Zugic v Vesuvius Australia Pty Ltd

Case •

[2020] NSWSC 106

•

21 February 2020

No judgment structure available for this case.

Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: Zugic v Vesuvius Australia Pty Ltd [2020] NSWSC 106
Hearing dates: 5 – 8 August 2019
Decision date: 21 February 2020
Jurisdiction:Equity
Before: Ward CJ in Eq
Decision:

1. Dismiss the plaintiff’s claim with costs.

Catchwords:

ESTOPPEL — Promissory Estoppel — Whether clear and unambiguous representation that defendant would enter into lease of premises on proposed terms and/or representation as to an appropriate occupation date and that defendant would sign lease for premises — Claim for equitable compensation

  EQUITY — Assignment — Assignability of cause of action in promissory estoppel — Whether assignee had a ‘genuine commercial interest”
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rr 2.1, 12.7, 14.14
Cases Cited: Ajayi (t/a Colony Carrier Co) v RT Briscoe (Nigeria) Ltd [1964] 3 All ER 556;1 WLR 1326
Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12
Austotel Pty Ltd & Anor v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 531
Beaton v McDivitt (1985) 13 NSWLR 134
Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142
Busby v Walker (1956) 84 So 2d 304
Caxton Street Agencies Pty Ltd v Korkidas [2002] QSC 210
Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371
Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752; UKHL 55
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26
Davidovic v Vesuvius [2014] NSWSC 1066
Davidovic v Vesuvius Australia Pty Ltd (No 2) [2016] NSWSC 1679
Davidovic v Vesuvius Australia Pty Ltd (No 3) [2017] NSWSC 76
Davidovic v Vesuvius Australia Pty Ltd (No 4) (Supreme Court of New South Wales, Stevenson J, 31 March 2017, unrep)
Delaforce v Simpson-Cook (2010)78 NSWLR 483; [2010] NSWCA 84
DHJPM Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728; [2011] NSWCA 348
Donis v Donis (2007) 19 VR 577; [2007] VSCA 89
Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105
E Co v Q [2018] NSWSC 442
Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50
Equity Capital Markets Limited [2008] NSWCA 206
Equuscorp Pty Ltd v Haxton (2012) 246 CLR 49; [2012] HCA 7
Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; [1964] 2 WLR 618
Galaxidis v Galaxidis [2004] NSWCA 111
Giumelli v Giumelli (1999) 196 CLR 101
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 64; [1937] HCA 58
Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295
Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Jopling v Jopling (1908) 8 CLR 33
Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265
Legione v Hateley (1983) 152 CLR 406
Leybourne v Permanent Custodians Ltd [2010] NSWCA 78
Low v Bouverie [1891] 3 Ch 82
Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72
Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148
New Zealand in First City Corporation v Downsview Nominees Ltd) [1989] 3 NZLR 710
Petersen v Moloney (1951) 84 CLR 91; [1951] HCA 57
Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep)
Pole v Leask (1863) 8 LT 645
Re Daley; Ex parte National Australia Bank (1992) 37 FCR 390; 8 ACSR 395
Re Timothy's Pty Ltd and the Companies Act [1981] 2 NSWLR 706
Repatriation Commission v Tsourounakis [2004] FCAFC 332
Rodda v Ian Rodda Pty Ltd (No 2) [2015] SASC 128
Rodda v Ian Rodda Pty Ltd [2015] SASC 95
Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274
Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19
Sullivan v Sullivan [2006] NSWCA 312
Thorner v Major [2009] 3 All ER 945; [2009] 1 WLR 776
Tonna v Mendonca [2019] NSWSC 1849
Trendtex Trading Corp v Credit Suisse [1982] AC 679; [1981] 3 All ER 520
United Equipment Pty Ltd v Australian Portable Buildings Pty Ltd (No 2) [2017] WADC 73
Van Dyke v Sidhu [2013] NSWCA 198
Vesuvius Australia Pty Ltd v V&M Davidovic Pty Ltd [2011] NSWSC 539
Vukmirica v Betyounan [2008] NSWCA 16
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Whitlock v Brew (1968) 118 CLR 445
Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907
Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265
Zugic v Vesuvius Australia Pty Ltd [2017] NSWSC 1185Walsh v Lonsdale (1882) 21 Ch D 9; [1881] 51 All ER Rep Ext 1690
Zugic v Vesuvius Australia Pty Ltd [2018] NSWSC 1544
Texts Cited: Bradbook, Croft and Hay, Commercial Tenancy Law (3rd ed, 2008, LexisNexis Butterworths)
G E Dal Pont (ed), Law of Agency (3rd ed, 2014, LexisNexis Butterworths)
J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis)
K R Handley, ‘The Three High Court Decisions on Estoppel 1988-1990’ (2006) 80 Australian Law Journal 724
K R Handley, Estoppel by Conduct & Election, (2nd ed, 2016, Thomson Reuters)
Category:Principal judgment
Parties: Damjan Zugic (Plaintiff)
Vesuvius Australia Pty Ltd (First Defendant)
Verekers Lawyers (Second Defendant)
Representation:

