effect repayments to the Commonwealth Bank and the Hong Kong Bank by 30 June 1996 were discussed.

44 On 31 January 1996 a copy of the report of 30 January 1996 was forwarded to the Hong Kong Bank.

45 The minutes of a meeting of the joint venturers held on 2 February 1996 included the following items:-

““DA was on target and positive responses had been received from Council. Final redrawn plans to be lodged today. Council meeting on 27 February 1996. BA drawings were about 35% complete.

…………………………..

Mr Wise to provide highrise credentials of G Jahn. Confirmed that G Jahn to prepare the BA and that his fees to be accepted for both DA and BA. Also agreed to engage him to prepare construction and tender documents at the nominated fee.””

46 A preliminary budget was tabled at the meeting on 2 February 1996. It contained the following particulars:-

47 At a meeting of Waverley Council held on 27 February 1996 the application for the development of the property as prepared by Mr Jahn was conditionally approved by the Council. Notice to Mr Jahn of the granting of development approval was given by the Council in a document dated 11 March 1996.

48 In a letter dated 15 March 1996 to Mrs Phillips the Commonwealth Bank noted a foreshadowed inability of the Milstern group of companies to meet a payment due on 31 March 1996. In its letter the Bank made an offer of compromise.

49 The minutes of a meeting of the joint venturers held on 18 March 1996 recorded that the development approval “had been reviewed, major issues were acceptable” and that the building application was to be lodged at the end of the week.

50 On 29 March 1996 Mrs Phillips replied to the Commonwealth Bank’s letter of 15 March 1996. She said that the offer made by the Bank would be accepted, “provided that CBA agrees to the following minor adjustments”.

51 The minutes of a meeting of the joint venturers held on 3 April 1996 recorded that lodgement of the application for building approval had been delayed due to the late receipt of reports.

52 On 5 April 1996 Robert Phillips became seriously mentally ill and entered a clinic. He did not subsequently take any part in the conduct of the affairs of the plaintiff. Mrs Phillips took over the day-to-day management of the affairs of the plaintiff.

53 On 9 April 1996 the Commonwealth Bank replied to Mrs Phillips’ letter of 29 March 1996. In its letter the Bank said that it did not regard the matters outlined in Mrs Phillips’ letter as “minor adjustments” and what the Bank described as Mrs Phillips’ “counter-offer” was rejected. The Bank reiterated the offer it had made in its letter of 15 March 1996. This offer was accepted by Mrs Phillips.

54 On 9 April 1996 the plaintiff wrote a letter to Waverley Council consenting to the building application. The letter was in the following terms:-

““We confirm we are the registered proprietors of the above mentioned property. (Bronte Inn – 107 MacPherson St, Bronte)

We hereby confirm our consent is granted to Dramwren Pty Limited and its Architects – Jahn & Associates to lodge a Building Application over this properly.””

55 The building application was lodged with the Council on the same day, 9 April 1996.

56 There is in the common tender bundle a letter dated 10 April 1996 from Peter Wise’s firm to Mrs Phillips. It will be necessary later in this judgment to refer to some of the evidence about this letter. The letter was in the following terms:-

““I refer to our recent telephone conversation and advise that pursuant to clause 5.4 of the Project Management Agreement either party may terminate the Agreement if Development Consent and Building Consent have not been granted by 28th February, 1996.

I understand that Development Consent was granted before 28th February 1996 but that Building Consent has not yet been granted.

I point out, however, that although Rebenta is entitled to terminate the Agreement pursuant to clause 5.4, Robin Wise may consider that Rebenta has waived its rights under that clause by its actions since 28th February 1996. Nevertheless, I stress that Rebenta is 100% entitled to terminate the Agreement.””

57 On 12 April 1996 both the Commonwealth Bank and the Hong Kong Bank wrote letters giving notice that Mrs Phillips’ companies were in default under their facilities with the Banks and the default would not be waived.

58 On 22 April 1996 the defendant wrote a letter to Mrs Phillips in the following terms:

““I raise the following points in relation to Bronte:-

A. Project Management Agreement

2. Recitals C (c) and (d) refer to the Project Manager’s (“PM”) appointment for the purposes of renovation of the building and sale of Strata Lots.

3. Under clause 5.3 the PM is to obtain DA and BA “with due expedition and diligence”

4. Under 5.4 either party may terminate if the DA and BA are not through by 28 February 1996. Noted that this is subject, however, to clauses 20.1 and 28.4 requiring 21 days notice.

5. Under clause 5.6 the PM must obtain the mortgagee’s consent to the BA. Has this been done?

6. Under clause 5.11 the PM was not allowed to make certain alterations – this was an essential condition. However, if Rebenta has consented to the lodgement of the Plans, despite any breach of this condition, then it will be taken to have waived its rights unless we can show that we did not appreciate or understand what we were being asked to sign in agreeing to the approval of the plans being lodged with Council. Please advise. (I am aware that there were some changes and these, I believe had been approved by Robert. Query, however, whether he was acting in his capacity as Trustee of the Charlotte Trust or as a director of Rebenta? Unfortunately, I don’t think it makes much difference, because he was both.

7. Under clause 6.1 once the PM has been given possession of the property (under clause 8 which should read clause 7) the PM has to commence renovation works with due expedition. Please note item 1 above.

8. Under clause 13.1 the PM warrants that it will use its best endeavours to introduce purchasers for all of the lots with the intent that such purchasers will complete by the due date so that the owner will receive the $7million by the due date, namely, 30 September 1996.

Although we cannot yet terminate on this ground, we can at this stage ask the PM to “show cause”, ie, how they propose to comply with this clause after telling them that we don’t think that they can complete the sales by the due date etc. This clause forms a very important part of the termination strategy.

I will send such a letter to Dramwren tomorrow and will send a copy for your approval first.

9. Under clause 21.1.4 if the PM “abandons the building and renovation works” we are entitled to forthwith terminate the Agreement. Unfortunately, at this stage although we can say that the situation is even worse – they never even started let alone abandoned the works – I think the response will be that they are merely slow.

From the above it is clear that the overall intention is as outlined in the recitals; it is also clear that the renovation works and sales won’t be through by 30 September 1996. However, against this, all the PM is required to do is to come up with $7million – which at this stage is also highly unlikely. If they come up with the funds or can demonstrate to a Court that they will shortly have the funds, under the terms of the Agreement you unfortunately will have no cause for complaint because you will receive what you are entitled to under the Agreement.””

59 On 22 April 1996 Mrs Phillips, after receiving the defendant’s letter, sent a fax to the defendant, which included the instruction “Pl(ease) send letter”.

60 On 22 April 1996 the defendant, acting on behalf of the plaintiff, sent the following letter to Ocean View:-

““We refer to the Project Management Agreement between Rebenta Pty Limited as Owner and your company as Project Manager dated 18th December 1995.

You have failed to obtain Building Consent from Waverley Council by the date stipulated in clause 5.4 of the Agreement, namely 28th February 1996. Accordingly, you are in breach of the Project Management Agreement.

Pursuant to clause 28.4 of the Project Management Agreement Rebenta Pty Limited you are hereby given twenty-one (21) days notice, time being of the essence, to remedy the breach by obtaining Building Consent from Waverley Council, failing which our client will exercise its right to terminate the Project Management Agreement.””

61 On 22 April 1996 Metway Bank wrote a letter to Ocean View, giving indicative approval to a loan to finance the redevelopment of the property.

62 On 24 April 1996 Mrs Phillips sent a fax in her own handwriting to the defendant, which was in the following terms:-

““Would you consider & discuss with Jeff

1. When I sent approval for late lodgement of BA I was not aware of contractual arrangement. Would not have sent, had I known.