Counsel:
JR Young (Plaintiff)
B Coles QC with PT Russell (Defendants)

  Solicitors:
James Legal (Plaintiff)
Pikes & Verekers Lawyers (Defendants)
File Number(s): 2013/00385037
Publication restriction: Nil

Judgment

  1. HER HONOUR: In these proceedings, by amended statement of claim filed 11 September 2017, the plaintiff, Damjan Zugic, seeks equitable compensation from the defendant, Vesuvius Australia Pty Ltd (Vesuvius) (formerly known as Cookson Plibrico Pty Ltd).

  2. The claim is based on a promissory estoppel said to arise out of dealings that took place in the period from 2006 to 2010 between V & M Davidovic Pty Ltd (V&M) and Vesuvius in relation to two parcels of land then owned by V&M in Unanderra, New South Wales. V&M was then a company owned by Mr Zugic’s grandfather (Velibor Davidovic, to whom I will refer to as Boris) and Mr Zugic’s uncle (Miroslav Davidovic, known as Mick, to whom I will refer to as Mr Davidovic). I will refer to the two parcels of land as the Doyle Avenue Land and the Sylvester Avenue Land, respectively. At the relevant time, on the Doyle Avenue Land (which was a parcel of land constituted by two adjacent titles) there was a factory, whereas the Sylvester Avenue Land was undeveloped (and is referred to in submissions as a “greenfield” site).

  3. Before turning to the events giving rise to these proceedings, it is relevant to note that there is an issue as to Mr Zugic’s standing to bring the claims he has made in these proceedings since the relevant dealings involved the company, V&M, in which he has no interest. Mr Zugic relies in this regard on a series of assignments (to which I will refer in due course) pursuant to which he claims to be in a position to maintain the causes of action brought in these proceedings. In particular, Mr Zugic alleges that he is the ultimate assignee of the “interests and legal rights” of V&M in earlier proceedings commenced in this Court against Vesuvius in 2010 (2010/84991), to which I refer in more detail below.

Chronology of relevant events

Initial proposal to lease Sylvester Avenue Land

  1. In mid-2006, there was discussion as to a potential long term lease by Vesuvius of the Sylvester Avenue Land (see the affidavit sworn 11 February 2018 by Mr Davidovic at [14]ff; and the affidavit sworn 9 February 2018 by Mr Shaun Prince, a commercial property agent/development manager/property consultant, at [8]ff). Mr Prince’s status in the relevant dealings between the parties is a matter in dispute in these proceedings.

  2. According to Mr Prince, although he did not have “any detailed/written commercial arrangement with [Vesuvius] at that stage”, he investigated the Sylvester Avenue Land site following a conversation with Vesuvius’ then general manager (Mr David Evans) regarding that company’s then need to find alternative premises to relocate its factory from Bulli. Vesuvius had previously owned the site at Bulli but had sold it and was occupying it under a lease from the new owner (the trustees of an Anglican Retirement Village trust) (ARV).

  3. Mr Davidovic has deposed to an initial meeting with Mr Prince, in which he says that Mr Prince told him that he represented a tenant who “may be interested” in a long term lease of the land. Evidence of that conversation was admitted provisionally (pending the determination of Mr Prince’s agency status, and subject to relevance) as evidence going to Mr Davidovic’s state of mind and not for the truth of what was said by Mr Prince to him.

  4. V&M retained solicitors to act for it in relation to the proposed lease (Verekers Lawyers) on 18 June 2006. A proposal for the lease of the Sylvester Avenue Land was prepared by Mr Davidovic in late July 2006 and forwarded to Mr Prince by email on 27 July 2006; draft lease conditions were forwarded by Mr Prince to Mr Evans on 3 August 2006; and a further amended draft lease was sent to Mr Evans on 5 September 2006. That proposal did not ultimately proceed (and no issue is here raised in relation to this) but it sets the scene for what later followed, namely that consideration was then given by the parties to a lease by Vesuvius of the Doyle Avenue Land (on which there was already a factory built) instead of the “greenfield” Sylvester Avenue Land.

  5. As at around 2007 to 2008, Obnova Concrete Pty Ltd (Obnova) another company owned by the Davidovic family, was in occupation of the Doyle Avenue Land; and the Sylvester Avenue Land was vacant.

Steps taken in relation to a proposed lease of the Doyle Avenue Land

  1. Mr Davidovic has deposed in his affidavit of 11 February 2018 to various discussions from September 2006 with Mr Prince in relation to the proposed lease by Vesuvius of the Doyle Avenue Land and to steps taken by V&M to purchase part of an adjoining lot (which he says was to provide the “requested access to the Princes Highway”) (which purchase was completed on 11 April 2007); as well as to steps taken for the preparation of lease and other documents. Mr Prince subsequently and sent a fee proposal to V&M and invoiced V&M for his services relating to the Doyle Avenue Land in March 2007 (see Mr Davidovic’s affidavit at [48]).

  2. Among other things, a firm of traffic engineers (ML Traffic Engineers) was retained to prepare a functional layout plan of intersection treatment for a proposed access point on the Princes Highway and to prepare a traffic report for submission to the Roads and Traffic Authority (see Mr Davidovic’s affidavit at [82]; and ML Traffic Engineers’ report dated 23 May 2007). Relevantly, in light of later communications from V&M’s subsequent lawyers (Rosier Lawyers) suggesting that there had not been articulation at an earlier stage of the need for access to the site by “B-doubles” (i.e., articulated vehicles with two pivot points – see Mr Atkins’ at T 187.2), this report makes reference to the assessment task being that of assessing “vehicular access (to/from Princes Highway via the proposed road opening) and internal turning movements associated with semi-trailers and B-doubles (if achievable for this site) using AutoTURN”. It also appears that as early as at late June 2007, it was perceived that there would or could be a problem about the new right of way by reference to the location of gas mains on the site; and that it was understood that the road opening treatment was to accommodate “semis and B-doubles”.

Deed of Options for Lease

  1. On 8 October 2007, at a time when Mr Evans was still the general manager of Vesuvius, V&M and Vesuvius (then still known by its former name) entered into a document entitled Deed of Options for Lease, pursuant to which V&M agreed to grant to Vesuvius an option for lease over the Doyle Avenue Land, that option being exercisable during the period from the date of the deed up to 11 January 2008, by written notice to V&M (cl 2.1); and Vesuvius granted to V&M an option to grant the said lease to Vesuvius exercisable during the period on and from 12 January 2008 up to 18 January 2008, by written notice to Vesuvius (cl 2.2). In other words, the Deed of Options for Lease provided for put and call options in relation to the Lease.

  2. The Lease was defined in cl 1 (the definitions section of the Deed) as meaning “the Lease of the Property Leased for the term, at the rental and upon and subject to the covenants, terms and conditions contained in the Lease annexed to this Deed and marked with the letter “A”” (emphasis in original).

  3. Clause 2.3 of the Deed of Options for Lease provided that “[a]n Agreement for Lease comes into effect on exercise of either of the options in clauses 2.1 and/or 2.2 above”.

  4. The terms of the Agreement for Lease which was to come into effect on the exercise of either of the said options were as set out in the Deed of Options for Lease (see cl 3). Provision was there made for certain works to be effected in respect of the Doyle Avenue Land (see Recital B and cll 4-7 of the Deed of Options for Lease). In essence, V&M was to undertake the Works specified in Item 3 of the Reference Schedule (the construction of particular capital improvements in accordance with a Plan and Schedule of Finishes and the provision of certain separately metered facilities) within 12 months from the date of the Deed of Options for Lease (Item 4 of the Reference Schedule) and Vesuvius was to have access to the property to undertake and complete its Fitout (as defined) of the property by 31 May 2008. There was provision in the Deed of Option for Lease for liquidated damages in the event that V&M failed to complete the Works within 12 months (cl 8); and cl 9 (headed ‘Landlord’s Default’) made provision for the consequences of what were there specified to be events of default on the part of V&M.

  5. Subject to the terms of the Deed of Options for Lease, the commencement date of the Lease was to be the date of the deemed completion of the Works (see cl 10).

  6. Pursuant to cl 13, a security deposit of $560,000.04 plus GST was required to be deposited by Vesuvius with its solicitors upon the signing of the Deed of Options for Lease and there was provision for how that deposit was to be treated in various events. The security deposit was paid, and a controlled moneys trust account was opened by Vesuvius’ solicitors, on 15 November 2007.