2. At that time Robert was out of office so could not check – would normally expect him to handle.

3. Problems of non-compliance only came to light when you read the contract.

4. R not himself, so overlooked some things.

5. Robin Wise fooled R by telling him we had to empty Bronte by mid April – R.W. also informed on several occasions the Bank’s letter of acceptance available next week. This probably not consequential.

Enclose fax Balog. Going to Tasmania back Friday a.m. Saw Dr this a.m.””

63 The person “Jeff” referred to at the beginning of the fax was Mr Jeffrey Hilton of senior counsel. “Robert” and “R” were references to Mr Robert Phillips.

64 On 1 May 1996 the defendant delivered a brief to advise to Mr Hilton. The instructions to Mr Hilton were contained in a document in the following terms:-

““We act for Rebenta Pty Limited, the owner of the Bronte Inn. After many months of negotiations in November 1995 Rebenta entered into a Project Management Agreement with Dramwren Pty Ltd, a company associated with a property developer, Mr Robin Wise.

A brief outline of the arrangements is as follows:-

1. Dramwren, the Project Manager, do all things necessary to obtain a DA and BA for the building so that the property can be converted to Strata Title with 55 units plus one retail shop.

2. The Project Manager market the properties and sell off the Strata Units with the intention that settlement occur by 30 September 1996.

3. The contracts for sale would be issued by Rebenta Pty Ltd and Rebenta would receive the first $7,000,000 (the Settlement Sum) which, in turn, is to be paid to Rebenta’s bankers, Hong Kong Bank (“HKA”), in reduction of Rebenta’s overall debt.

4. The balance of the profit is to go to a joint venture between interests associated with Mr Tibor Balog (Progress & Properties), Robin Wise (Simjack Pty Ltd) and Robert Phillips as trustee for the Charlotte Trust.

5. HKB is only aware of the Project Management Agreement and is not aware of the joint venture arrangements.

6. The project costs are under a joint venture deed, to be borne by the joint venturers and the profits divided equally. Effectively the Project Manager is a trustee for the joint venture.

What has happened

To date the D.A. has been approved within the time stipulated by the Project Management Agreement (“PMA”), namely by 28.2.96.

Under clause 5.4 of the PMA either party may terminate if the D.A. and the B.A. are not through by 28.2.96. The B.A. was only lodged on 24 April 1996 and the Project Manager is in breach. Please, however, note the provisions of clauses 20.1 and 28.4 of the PMA which requires 21 days notice to be given in the event of breach. Such a notice was given by us on 22 April 1996. Although the letter is dated 22 April, service was only effected for the purposes of the PMA on 23 April.

Under the PMA the Project Manager is to receive vacant possession of the property to carry out its building programme but under clause 7.1(b) Rebenta is not required to hand over vacant possession unless $4,500,000 worth of pre-sales have taken place.

To date no pre-sales have taken place and the marketing programme is way behind schedule.

The Project Manager has allegedly been trying to refinance the property by obtaining 100% finance for its building programme and the repayment of the $7,000,000 to HKB. Accordingly, the Project Manager has been looking for approximately $23,000,000. We are extremely sceptical as to whether this level of funding will be obtained.

The Project Manager has maintained that Metway Bank (which has other dealings with Robin Wise) will fund up to 80% of valuation. To date we have seen nothing in writing confirming this belief.

Our client’s arrangements with the HKB provide that the $7,000,000 facility must be repaid by no later than 30 September 1996. With the inactivity it is now clear to us that from sales it is impossible for this to be achieved.

Under clause 15.1 of the PMA the Project Manager may elect to pay the outstanding balance of the Settlement Sum owing to the HKB, in which case Rebenta will offer the property as security. The payment must be made by 30 August 1996.

Millie Phillips, the principal of our client company believes the following:-

1. The Project Manager has not commenced pre-sales because the sales prices will not be achieved which will force a revaluation by any prospective lender.

2. That the Project Manager is hopeful of refinancing the property by 30 August 1996.

3. That given a movement in property prices in the Bronte area, she has sold the property too cheaply and could do better by approaching another joint venture partner (e.g. Macquarie Bank or private investors) to gain a higher return than is possible under the joint venture arrangements.

4. There has been a lot of conflict between Mr Balog and Mr Wise (no relation to the writer) and largely the joint venture is unworkable in any case.

5. Given that it is unlikely that the property will be refinanced in the manner envisaged by the PMA by 30 August 1996, our client faces difficulty with the HKB and any breach of its arrangements with HKB may have the effect of bringing down the whole group due to cross collateralisation of mortgages.

Representation Made to Rebenta

Our client entered into the arrangements based on the following representations:-

1. That Balog and Wise had the necessary resources to either arrange funding or put funds in place for the development to proceed.

2. That marketing would begin prior to Christmas 1995 and that the project would be completed by 30 September 1996 at the latest.

3. As a fall-back, they would be able to refinance the property prior to the cut off date for the HKB.

At best, all this was wishful thinking.

Breaches

Our client believes that the B.A. will be pushed through by 14 May 1996 in which case we will have to look for other avenues to terminate the agreement.

While there is nothing specific in the agreement requiring the Project Manager to market the property (partly due to the fall-back position of refinancing prior to 30 August 1996) the overall tenor of the agreement certainly is that marketing is to be done and that $7,000,000 will be paid out by the due date of 30 September 1996. Please see clause 13.1. Please also see my letter to Millie Phillips of 22 April 1996 giving summary of the PMA.

The Joint Venture

Under clause 3 of the Joint Venture Agreement (“JVA”) the objects of the Project Manager and the joint venturers are to renovate, strata and develop the property and to sell it. This they have as yet not done.

Under clause 2.1.3 of the JVA the joint venture will terminate if the PMA is validly terminated.

Tripartite Deed

Under a Tripartite Deed with the Project Manager and HKB a second mortgage has been given to the Project Manager.

Under clause 2.1.5 our client cannot terminate the PMA without the prior written consent of HKB and under clause 2.1.3 our client is to notify the HKB of any material default by the PMA (we have not as yet notified the Bank of our notice of 22 April 1996 re the B.A.)

Mortgage

The Mortgage which, at today’s date according to our search has not yet been registered nor a caveat lodged, provides under clause 1 that the charge is to secure the performance by the mortgagor (Rebenta) under the PMA. Presumably, if the PMA has been terminated then the mortgage would also have to be discharged.

Although not yet registered we still may have a difficulty with the mortgage should a caveat be lodged and the PMA terminated.

Your advices

Your advices are sought on how best our client can extricate itself from the arrangements.

Documents Enclosed:-

65 On 1 May 1996 the defendant and Mrs Phillips attended a conference with Mr Hilton. At the conference Mr Hilton advised that a letter should be sent to Ocean View setting out the matters of concern to the plaintiff regarding the joint venture.

66 On 2 May 1996 the plaintiff prepared for the defendant a statement by her about “the sale of the Bronte Inn to Robin Wise”. The statement included a passage in which the plaintiff said:-

““Of course you know my bankers would be astounded to learn that I was involved in the development.””

67 As advised by Mr Hilton, a letter was sent by the defendant to Ocean View on 8 May 1996, outlining complaints by the plaintiff about the joint venture.

68 On 10 May 1996 Waverley Council granted its consent to the application for building approval.

69 On 16 May 1996 Robin Wise replied at length, point by point, to the letter of 8 May 1996. Mr Wise concluded:-

““In summary then it is clear that the interest of the joint venturers and particularly Rebenta have been paramount at all times and that all parties stand to gain substantially from the sustained efforts of my company.