  7. The form of lease annexed to the Deed of Options for Lease provided for a term of 20 years with an option to renew for a further period of 20 years, at a rent of $560,000.04 per annum by equal calendar payments of $46,666.67 with the first payment due on the Commencing Date. It included, by way of amendment to the registered memorandum to be incorporated into the lease, among other things, the addition of the following covenant as an essential term of the lease: a covenant whereby V&M agreed “to provide vehicular access to the Princes Highway as contained in Condition 30 of Annexure A to the Lease” (see cl 27.10, amending cl 16.09(b) by the addition of an extra sub-clause to that effect). Condition 30 provided:

30.   ACCESS TO PRINCES HIGHWAY

The Landlord agrees that at all times during the term of this Lease or any extension or renewal thereof, the Landlord will ensure the provision to the Tenant of vehicular access for the Tenant, its employees, agents and invitees directly to and from the Property Leased to and from the Princes Highway to be secured by a right of carriageway over any intervening lands which comprise the whole or part of any separate allotment from the demised premises and shall be registered on the title thereof. The right of vehicular access shall be a minimum of 20m wide, shall permit heavy vehicular access and shall be maintained by the Landlord at all times with an appropriate level of finish. [emphasis added]

  1. In terms, Condition 30 did not expressly refer to “B-doubles” although there appears to be no dispute that B-doubles would fall within the notion of heavy vehicles.

  2. Mr Davidovic has deposed that at around this time, i.e., around October 2007, there were discussions as to an expanded factory on the Doyle Avenue Land; and he has also deposed to the steps taken in relation thereto (see his affidavit at [93]ff).

Exercise by Vesuvius of option for lease of the Doyle Avenue Land

  1. It is not disputed that, on 8 January 2008, Vesuvius validly exercised the option contained in the Deed of Options for Lease. Nor is it disputed that this gave rise to a binding agreement for lease of the Doyle Avenue Land (amounting in equity to an equitable lease – see Walsh v Lonsdale (1882) 21 Ch D 9; [1881] 51 All ER Rep Ext 1690) on the terms of the lease annexed to the said deed. It was described colloquially, in submissions for Mr Zugic in these proceedings, as “money in the bank”. It is, however, relevant here to note that commencement of the lease was not to occur until the deemed completion of the Works as provided for under the Deed of Options for Lease. Therefore, insofar as Mr Zugic emphasises the value to V&M of the rental stream provided for under that agreement for lease it was contingent on V&M duly completing the Works required in respect of the Doyle Avenue Land.

  2. Mr Davidovic has deposed that on 30 January 2008 the agreement for lease in respect of the Doyle Avenue Land was signed by V&M (see Mr Davidovic’s affidavit at [111]).

  3. Following the exercise by Vesuvius of the option, Obnova vacated the Doyle Avenue Land (see Mr Davidovic’s affidavit at [103]).

  4. It would seem that, almost from the time that the agreement for lease in relation to the Doyle Avenue Land came into existence, there were delays experienced or expected to be experienced in relation to completion of the Works.

  5. By letter dated 5 March 2008, V&M’s solicitors wrote to Vesuvius’ solicitors advising that, due to inclement weather, the completion of work would be delayed but that their client expected to have the works completed at least one year from the date of exercise of the option (i.e., one year from 8 January 2008 as opposed to one year from 8 January 2007, that being the date of the Deed of Options for Lease). The letter stated that development approvals for the works referred to in the lease were being lodged that week as well as the proposed development of the adjoining land “to which a further agreement has been reached between the parties” (and which it was said would be reflected in a document to be prepared shortly). The letter also advised that, given the delays as a result of inclement weather, it appeared that the access required for fitout purposes would be delayed (i.e., from 31 May 2008 as per the Deed of Options for Lease) to at least the middle of July 2008. The letter requested that Vesuvius’ solicitors discuss those matters with their client “to review the proposed date for completion of the work as set out in the original deed of option for lease”.

  6. The response from Vesuvius’ solicitors to the request for review of the proposed date for completion of the work required under the Deed of Options for Lease, by letter dated 2 April 2008, was to question the reasonableness of the extension of time sought by V&M and to request V&M to reconsider its position. The letter noted that the obligations in respect of completion of works contemplated under the “present arrangement” (i.e., under the agreement for lease that had come into existence on exercise of the option) were for Vesuvius to have access to the site to carry out fitout works by 31 May 2008 and for the building works to be completed by V&M by 8 October 2008.

  7. By this time, (i.e., by April 2008) it seems that Mr Evans had left Vesuvius, apparently in acrimonious circumstances (see T 5.45-50).

  1. Mr Paul Armitage became the general manager of Vesuvius at that time. According to Mr Armitage, there was no effective hand-over at the time (see his “note to self” – referred to at [73]ff below).

  2. Mr Davidovic has deposed to a meeting on 8 April 2008 with various persons (including Mr Armitage and Mr Prince) at his office at the Doyle Avenue Land site at which he says there was a discussion as to the proposed expansion of the factory and Mr Prince raised the possibility of the Sylvester Avenue Land site again. Mr Davidovic says that following this conversation, he was advised by Mr Prince on 22 April 2008, that Vesuvius had agreed to extend the date for completion of the building works on the Doyle Avenue Land to 8 March 2009 (see Mr Davidovic’s affidavit at [130]-[132]).

Negotiations in relation to the Sylvester Avenue Land

  1. By letter dated 29 April 2008, V&M’s solicitors noted that a new end date for completion “within the context of the current arrangement” had been agreed between Mr Prince (who was described in their letter as their client’s consultant i.e., V & M’s “consultant”) and Mr David Cox of Vesuvius for the purpose of granting Vesuvius occupation on 8 March 2009 and sought confirmation “in due course”. That letter referred to instructions from V&M “that the consultant has been in discussions with your client’s new management for the past four weeks over the possibility of either expanding the current site to incorporate an adjoining site, owned by our client, or relocating your client’s [sic] to another potentially more suitable site also owned by our client”. (For V&M, it is said that “relocating” in this context meant “substitution” of the premises the subject of the existing agreement (i.e., substitution of other premises for the Doyle Avenue Land – see T 78, although this begs the question as to how the substitution was to be effected).

  2. By email on 14 May 2008 to Mr Prince, Mr Armitage referred to “our discussion on the telephone” the previous day and confirmed “our [i.e., Vesuvius’] position” as follows:

1.   If the greenfield site option [i.e., a lease of the Sylvester Avenue Land] is cost effective for us we prefer to go this route.

2.   We would like to have rental proposals for a 7500m2 and 8500m2 on the greenfield site.

3.   We would like the proposals to include a 10 Tonne crane with a span of 20m. This would run on track 40m long.

4.   We will be moving the Ball Mill and Crusher to the new site and will require the necessary foundations to accommodate them.

5.   We would need to be in a position to move our plant from Bulli to the new site in April next year.

6.   At the end of the 20 year lease we would like to have an option to but [sic; buy] the site or continue with the rental.

  1. Mr Prince’s response, by email the same day, was to the effect that he would discuss Mr Armitage’s proposal with the directors further and come back to him in the next day or so but in the interim he asked that Mr Armitage consider “the following based on my present understandings”, there setting out various matters in relation to the proposal, and stating that Mr Armitage’s proposed April commencement date was in line with Obnova’s current expectations for “project delivery”.

  2. On 5 June 2008, Mr Prince sent a further response to the above 14 May 2008 email to Mr Armitage, advising inter alia that April 2009 “is considered a reasonable time frame – given near normal circumstances re the approval process, weather and etc”.

  3. On 5 June 2008, Vesuvius’ lawyers responded to V&M’s lawyers’ letter of 29 April 2008 (see [29] above), advising that Vesuvius would accept a new commencement date of 8 March 2009 but stating that:

What remains unclear, however, is whether the premises the subject of the lease is to be:

   as presently described;

   expanded to incorporate an adjoining site; or

   an alternative mutually acceptable site.

Please let us know what your client’s position is in that regard so that we can obtain instructions. It appears likely that both the agreement for lease and lease will require amendment.

We assume that such matters have to be determined expeditiously to enable a development application to be lodged and works to commence and we would be pleased to hear from you at an early date.

  1. Pausing here, it is apparent from the above correspondence that Vesuvius’ solicitors were foreshadowing, at the very least, the need for amendment of the existing agreement for lease/lease documents to reflect the discussions to which reference was made in the 29 April 2008 letter and required their client’s instructions in that regard. There was no suggestion that some immediately binding arrangement to “substitute” one property for another under the Lease arrangements without some formal documentation had been reached. That is reinforced by Mr Prince issuing new lease terms and conditions in relation to the Sylvester Avenue Land (see below).

  2. On 17 June 2008, Mr Prince forwarded to Mr Armitage a document headed “Re; Agreement to lease certain land and buildings at Unaderra” containing “Principal Terms and Conditions” in respect of a lease of land and buildings at the Sylvester Avenue Land. Those included a lease term of 40 years (being 20 years plus a 20 year option), with a commencement date of April 2009, and a rental of $744,000 per year paid monthly. For a number of the terms and conditions, the letter stated “[a]s per current agreement” (which can sensibly only mean the then existing agreement for lease in relation to the Doyle Avenue Land). The letter bore the signature block “Shaun PRINCE For Obnova Pty Ltd” (my emphasis).

  3. From internal Vesuvius emails around 20 – 24 June 2008 between Mr Armitage and an overseas executive (Mr Bikard), it appears that Mr Armitage did not have on file a copy of the “current agreement” to which Mr Prince had referred. Obnova sent an email on 24 June 2008 to its solicitors asking them to “forward a copy of the lease … The new Manager would like to have a copy on file”. (Although some scepticism was expressed in the course of his cross-examination as to this request, as adverted to earlier Mr Armitage’s evidence was, in effect, that there was no “hand-over” from Mr Evans; and it is therefore not implausible that Mr Armitage may not have had on file (or may have wanted to confirm) the documentation to which Mr Prince had been referring in his 17 June 2008 document.)