Accordingly, I trust this submission adequately satisfies all of your concerns, such that we can again move forward in a harmonious manner to our mutual benefit.””

70 The redevelopment of the property in accordance with Mr Jahn’s design proceeded and was ultimately completed. The plaintiff received $7m for the sale of the property. The plaintiff’s share of the profit on the project for the redevelopment of the property was $446,119.

Disputed facts

71 At the hearing there were a number of disputed issues of fact. It is unnecessary for me to attempt to resolve all of these issues. Some of these issues I will seek to resolve in later parts of this judgment, when I deal with some of the general issues between the parties. In this part of the judgment I will seek to resolve only some issues of fact about matters and events occurring between March 1996 and early May 1996.

72 Paragraphs 44 to 53 of Mrs Phillips’ first affidavit of 14 November 2002 were in the following terms:-

“I understand the Development Application for Bronte was put through in time. Doesn’t that affect the ability of Rebenta to terminate the agreement?

“No, because the agreement requires the building approval to be approved by 28 February 1996 as well”.

45. On 18 March 1996, there was a meeting of the joint venture at which a valuation report of the Bronte Inn by Landsbury’s was tabled. The report dated 28 February 1996 valued the property at $8.6 million as at that date. At about that time I was also concerned about the ability of Robin Wise to obtain the necessary finance to proceed with the development and to pay out HKB prior to 30 June 1996. On 21 March 1996, I spoke with the defendant concerning the possibility of getting out of the Contract for Sale of the Property. A conversation to the following effect took place:

The defendant said: “We could give them [Robin Wise and the Project Manager?] twenty-one days notice to produce Building Approval”.

I said: “Well give it to them. They haven’t got engineering drawings; that will take six weeks”.

The defendant said: “Let me think about that”.

“No, I don’t think we can give them notice; it’s too soon”.

“I can’t see why not, why can’t we give them notice?”

“It’s too soon. It might look bad because we haven’t given sufficient time from the DA. We won’t get away with it”.

46. On or about 8 April 1996, I was visiting my son, Robert, who had been admitted to South Sydney Clinic on 3 April 1996. The defendant was also present. We left Robert’s presence due to my allergy to Robert’s smoking. As the defendant walked me to my car, a conversation to the following effect took place:

The defendant said: “I am pleased to see that you and Robert are getting on as well as you did before his marriage”.

I said: “Yes, but with Robert out of action, the Joint Venture will be even harder to attend to. Is there any way of getting out of the sales agreement?”

The defendant said: “I’ll look into it and let you know”.

47. On or about 9 April 1996, the defendant telephoned me in an excited state and a conversation to the following effect took place:

The defendant said: “I have a brilliant idea. We will give them twenty one days notice to produce the BA”.

I said: “But you said that last month and said that it was too early”.

The defendant said: “It’s not too early now”.

I said: “Give it to them then. Every day counts”.

The defendant said: “No, I want to see Jeffrey Hilton [SC] first”.

I said: “I don’t see the need for a barrister to approve of something we have a right to do”.

The defendant said: “If we don’t see Hilton it could be messed up and these people are just waiting to take you to Court”.

I said: “Why don’t you send it now and if appropriate, Hilton will tell us how to get it right later on”.

The defendant said: “No, that would make it worse”.

48. Exhibited to me is a letter from the defendant dated 10 April 1996 addressed to me. I say that I not recollect receiving this letter at or about the time it is dated and I did not see it until discussions took place in relation to other matters concerning the Property which was some considerable time after April 1996.

“We can get Millie out of the Bronte sales agreement by giving twenty-one days notice to produce the BA”.

“Well, why don’t you just send the letter requesting a BA in twenty-one days. It would be best if you did it quickly”.

I then had a conversation with the defendant in the presence of Mr Hilton SC where words to the following effect were said:

I said: “Fax the request this evening”.

The defendant said: Okay, I will send a fax today. I will do it either from my office or from my home”.

“I will fax the request this evening”.

I am aware that the defendant claims that this meeting took place on 1 May 2002. I say that this does not accord with my recollection of the date or what was said at the meeting.

50. The following Monday, 15 April 1996, I telephoned the defendant to ask if he had sent the fax notifying Ocean View of the plaintiff’s intention to terminate the agreement if building approval was not obtained within twenty-one days. A conversation to the following effect occurred:

I said: “Have you sent the notice yet?”

The defendant said: “I have not yet had time, but I will do it today”.

“The notice has not been sent”.

52. I telephoned the defendant again on Wednesday, 17 April 1996. A further conversation to the following effect occurred:

I said: “Has the notice been sent yet?”

The defendant said: “I will do it when I can”.

I said: “I’ll send it myself then”.

53. On the evening of Friday, 19 April 1996, one week after the meeting with Jeffrey Hilton SC, the defendant telephoned me at my mountain home and a conversation to the following effect occurred:

The defendant said: “It’s too late to send the fax. Robin Wise telephoned to tell me that he has received approval from Metway for a loan”.

73 The defendant responded to Mrs Phillips’ affidavit of 14 November 2002 in an affidavit of 13 August 2003 and in particular at paras 61-85. In his affidavit the defendant denied the conversations alleged in pars 44, 45, 46, 47,50, 51, 52 and 53 of Mrs Phillips’ affidavit.

74 In his affidavit the defendant said (par 62) that after the Council had granted Development Consent he had on 28 February 1996 had a conversation with Mrs Phillips in which Mrs Phillips had said, “they got the DA through last night. There is not much I can do about that now, is there?” and the defendant replied “No”.

75 With regard to the letter of 10 April 1996 the defendant said in par 71:-

““In response to paragraph 48 of the affidavit of Mrs Phillips sworn on 14 November 2002, I do not recall dictating, authorising, drafting or writing the letter dated 10 April 1996. I had never seen this letter prior to it being served with Mrs Phillips’s affidavit. I do not believe that I drafted this letter, given the inconsistent advice in the penultimate and ultimate sentences of the letter. Further, I would never tell a client that it was “100% entitled” to terminate any agreement.””

76 In his affidavit the defendant said that there had not been any conference or meeting with Mr Hilton on 12 April 1996 and that the first conference with Mr Hilton had been on 1 May 1996 and the defendant denied that at that conference the things alleged by Mrs Phillips in par 49 of her affidavit had been said.

77 In his affidavit the defendant gave an account of what he said had happened in the second half of April 1996. In par 72 he said that at some time between Friday 19 April 1996 and Sunday 21 April 1996 he had had a conversation with Mrs Phillips outside the clinic where Robert Phillips was a patient. The conversation was to a large extent about Mr Robert Phillips. In part of the conversation Mrs Phillips said words to the effect “I would love to get out of the development. Is there any way I can get out of the contract?” And the defendant said “I will have a look at it for you and let you know”.

78 The defendant said that, although he had been aware that Mrs Phillips was unhappy with the deal, this was the first time he had received instructions to consider how the plaintiff might terminate the Project Management Agreement.

79 After his conversation with Mrs Phillips the defendant reviewed the documents and on 21 April 1996 he had a conversation with Mrs Phillips to the following effect (par 75):-

“Have they got the BA yet?”

“As far as I know, they haven’t even lodged it”.

I don’t know if we can get away with it. From what Robert had told me, he has agreed at all times to the delay of the BA and there have been all sorts of arguments. So it is unlikely you will be able to get away with it but it is worth a try”

“Good”.

“I will write to you later.””

80 On 22 April 1996 the defendant sent the letter of advice of that date to Mrs Phillips, and he received Mrs Phillips’ fax of 22 April 1996. He sent the notice of 22 April 1996 to the directors of Ocean View.

81 The defendant said to Mrs Phillips that he wanted to get Mr Hilton to look at all of the plaintiff’s options “to see if there is any way that you can get out of the agreement” and Mrs Phillips agreed to take this advice.

82 Paragraph 80 of the affidavit was in the following terms:-

““After 26 April 1996, and probably when I (was) informing Mrs Phillips of the conference fixed with Mr Hilton for 1 May 1996, I had a conversation with Mrs Phillips to the following effect. She said:

“They have lodged the BA. When does the 21 days’ notice expire.”

“It wasn’t faxed until after 5.00pm on 22 April so it is deemed to have been served on 23 April. On that basis the 21 days expires on 14 May.”

“They will get it through by the 14th.”

“That is why we are going to Jeff to look at all your options.””

83 The defendant received a letter from Mrs Phillips on 24 April 1996 asking the defendant to “consider and discuss with Jeff” certain matters.

84 The defendant appointed a conference with Mr Hilton and a conference which Mrs Phillips attended took place on 1 May 1996. Also present was a junior barrister Mr Orlov. Mr Hilton had told the defendant not to deliver a brief before the conference, as Mr Hilton would not have the time to read it. At the conference Mr Hilton read the brief the defendant had prepared and delivered. Mr Hilton advised sending a letter to the directors of Ocean View.

85 In an affidavit of 10 October 2003 Mrs Phillips said that on 28 February 1996 she was in India and that she returned to Australia on or about 4 March 1996. She said that the signature on the letter of 10 April 1996 appeared to be that of Margaret Rowley, a paralegal employed by the defendant. She did not recollect having a conversation with the defendant on 21 April 1996 as alleged by the defendant. She reiterated that the conference with Mr Hilton had been on 12 April 1996.

86 In an affidavit by the defendant of 14 May 2004 he accepted that Mrs Phillips had been away from Australia until 4 March 1996 and that the conversation, which he had said in par 62 of his earlier affidavit had been on 28 February 1996, might have been on or about 4 March 1996. In this affidavit the defendant confirmed that the signature on the letter of 10 April 1996 was that of Margaret Rowley.

87 In an affidavit of 27 February 2007 the defendant gave further evidence about the letter of 10 April 1996. He said that that the first time he had seen the letter was when he had received a copy of it as an exhibit to Mrs Phillips’s first affidavit. The defendant added:-

““13. I have always been aware that at one stage of my dealings with Mrs Phillips concerning the Bronte Inn I had a discussion with her in which she asked me to send her a letter which she could use to “scare” Dick Arnold, who was at that time a director of some of Mrs Phillips’ companies and the partner of Robin Wise and advisor to Tibor Balog (the other two joint venture parties).

14. In particular, I recall being telephoned by Mrs Phillips on an occasion when I was in my car. For the reasons set out in paragraphs 18 to 22 I now believe that this conversation occurred on or shortly before 10 April 1996. The conversation was in words to the following effect:

“Dick keeps promising me “finance approval will be through next week or in 2 weeks’ for Robin. He’s been saying this for weeks and nothing has happened. I’ve lost confidence that Robin can come up with the finance he always promised. Can you come up with something that I can show Dick to scare him that I could terminate if I wanted to”.

“I will send you something as soon as I can”.

“Can you send it to me today.””

88 In pars 22 and 23 of this affidavit the defendant said:-

““22. Margaret Rowley was employed by me as a paralegal from 1988 until 1997 and then again from 1999 to 2002. When I employed her in 1988, I believe that she had over 20 years experience at that time. I regarded her as extremely knowledgeable and competent and it was not unusual for her to draft, sign and send letters on behalf of the firm.

23. During the time that Margaret Rowley was employed by me only on rare occasions did I dictate letters to her on a “word for word” basis. Usually, I would explain an issue to her and ask her to write a letter along those lines.””

89 The defendant said in his affidavit that he had perused his files and could not find any other letter which could have been the “scare” letter. It was submitted on behalf of the defendant that I should infer that the letter of 22 April 1996 was the “scare” letter.

90 I will now make some findings of fact.

91 On or about 4 March 1996, after the Council had granted Development Consent and after Mrs Phillips had returned from India, a conversation took place between Mrs Phillips and the defendant. At the hearing it was accepted by Mrs Phillips that in this conversation the defendant could not have said the words attributed by her to him in par 44 of her affidavit of 14 November 2002, because, if he had, she would, consistently with her case in these proceedings, have immediately sought to terminate the Project Management Agreement on the ground that building approval had not been granted by 28 February 1996.

92 I accept that a conversation to the effect of that deposed to by the defendant in par 62 of his first affidavit took place and, indeed, in one of her affidavits Mrs Phillips deposed to a conversation to that effect having taken place. I do not accept that the defendant, by saying “No”, was merely confirming that, as a matter of fact, development approval had been granted. I consider that Mrs Phillips was seeking, and that the defendant understood that she was seeking, legal advice about whether there was anything she could do to extricate the plaintiff from the Project Management Agreement, now that Development Consent had been granted. In oral evidence at the hearing the defendant said that one reason why he had given the answer “No” in this conversation was that he considered that the plaintiff would be estopped from terminating the Project Management Agreement.

93 I do not consider that a conversation as alleged by Mrs Phillips in par 45 of her first affidavit took place on or about 21 March 1996.

94 The letter of 10 April 1996 is puzzling. Mrs Phillips in her first affidavit said that she did not remember receiving the letter, even though it was available to her to be exhibited to her affidavit. The defendant in his first affidavit said that he did not recall ever having seen the letter before it was exhibited to Mrs Phillips’s first affidavit and he concluded that he had not drafted the letter. In his last affidavit the defendant gave evidence of facts from which an inference was sought to be drawn that the letter had been prepared at Mrs Phillips’s request to frighten Richard Arnold and Robin Wise into believing that the plaintiff might terminate the Project Management Agreement.

95 I find that the letter of 10 April 1996 was drafted by Margaret Rowley, the paralegal employed by the defendant. However, Margaret Rowley would not have drafted, signed and sent the letter, without having received instructions at least of a general nature from the defendant.

96 I do not accept that the letter was prepared as a “scare” letter to frighten Richard Arnold or Robin Wise into believing that the plaintiff might terminate the Project Management Agreement. Its efficacy for any such purpose would have been greatly reduced by the part of the final paragraph of the letter in which a possible ground for resisting any purported termination was exposed. In any event, the attempted explanation of the letter seems to me to be farfetched.

97 The reference in the letter to “our recent telephone conversation” and the nature of the advice given in the letter indicate that in some conversation shortly before 10 April 1996 Mrs Phillips had asked the defendant for advice about terminating the Project Management Agreement.

98 It is quite clear from contemporaneous documents that Mrs Phillips was wrong in saying that there was a conference with Mr Hilton on 12 April 1996. The first conference with Mr Hilton was on 1 May 1996. The contemporaneous documents requiring this conclusion include the terms of the brief to Mr Hilton to advise of 1 May 1996 and memoranda of fees from Mr Hilton and Mr Orlov, including fees for a conference on 1 May 1996 but not for any earlier conference.

99 The defendant did not deliver a brief to Mr Hilton before the conference, because Mr Hilton had told the defendant that he would not have time to read any brief which was delivered before the conference was held. The brief prepared by the defendant was delivered to Mr Hilton at the conference and it included copies of the agreements or deeds. Mr Hilton had the opportunity of reading these documents at the conference.