  4. After communications with others at Vesuvius, Mr Armitage then emailed Mr Prince on 30 June 2008 (an email on which Mr Zugic here places considerable weight):

I have approval for the new site now.

I will speak to our solicitors this morning so that we can get the lease sorted out. [Emphasis added]

  1. It would appear that Mr Armitage did indeed speak to his solicitors, as he had said he would, because, by letter dated 3 July 2008, V&M’s solicitors then wrote to Vesuvius’ solicitors acknowledging receipt of a letter of 1 July 2008 enclosing a “basic agreement for lease” and referring to their understanding that the respective clients had reached a “new agreement” in relation to the Sylvester Avenue Land. The letter sought confirmation as to whether Vesuvius’ solicitors wished to attend to the preparation of the agreement for lease and new lease similar to the one relating to the Deed of Options for Lease. (Pausing here, clearly what was there contemplated was that there would be new documentation entered into in respect of the different premises now proposed to be leased (i.e., the Sylvester Avenue Land rather than the Doyle Avenue Land); which is consistent with an understanding between the parties that the new arrangements were to be formally documented.)

  2. By email on 28 July 2008, Vesuvius’ solicitors sent to V&M’s solicitors (at the same time as submitting the draft documents to their client) the following draft documents: a deed of surrender of current lease (noting that the “current lease” had been signed by the parties but not registered); an agreement for lease to replace the Deed of Options for Lease previously signed by the parties; and the lease with annexure A thereto and registered memorandum E485492. The letter noted that there were a number of clauses in the agreement for lease that required further information to be provided by the parties. The email stated that “[w]e are, of course, subject to further instructions from our client and submission of these documents is not intended to create a binding agreement between the parties”. (Pausing here, this is inconsistent with any understanding or earlier intention that there was already a binding agreement in place for the new site.)

  3. On 29 July 2008, V&M’s solicitors responded by facsimile transmission with some suggested amendments to the agreement for lease, including as to the time for completion of the works and the date for provision of access for fitout works.

  4. Over the period from 30 July 2008 through to August 2008, it appears that steps continued to be taken with a view to progressing the proposed lease by Vesuvius of the Sylvester Avenue Land.

  5. At the same time, it seems that there were discussions between Vesuvius (Mr Armitage and Mr Cox) and representatives from ARV, as to an extension of the lease then held by Vesuvius over the Bulli site (where Vesuvius was then operating its factory). Mr Prince is recorded as having been in attendance at a meeting at which ARV indicated it would consider the request for an extension of the lease term “in light of the obligations of ARV to Stockland whereby [Vesuvius] must cease operation of certain plant and equipment by April 2009 (if ARV and [Vesuvius] are to benefit from an incentive payment by Stockland), and relocate from the site by August 2009” [emphasis in the original].

  6. By letter dated 12 August 2008, Vesuvius’ solicitors responded to the letter dated 29 July 2008 from V&M’s solicitors, seeking advice as to whether V&M would be agreeable to a 1 June 2009 date (for completion of the works) and noting that Vesuvius “must vacate its current premises on 31 July 2009”.

  7. By letter dated 14 August 2008, V&M’s lawyers stated, among other things, that:

It appears we can now proceed to finalisation of the Agreement however, the day of completion can only be brought forward to the 30 June 2009. As you can appreciate our client will have limited time to complete this project and at this point in time would be stretch [sic] to even complete the building by the 30 June 2009.

Position as at late 2008/early 2009

  1. It is clear from the contemporaneous documents that, in the period from late 2008 to early 2009, steps were being taken with a view to the project (i.e., the construction of a building on the land for the purposes of the proposed lease by Vesuvius) proceeding at the Sylvester Avenue Land. However, it is also clear that the parties’ lawyers contemplated that the agreement for lease of the Sylvester Avenue Land would be the subject of written documentation.

  2. On 5 January 2009 there was a meeting between Mr Prince and Mr Armitage (at which Vesuvius’ then financial controller, Ian Heggie, also attended (see the email of that date from Mr Prince to Rosier’s solicitors – [216] below). At that meeting, according to Mr Prince’s email of 5 January 2009, a suitable occupation date of March 2010 was agreed and it was agreed that the lease would be signed by the end of January 2009. (This forms the basis of the alleged Second Sylvester Representation – see further below.)

  3. In mid-February 2009, Mr Swinbanks commenced with Vesuvius as its plant relocation project manager. In the “note to self” later prepared by Mr Armitage (see below at [73]ff), Mr Armitage’s recollection (as at March 2010) is recorded as being that Mr Swinbanks visited the site in February 2009 and that it was not to his (Mr Swinbank’s) liking. Although Mr Davidovic’s affidavit suggests that this visit did not happen until July 2009, the February 2009 date is consistent with the overall chronology of events.