100 Mrs Phillips’s error about the date of the conference with Mr Hilton necessarily entails that much of her other evidence in the parts of her affidavit which I have quoted cannot be correct, including her evidence about the advice allegedly given by Mr Hilton to send a 21 day notice and to do it quickly and the alleged conversations between Mrs Phillips and the defendant between 12 April and 19 April 1996. In any event, it is inherently improbable that an experienced and generally competent solicitor like the defendant, who had acted for Mrs Phillips for many years and who was a personal friend of her son, would have disregarded daily reminders from Mrs Phillips to send a notice which counsel had advised should be sent.

101 Mrs Phillips and the defendant assigned different dates to the conversation in which the defendant said he had a “brilliant” or “great” idea, Mrs Phillips saying the conversation occurred about 9 April 1996 and the defendant saying it occurred on 21 April 1996. Mrs Phillips’ evidence included saying that the defendant said that he wanted to see Mr Hilton, which would be consistent with her evidence, which I have rejected, that the conference with Mr Hilton took place soon afterwards, on 12 April 1996. Her evidence also included references to her evidence of an alleged previous conversation on 21 March 1996, which I have rejected. I find that this conversation occurred on the day alleged by the defendant and was in the terms alleged by the defendant.

102 I accept that a conversation between Mrs Phillips and the defendant occurred, as alleged in par 80 of the defendant’s affidavit.

103 Counsel arranged their written submissions under a number of headings. It is convenient to adopt some of counsel’s headings and to divide the rest of this judgment into parts under these headings, namely retainer, construction issues, rectification, estoppel, election, negligence, causation and damages.

Retainer of the defendant by the plaintiff

104 It is, of course, an element of the plaintiff’s cause of action for alleged professional negligence that the defendant was retained as a solicitor by the plaintiff.

105 Counsel for the plaintiff submitted that I should find that there was a continuing retainer of the defendant by the plaintiff from August 1995 up to and including 22 April 1996 and, indeed, past 22 April 1996.

106 Counsel for the defendant submitted that I should find that there were two separate retainers from the plaintiff to the defendant, namely:-

1. A retainer given in late August 1995 to prepare or assist in the preparation of formal documents to give effect to the deal struck between Mrs Phillips, Tibor Balog and Robin Wise.

2. A retainer to advise the plaintiff, which was not given until 19 April 1996.

107 Counsel for the defendant submitted that there was no other retainer of the defendant by the plaintiff and that there had not been a continuing retainer of the defendant by the plaintiff from August 1995 to April 1996.

108 Counsel for the plaintiff submitted that the giving of a retainer was admitted on the pleadings. Paragraphs 8, 8.1 and 8.2 of the fourth further amended statement of claim (which I will sometimes refer to simply as “the statement of claim”) were in the following terms:-

““8. At all material times the defendant acted on behalf of the plaintiff in relation to the agreement and the development of the land.

8.1 At all material times the defendant owed the plaintiff a duty as its solicitor that in so acting he would perform his role with all due care and skill and exercise professional knowledge and skill in the lawful protection and advancement of the plaintiff’s interests in relation to the agreement and the development.

8.2 Prior to 8 April 1996 the plaintiff sought the advice of the defendant as to its rights to terminate the agreement including such rights as might accrue consequent on the matters referred to in paragraph 7 above.””

109 In par 7 of the fourth further amended statement of claim it was alleged that Building Consent had not been granted by the Council on or before 28 February 1996. In par 12 of the Defence to the fourth further amended statement of claim the defendant, subject to a qualification which is not material, admitted par 8 of the fourth further amended statement of claim. In par 10 of the Defence the defendant, in answer to par 8.1 of the fourth further amended statement of claim, admitted that he owed the plaintiff a duty of care when he was retained by the plaintiff in respect of the matters the subject of the retainer but otherwise denied par 8.1 of the fourth further amended statement of claim.

110 In par 11 of the Defence the defendant denied par 8.2 of the fourth further amended statement of claim.

111 Having regard to the ambiguity and vagueness of the expression “at all material times”, the express denials in pars 10 and 11 of the Defence and to the way in which the proceedings were conducted, both in the taking of evidence and in the making of submissions, I do not consider that I should regard the question of retainer as having been determined by the pleadings.

112 Some of the findings of fact I have already made are relevant to the issue of retainer, for example my rejection of the explanation of the letter of 10 April 1996 given by the defendant in his affidavit of 27 February 2007.

113 In my opinion, between 18 December 1995 (the date when a first retainer to prepare or assist in the preparation of formal documents was completed by performance) and 19 April 1996 there were two retainers of the defendant by Mrs Phillips acting on behalf of the plaintiff.

114 The first of these retainers was in the conversation between Mrs Phillips and the defendant on or about 4 March 1996. I have already stated my view that in this conversation Mrs Phillips was seeking legal advice and the defendant understood that Mrs Phillips was seeking legal advice and that the defendant’s answer “No” to the question asked by Mrs Phillips amounted to the giving of legal advice and was not merely a confirmation of the fact that Development Consent had been granted.

115 On the other hand, I accept an alternative submission made by counsel for the defendant that the retainer was a request for limited, and not general, advice, being limited to a request by Mrs Phillips for confirmation that, Development Consent having been granted, any opportunity of terminating the Project Management Agreement on the ground that Development Consent had not been granted by 28 February 1996 had been lost.

116 The second retainer of the defendant by Mrs Phillips on behalf of the plaintiff was in a conversation which I have already found happened shortly before 10 April 1996 and which led to the writing of the letter of 10 April 1996. However, I consider that this retainer, like the retainer on or about 4 March 1996, was a limited retainer, which was performed by the writing of the letter of 10 April 1996.

117 Counsel for the plaintiff sought to fit the letter of 10 April 1996 into a connected series of events, commencing with the previous telephone conversation referred to in the letter and including the alleged conference with Mr Hilton on 12 April 1996, the advice allegedly given by Mr Hilton at that conference and the subsequent alleged failure of the defendant to carry out that advice. However, I have already found that there was no conference with Mr Hilton on 12 April 1996 and that there were no telephone conversations between Mrs Phillips and the defendant between 12 April 1996 and 19 April 1996 as alleged by Mrs Phillips.

118 In my opinion, the telephone conversation before 10 April 1996 and the letter of 10 April 1996 formed a separate, discrete retainer.

119 Apart from these two interventions by Mrs Phillips, the person who would have given any instructions to the defendant to advise in relation to the Project Management Agreement would have been Mr Phillips, who was Mrs Phillips’ son, a director of the plaintiff, a qualified solicitor who had practised as a solicitor, the trustee of the Charlotte Trust and the person who had been authorised by Mrs Phillips to deal with the defendant. Mr Phillips gave evidence, which I accept, that between August 1995 and 5 April 1995, when he was admitted to the clinic, he never instructed the defendant to advise in relation to the Project Management Agreement.

120 Mr Phillips gave evidence, which I accept, that he was aware from January 1996 onwards that his mother was unhappy with the other joint venturers and that, before 28 February 1996, she wished to terminate the Project Management Agreement, if Development Consent, that is a resolution by the Council granting Development Consent, was not obtained by 28 February 1996. Mr Phillips would have supported such a termination, because a failure to obtain Development Consent for the project by 28 February 1996 would have meant that the whole project was in serious trouble.

121 I accept the submission made by counsel for the defendant that a retainer to advice generally was given on or about 19 April 1996, and not before. That the retainer was given then fits in with the actions of the parties on 22 April 1996, the first working day after the weekend, and on the following days.

122 I accept a submission made by counsel for the defendant that the differences between the evidence of Mrs Phillips and the evidence of the defendant about events in March and April 1996, and the dates on which those events happened, became of less importance as the hearing progressed, because the plaintiff’s case that the defendant had been negligent concentrated more and more on the letter of advice and the notice of 22 April 1996. By 22 April 1996 the defendant had clearly been retained to advise generally in relation to the Project Management Agreement.

Construction issues

123 A number of issues were argued under the general heading of the “construction” of the Project Management Agreement and particularly cl 5.4 of the Agreement. I will deal with these issues in turn.

1. Whether the expression “Development Consent” in cl 5.4 of the Project Management Agreement should be interpreted as having the meaning given to the expression “Development Consent” in the definition in cl 1.1(h) of the Project Management Agreement, that is “written consent from the Council to the Development Application” or as having the meaning of Development Consent being granted by a resolution of the Council, without the need for any writing.

124 If the expression “Development Consent” has the former meaning in cl 5.4, then a condition on which the operation of cl 5.4 is premised, insofar as it refers to Development Consent, would have been fulfilled and, leaving aside any other questions, a right to terminate the Project Management Agreement would have arisen. On the other hand, if Development Consent has the latter meaning, then neither of the conditions on which the operation of cl 5.4 is premised, insofar as it refers to “Development Consent”, would have been fulfilled and a right to terminate the Project Management Agreement, on the ground of an absence of Development Consent, would not have arisen.

125 Counsel for the defendant submitted that “Development Consent” in cl 5.4 should be interpreted as meaning simply the granting of Development Consent by the Council. Counsel submitted that, in accordance with general principles of statutory construction, I should, in interpreting the Project Management Agreement, take into account background knowledge which would have been available to the parties at the time the Project Management Agreement was entered into on 18 December 1995. This background knowledge would have included knowledge that the application for Development Consent, which had already been lodged with the Council, was unlikely to come before the Council for the granting of consent, before the meeting of the Council to be held near the end of February 1996, that is just before the date 28 February 1996 in cl 5.4.

126 It was submitted by counsel for the defendant that in cl 5.4 the focus was on the granting of Development Consent and that there was the same focus on the obtaining or granting of Development Consent or Building Consent in other provisions of the Project Management Agreement, including cl 5.7. The event on which the operation of cl 5.4 was premised was the Project Manager not obtaining “the Development Consent approval” by 28 February 1996.

127 I do not consider that I should interpret “Development Consent” in cl 5.4 as having a meaning different from that given to the expression in par (h) of the definitions provisions cl 1.1. I note that in cl 5.4 the two words of the expression have initial capital letters, suggesting that the words are to be taken as having a special meaning, being the meaning given in the definitions provision, where the two words of the expression also have initial capital letters.

128 The use elsewhere in the Project Management Agreement of expressions other than “Development Consent” suggests that those other expressions were intended to have different meanings from “Development Consent” as defined in the agreement, rather than that the expression “Development Consent” in cl 5.4 was intended to have the same meaning as those other expressions.

2. An alternative submission made by counsel for the defendant was that, if “Development Consent” in cl 5.4 is to be interpreted as having the meaning given to that expression in the definition in cl 1.1(h), that is written consent from the Council to the Development Application, then there had been such a written consent by 28 February 1996.

129 This submission raises an issue which is not really an issue of construction but it is convenient to deal with it in this part of my judgment.

130 Counsel for the defendant submitted that a document could constitute a written consent, without being the document formally notifying the applicant for Development Consent that Development Consent had been granted.

131 Counsel for the defendant referred to a number of documents, including a fax from Mr Jahn to Mr Robin Wise of 23 February 1996, informing Mr Wise that the development application had gone before the Council’s Building Board, so that the application was on schedule to make the meeting of the Council to be held on 27 February; and a fax from Mr Jahn to Mr Robin Wise of 24 February 1996, communicating the contents of the Council planning report, which was favourable to the application.

132 The document particularly relied on by counsel for the defendant was the minutes of the meeting of the Council on 27 February 1996 recording that a motion that the report recommending approval of the application be adopted, subject to certain stated amendments, was put and carried at the Council meeting on 27 February. A witness Lara Kirchner, whose statement was read, gave evidence that in 1996 she had been employed by Waverley Council and that it had been the usual procedure of the Council for a handwritten minute of any resolution passed by the Council to be made at the Council meeting by a minute taker and for a typed written minute to be made the following day. Counsel for the defendant submitted that the handwritten minute and the typed written minute which would have been made in accordance with the Council’s usual procedure, would have come into existence by 28 February 1996 and would have constituted written Development Consent.

133 I do not consider that any of the documents referred to by counsel for the defendant amounted to “written consent” from the Council to the development application. The documents which were brought into existence before Council passed its resolution would not meet this criterion. The handwritten and typed minutes of the passing of the resolution granting Development Consent, which were prepared for the purposes of the Council’s own records, would not, in my opinion, amount to written consent “from” the Council to the development application.

134 I consider that there is force in a submission made by counsel for the plaintiff that under ss 92 and 93 of the Environmental Planning and Assessment Act, as they then stood, the notice of the determination of the development application given to the applicant was not a mere formality. Under these sections the date of the determination by Council and the date from which the Development Consent operated had to be endorsed on the notice.

3. A submission was made by counsel for the defendant that, as a matter of construction of the Project Management Agreement, cl 5.4 should be read out of the Agreement, because of its inconsistency with cl 5.7.

135 In support of this submission counsel for the defendant referred to Westpac v Tanzone (2000) NSWCA 77, in which the Court of Appeal held that a provision which the Court considered had been omitted by mistake from a lease should be regarded as added to the lease, so as to prevent an absurdity.

136 I accept that the presence in the Project Management Agreement of both cl 5.4 and cl 5.7 produces odd consequences. For example, if there had been no grant of Development Consent by 28 February 1996, then it would seem that the plaintiff could have terminated the Project Management Agreement, either under cl 5.4 with the consequence that it would have no claim against the Project Manager, or under cl 5.7 with the consequence that any claim it had against the Project Manager would not be affected.

137 However, it would be a drastic step to read cl 5.4 out of the agreement, as a matter of construing the agreement.

138 I note that under cl 5.4 a conditional right to terminate the Project Management Agreement is conferred on the Project Manager, whereas no such right is conferred by cl 5.7.

139 The case of Tanzone to which counsel for the defendant referred was an extreme case, where the consequences of a literal interpretation of the words actually appearing in the lease would have been truly absurd.

348 In my opinion, it is virtually certain that, if the plaintiff had purported to terminate the Project Management Agreement, Robin Wise would have sought legal advice. If he had sought legal advice, it is likely that the grounds on which I have held that the plaintiff did not have any right to terminate the Project Management Agreement would have been revealed. Legal proceedings would then have been taken to challenge the purported termination of the Project Management Agreement by the plaintiff.

349 I have found that there were grounds on which such proceedings would have succeeded. Even if I am wrong in my conclusions that such grounds would have succeeded, they were fairly arguable grounds of such a nature that they would not have been liable to being summarily disposed of.

350 As I have already indicated, there were a number of weaknesses in Mrs Philips’ position. Furthermore, these weaknesses were known to Mr Robin Wise. Mr Robin Wise knew that Mrs Phillips had entered into the joint venture because she had been unable to finance the development herself and he knew that the banks were “breathing down her neck”. Mr Robin Wise knew that Mrs Phillips had concealed her interest in the joint venture from her banks.

351 In all of these circumstances, Mr Robin Wise had only to stand fast for a short period to force Mrs Phillips into negotiating with him. The likely result of such negotiations would have been a resumption of the status quo, that is a resumption of the joint venture arrangements, on the original terms or close to the original terms.

Damages

352 On the findings I have made that the plaintiff did not have any right to terminate the Project Management Agreement forthwith under cl 5.4, the question of damages does not really arise. However, in case it is held on an appeal that I was wrong in holding that the plaintiff had no right to terminate the Project Management Agreement forthwith, I will give some consideration to the issue of damages.