Documentation of surrender

  1. Meanwhile, different solicitors had become involved in the matter for V&M. By letter dated 20 February 2009, Rosier Partners wrote to Vesuvius’ solicitors in relation to the “Proposed Surrender of Lease and Termination of Agreement for Lease” and “Proposed Agreement to Lease and Lease”, advising among other things that:

We note that some efforts have previously been made to document these transactions but they have not so far been formalised. Our client wishes to take the matter forward as soon as possible and we understand that your client takes the same position.

  1. The letter went on to make comments as to the proposed lease for the Sylvester Avenue Land, attaching a draft of the lease; advised that the solicitors had no comments in relation to the surrender of lease; and attached a redrawn agreement to lease. As to the agreement to lease, the letter stated that the advice given by the “development manager” (Mr Prince) was that the realistic date for completion should be fixed at 31 March 2010, though stating that their client would endeavour to complete before that date. (That date was later changed to 1 July 2010 – see email of 5 May 2009 from Mr Prince to Mr Armitage and Mr Swinbanks.) The letter referred to a delay in progressing the matter which it was said “is not wholly due to the fault of either party: both have contributed”.

  2. A further letter dated 29 April 2009 was sent by Rosier Partners, enclosing an amended form of the agreement to lease and of the annexure to the lease, but noting that, as some of the changes had been made without their client’s instructions confirming the changes, they reserved their client’s rights in respect of the form of the agreement. The letter stated the solicitors’ understanding that Vesuvius had agreed to the commercial terms contained in the documents and was “now very keen to proceed”. The letter also said that “[i]t has been suggested to us that the exchange may take place directly between the parties as soon as 1 May 2009”. The letter concluded that the surrender previously prepared by Vesuvius’ solicitors would need to be executed by the parties when they entered into these documents.

  3. Vesuvius’ solicitors responded on 4 May 2009 that they now had instructions urgently to review the documents.

  4. Then, by email dated 11 May 2009, Mr Prince asked Mr Armitage to consider certain matters and to advise of his agreement (or not) to the proposed changes. Relevantly, what was there set out was a new timetable, with the commencement date in the agreement to be “pushed out from the now July 1st 2010 to say October 1st 2010”. The change to the key dates in the agreement was put forward by reference to the likely dates for relevant Ministerial consent to the development.

  5. By late May 2009 there was still no answer from ARV on the requested lease extension of the Bulli site, although Mr Armitage received an email on 28 May 2009 from Trevor Ratcliff of ARV setting out key issues on which it was said ARV would want agreement. The then proposed extension was to 2 August 2010.

Evaluation of other (Port Kembla) site

  1. In June 2009, Mr Robert Donsante was appointed the financial controller of Vesuvius. Mr Donsante agreed that he inspected the Sylvester Avenue Land site shortly after he became financial controller (see T 167-168). Mr Armitage seemed to suggest that the visit did not occur until 2010 (see T 93) but nothing here turns on this. According to Mr Armitage, Mr Donsante was “very negative” about the site (see [78] below). (Mr Donsante himself did not accept that characterisation of his views – see T 167-168. He initially said he did not consider it was a matter of like or dislike, but of operational considerations; and then later, in response to a question as to whether he had a negative view of the site, said he did not recall – see T 167-168).

  2. By email dated 1 July 2009, Mr Ratcliff of ARV set out varied proposed key terms of the new ARV lease, including a proposed term through to 2 February 2011 but with a lessee “break clause” allowing termination of the lease after 12 months on the giving of notice not later than 3 May 2010. Vesuvius entered into a new lease with ARV in relation to the Bulli site commencing on 3 August 2009 for an 18 month term.

  3. By this stage, it seems that the RTA had been unwilling to allow Vesuvius’ “use of the crucial Princess [sic] Hwy access” (see Mr Prince’s email to Mr Armitage of 7 July 2009) and Mr Prince had advised Vesuvius that the date in the agreement for planning consent would need to be changed to at least 30 October 2009, with a consequential change to the commencement date in the agreement to “about” 1 November 2010. By 1 September 2009, Mr Prince was advising that the planning consent could be issued by, say, the of November 2009.

  4. In mid-October 2009 (it seems on 11 October 2009), Mr Donsante suggested to Mr Armitage that they look at another site at Port Kembla (see T 167-168; T 94) and on 12 October 2009, various of the Vesuvius personnel (but not Mr Armitage) visited that other site (see T 95-97), this being the site to which Vesuvius ultimately relocated its factory business.