353 In the statement of claim the plaintiff claimed that the damage it had suffered as a result of the defendant’s negligence was that it had been obliged to transfer the Property to Ocean View for the sum of $7 M, when the true value of the property was substantially more, and that it had been deprived of the opportunity to development the property itself and make a profit from such a development.

354 In a document described as “Plaintiff’s Schedule of Loss and Damage”, which was prepared for a hearing which was to have taken place in June 2006, the plaintiff claimed a loss of land value, that is the difference between what was alleged to have been the true value of the land and the amount of $7 M which it was to receive under the joint venture arrangements, and a loss of the profit which it alleged it would have made from a development by it of the property in accordance with the plans of Peter Rommel which had been lodged with the Waverley Council, as explained and expanded upon in affidavits by Mr Rommel, which profit was quantified in accordance with a schedule to an affidavit by a valuer Mr Stephen Wiseman, together with interest, which, it was submitted, should run from a commencement date no later than 31 August 1997.

355 In the plaintiff’s claim for damages as ultimately propounded the separate claim for loss of land value was abandoned. The plaintiff claimed damages the loss of the opportunity to develop the property in accordance with the plans and affidavits of Mr Rommel. The plaintiff claimed interest on the principal amount of the damages and submitted that interest should be calculated from 22 April 1996, when the opportunity to terminate the Project Management Agreement and develop the property in accordance with Mr Rommel’s plans and affidavits had been lost. It was accepted by counsel for the plaintiff that, although the plaintiff had not been a party to the joint venture, the plaintiff and the Charlotte Trust formed part of the “one pocket” of Mrs Phillips and a credit should be allowed for the amount of the share of the actual profit which had been received, namely $446,119.

356 As the plaintiff’s claim for damages was a claim for the loss of an opportunity or a chance, it was accepted by both counsel that the principles for determining damages stated by the High Court in Sellars v Adelaide Petroleum NL were applicable. Many parts of both the joint judgment of Mason CJ, Dawson J, Toohey J and Gaudron J and of the separate judgment of Brennan J in Sellars are relevant. The conclusions reached by the judges who delivered the joint judgment were summarised at p 355 as follows:-

some

357 It was submitted by counsel for the plaintiff that in referring to “the degree of probabilities or possibilities” I should adopt a broad approach. I accept that a broad approach should be adopted but it is still necessary to make some critical examination of the alleged probabilities or possibilities.

358 In any calculation or estimate of the profit which would have been made from a development of the property by the plaintiff, important variables would be the costs of constructing the development and the gross realisations from the sale of units or apartments in the development. Each of the plaintiff and the defendant engaged an expert quantity surveyor (Mr Fisher for the plaintiff and Mr Meredith for the defendant) to estimate the costs of construction of a development in accordance with Mr Rommel’s plans or Mr Rommel’s affidavits and an expert valuer (Mr Wiseman for the plaintiff and Mr Wotton for the defendant) to estimate the amount of gross realisations from the sale of units or apartments in the development.

359 Each of the two pairs of experts held a joint conference and succeeded in producing a joint report in which the differences between them were substantially narrowed. The joint report of the expert quantity surveyors is to be found in exhibit B tab 18 and the joint report of the expert valuers is to be found in exhibit C.

360 In appendix A to the joint report of the quantity surveyors the opinions of each surveyor as to the costs of the project were tabulated. Each surveyor assumed a development in accordance with Mr Rommel’s drawings and statement of environmental effects, with work to commence either in June 1996 or in October/November 1996 or a development in accordance with Mr Rommel’s drawings as expanded in his affidavits, with work to commence either in June 1996 or in October/November 1996. There were, accordingly, eight columns or scenarios in appendix A, namely:-

A. Mr Fisher’s estimate of the costs of the development in accordance with Mr Rommel’s drawings, with work to commence in June 1996.

B. Mr Merediths’ estimate of the costs of the development in accordance with Mr Rommel’s drawings, with work to commence in June 1996.

C. Mr Fisher’s estimate of the costs of the development in accordance with Mr Rommel’s drawings, with work to commence in October 1996.

D. Mr Meredith’s estimate of the costs of the development in accordance with Mr Rommel’s drawings, with work to commence in October 1996.

E. Mr Fisher’s estimate of the costs of the development in accordance with Mr Rommel’s affidavits, with work to commence in June 1996.

F. Mr Meredith’s estimate of the costs of the development in accordance with Mr Rommel’s affidavits, with work to commence in June 1996.

G. Mr Fisher’s estimate of the costs of the development in accordance with Mr Rommel’s affidavits, with work to commence in October/November 1996.

H. Mr Meredith’s estimate of the costs of the development in accordance with Mr Rommel’s affidavits, with work to commence in October/November 1996.

361 The estimates varied between a minimum figure of $5,933,000 (Mr Fisher’s estimate of the costs of a development in accordance with Mr Rommel’s affidavits with work commencing in June 1996) and $7,836,000 (Mr Meredith’s estimate of the costs of construction of a development in accordance with Mr Rommel’s plans with work commencing in October/November 1996).

362 The only important matter in which the valuers disagreed in their joint report was in their estimates of the amount of the gross realisations from the sale of units in the development. As a result of the joint conference Mr Wiseman reduced his estimate of the amount of gross realisations from $22,070,000 to $19,495,000. Mr Wotton estimated gross realisations at $18,487,000.

363 The valuers were in agreement that the appropriate method for valuing the property was the hypothetical development method of valuation. This method was explained in extracts from textbooks which were annexed to Mr Wotton’s affidavit of 27 March 2007 (annexures B and C). At p 124 of “The law affecting valuation of land in Australia” by Alan Hyam the author states:-

Robertson Ltd v Valuer-General

364 At p 125 the author quotes part of the judgment of Cripps J of the Land an Environment Court in Gwynvill Properties Pty Ltd v Commissioner for Main Roads (1983) 50 LGRA 322 at 326 where his Honour said:-

““The hypothetical development method is normally suspect because it depends on a number of assumptions and a number of estimates, for example cost of building, estimated gross rentals obtainable, probable outgoings and, most significantly, the rate percentum of return which could be expected and the profit and risk factor expressed in percentage terms. It has been said that because many estimates and assumptions must be made the hypothetical development method ought not be used where some use can be made of a comparable sale.””

365 In their joint report the valuers said that the profit and risk allowance used by each valuer in applying the hypothetical development method of valuation was 25 per cent.

366 In a table in the joint report of the valuers an amount for gross realisations of $19,495,000 (being the figure contended for by Mr Wiseman but not accepted by Mr Wotton) is assumed, a profit and risk factor of 25 per cent is assumed and then the value of the land is calculated according to the hypothetical development method, using each of the eight estimates of costs in the joint quantity surveyor’s report, producing a range of values for the land from a low of $5,305,000 to a high of $6,990,000.

367 Counsel for the plaintiff submitted that I should adopt the residual land value in column E of the table $6,990,000 (based on Mr Fisher’s estimate of the costs of constructing a development in accordance with Mr Rommel’s affidavits, with work to commence in June 1996) or the residual land value in column G of the table $6890,000 (based on Mr Fisher’s estimate of the costs of constructing a development in accordance with Mr Rommel’s affidavits, with work to commence in October/November 1996), each being a value close to $7 M, and find that the profit which would have been made from a development would have been the amount assumed for the profit and risk factor being $3,901,320.

368 A number of criticisms were made by counsel for the defendant of this method of determining what damages should be awarded for any loss of an opportunity to terminate the Project Management Agreement and develop the property in accordance with Mr Rommel’s affidavits. I will put to one side criticisms of the details of the evidence relied on by counsel for the plaintiff as being evidence of the costs of construction and the amount of gross realisations.

369 It was pointed out by counsel for the defendant that Mr Wiseman and Mr Wotton were both real estate valuers, not accountants, and what each had been purporting to do was to value the land by applying the hypothetical development method of valuing land and not to determine the profit which might be made from a development of the land.

370 In applying the hypothetical development method of valuing the land each of the valuers adopted an assumed profit and risk factor of 25 per cent. It was not legitimate to attempt to quantify the amount of the profit which might have been made from any actual development of the land by reference to the amount of the profit and risk factor assumed for the purpose of valuing the land according to the hypothetical development method. The artificiality or formal nature of the assumption as to the amount of the profit and risk factor was shown by its remaining the same figure $3,901,320 in all of the eight scenarios for construction costs considered by the valuers, whereas differing construction costs would surely produce different profit outcomes.

371 Although a separate claim for loss of value of the land had been abandoned by the plaintiff, the plaintiff’s claim for loss of profit still involved “double dipping”, that is a claim for double or at least overlapping compensation, because the hypothetical development method of valuing land brings into account the development potential of the land. It was submitted that there was a circularity in the plaintiff’s claim for loss of profit, in that, a profit and risk factor having been assumed to determine the value of the land, the value of the land so derived was then sought to be used to determine the amount of the profit which would be made from a development of the land.

372 On all of the eight scenarios the value of the land was less than $7 M, which was the amount the plaintiff was promised for the land under the joint venture arrangements and the amount which the plaintiff ultimately received. Particularly when some discounts were made to the estimates of Mr Fisher and Mr Wiseman, which it was submitted should be made, the value of the land was substantially less than $7 M. It was accepted by counsel for the plaintiff that, if the value of the land was found to be less than $7 M, then the amount by which the value of the land was less than $7 M would have to be deducted from the plaintiff’s claim for loss of profit.

373 As counsel for the plaintiff recognised, what was to be assessed was the value of a lost opportunity to terminate the Project Management Agreement and develop the land. The lost opportunity was by no means a certainty and therefore the damages claimed by the plaintiff would have to be discounted.

374 It was submitted by counsel for the plaintiff that a calculation of the kind performed by Mr Wiseman and Mr Wotton could be adapted either to determining the value of land by the hypothetical development method or to determining the amount of the profit which would be made from a development of the land. If adapted to the former purpose, an assumption as to the profit and risk factor would be a step in the calculation and a value for the land would be the result of the calculation. If adapted to the latter purpose, the value of the land would be a step in the calculation and the amount of the profit from a development of the land would be the result of the calculation. In the present case, if in a calculation of the latter kind the value of the land approximated to $7 M, then the amount of the profit and risk factor would approximate to the amount of the profit which would have been made from an actual development of the land. There was no need for an accountant to perform the calculation; anyone could do the arithmetic.

375 Counsel for the plaintiff pointed to the amount of the actual profit which had been made from a development in accordance with Mr Jahn’s plans, which, it was submitted, had been an overcapitalised development. Counsel for the plaintiff also stressed that in any development carried out by the plaintiff alone, Mrs Phillips would have been a dynamic force, with her experience in real estate development, her drive, her resilience and her financial capacity.

376 In my opinion, there is considerable force in the submissions made by counsel for the defendant. Mr Wiseman and Mr Wotton were merely real estate valuers endeavouring to value the land. In valuing the land each assumed a profit and risk factor of 25 per cent. The plaintiff’s claim for loss of a profit derived by using a land value which had itself been derived by the hypothetical development method of valuation did involve a claim for double or at least overlapping compensation and did involve circular reasoning. I find that the value of the land was substantially less than $7 M and the amount of that deficiency would have to be deducted in determining the amount of any loss of profit. Even if a calculation of a kind performed by the valuers could be adapted to determining the amount of the profit which would be made from a development of the land, it would be a crude way of proceeding.

377 I have stated a conclusion that the value of the land was substantially less than $7 M. I do not propose to examine the details of the differences between the valuers and the differences between the quantity surveyors. However, I consider that Mr Wotton’s estimate of the amount of gross realisations is likely to be a better estimate than Mr Wiseman’s final figure. Mr Wiseman’s initial assessment of the amount of gross realisations was based on a development in accordance with Mr Jahn’s plans. Mr Wiseman was unable to explain satisfactorily how he arrived at his initial estimate of the amount of gross realisations from a development in accordance with Mr Rommel’s plans or affidavits and I consider it likely that a submission made by counsel for the defendant is correct that Mr Wiseman simply made a rough discount from his estimate for a development in accordance with Mr Jahn’s plans. The big reduction Mr Wiseman made from a figure of $22,070,000 to a figure of $19,495,000 weakens the credibility of his first figure and also his reduced figure. In the dispute between Mr Wiseman and Mr Wotton about whether the inferior quality external wall cladding and internal finishes of a development in accordance with Mr Rommel’s affidavits would adversely affect the prices of the apartments and the time required to sell them, I would prefer Mr Wotton’s views.

378 As regards the quantity surveyors, much of the difference between Mr Fisher and Mr Meredith is in Mr Meredith’s so called “add ons”. I consider that at least a substantial part of the “add ons”, although not expressly referred to in Mr Rommel’s plans and affidavits, would have been needed to achieve the construction of a development.

Conclusion

379 Having found that the plaintiff did not have any right to terminate the Project Management Agreement and that, therefore, the plaintiff did not suffer any loss or damage by reason of the defendant’s negligence, I find a verdict for the defendant.

**********

Actions

Download as PDF Download as Word Document

Citations

Rebenta Pty Ltd v Wise [2007] NSWSC 1332

Most Recent Citation

Rebenta Pty Ltd v Wise [2009] NSWCA 212

Cases Citing This Decision

3

Small v Phillips (No 2) [2019] NSWCA 268

Rebenta Pty Ltd v Wise (No 2) [2009] NSWCA 334

Rebenta Pty Ltd v Wise [2009] NSWCA 212

Cases Cited

6

Statutory Material Cited

1

Moratic Pty Ltd v Gordon [2007] NSWSC 5

Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65

Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64

CITATION:	Rebenta Pty Ltd v Wise [2007] NSWSC 1332
HEARING DATE(S):	19-30 March 2007; 2-11 April 2007; 27-30 August 2007
JUDGMENT DATE :	30 November 2007
JUDGMENT OF:	James J
DECISION:	Verdict for the defendant
CATCHWORDS:	PROFESSIONAL NEGLIGENCE - solicitors - retainer - construction of commercial contracts - rectification of contract - estoppel by convention - election between inconsistent rights - negligence - causation of damage - damage for loss of opportunity
LEGISLATION CITED:	Environmental Planning and Assessment Act
CASES CITED:	Amalgamated Investment & Property Co Ltd v Texas Commercial International Bank Ltd (in liq) [1982] QB 84 Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Aust) Ltd (1985-1986) 160 CLR 226 Gwynvill Properties Pty Ltd v Commissioner for Main Roads (1983) 50 LGRA 322 Moratic Pty Ltd v Gordon [2007] NSWSC 5 Ryledar v Euphoric [2007] NSWCA 65 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 The Indian Grace (No 2) [1998] AC 878 Westpac v Tanzone (2000) NSWCA 77
PARTIES:	Rebenta Pty Ltd v Peter Wise
FILE NUMBER(S):	SC 20349/98
COUNSEL:	JC Kelly SC (Plaintiff) LS Foster SC / DR Pritchard (Defendant)
SOLICITORS:	Cohen & Krass (Plaintiff) Mallesons Stephen Jaques (Defendant)