  5. At this point in the chronology, it is relevant to note that Mr Davidovic accepts that by this time (mid-October 2009), V&M’s bank had called up a loan to V&M (asserting that there had been events of default) (T 64 8-15), which Mr Davidovic says then led to V&M obtaining private financing from another financier (Windlock) in the order of $6.5 million, all of which (with the exception of $100,000) was used to repay V&M’s initial bank facility by around late November 2009 (see T 66 1-45). (It is noted by Vesuvius and seems to have been accepted by Mr Davidovic in cross-examination that, less than a year later, V&M was in default under its new finance arrangements – see T 67.38. Mr Davidovic said in the witness box that this was because by then Vesuvius had taken proceedings against it in 2010 – T 66.49 (see below)).

  6. Mr Armitage’s recollection (in his March 2010 “note to self”) was that on 20 October 2009, there was a conversation with Vesuvius’ solicitor about the rescission of the Doyle Avenue Land lease (in which there was reference to an intention to commence looking at alternative sites if not satisfied in 14 days).

  7. There was further internal communication within Vesuvius as to alternative sites on 28 October 2009 and Mr Armitage’s March 2010 “note to self” records that on 2 November 2009, Mr Donsante received a tentative proposal from another entity in relation to a site at Port Kembla (which Mr Armitage’s “note to self” records he considered to be too expensive a proposal and decided not to pursue).

Termination of lease arrangements in relation to Doyle Avenue Land

  1. By letter dated 22 October 2009, consistent with Mr Armitage’s recollection of a conversation to that effect with the solicitor on 20 October 2009, Vesuvius’ solicitors wrote to Rosier Partners, stating that:

We note that although our clients have not yet entered into a legally binding agreement they have been working together for some time with a common interest of finalising a lease arrangement for the property [that properly being defined in the header of the letter as the Sylvester Avenue Land - Lot 2, Sturdee Avenue, Unanderra].

Entry into the arrangement is dependant [sic] upon obtaining a planning approval for the use of the property on terms satisfactory to our client.

At this stage, the consent authority appears disinclined to provide an approval in terms acceptable to our client. In particular, there are issues with heavy vehicle access to and from the property and access to the Princes Highway.

An overarching concern is that of time constraints. It is uncertain how much longer it will be before the consent authority determines the matter. Our client has to vacate the existing site before 2 February 2011 and to achieve this goal requires a lead time of 5 months to relocate plant and equipment.

In the circumstances, if our client cannot be satisfied within the next 14 days that:

•   a planning approval will be forthcoming shortly on terms acceptable to it; and

•   proposed legal arrangements between the parties are satisfactory to it

it will, with regret, commence looking at alternative arrangements and sites with other landlords.

  1. On the same day, Vesuvius’ solicitors issued a default notice pursuant to cl 9.1 of the Deed of Options for Lease in relation to the Doyle Avenue Land under cover of a letter dated 22 October 2009 to Verekers Lawyers (the former solicitors for V&M but whose details were included in the Deed in respect of the service of notices). The default notice specified, as the relevant default, the failure to complete works within 12 months of the date of the Deed as required by cl 9.1(b). The covering letter stated that:

We understand the parties are currently negotiating an arrangement in respect of another property in Unanderra. We have however been instructed to, as a procedural matter, finalise the arrangement between the parties in relation to the Doyle Avenue property to which the Deed relates.

  1. A copy of the default notice was also forwarded to the solicitors who were by then acting for V&M (Rosier Partners), who responded on 22 October 2009 that:

It may be the fact that our client has not performed the obligations set out in the Agreement for Lease, but it seems clear on any reading of the facts that your client has at the very least waived any rights it may have had as a result of the alleged default. Accordingly, our client entirely reserves its position in relation to the notice.

Obviously, notwithstanding this, it is our client’s hope that this issue never falls for determination and that, with goodwill on both parts, your client’s need for premises can be satisfied on the Sylvester Avenue site in a timely way.

  1. That provoked the response from Vesuvius’ solicitors, by letter dated 26 October 2009, that:

We would have thought it common ground that both parties have long since abandoned the agreement for lease of this site. One of the benefits of our client’s notice is to provide certainty to both parties in that regard.

While our client’s goodwill is assured your client will appreciate that the time constraints contemplated by the parties have long since been exceeded. Our client is now compelled to protect its ongoing business.

  1. Meanwhile, by email on 27 October 2009, Mr Prince advised Vesuvius that, at a Department of Planning meeting that day, it was agreed that Vesuvius could use the Princes Highway exit “as we had proposed (ie one way, with left turn only)”; and that there was discussion as to what heavy vehicle types could be utilised on site. Mr Prince sought advice as to what “HV” at a minimum Vesuvius would require and what would be ideally preferred “apart from B-double”. Mr Prince raised as an issue that B-doubles could be employed only if approved and gazetted for use from Orange Grove Road to Sylvester and that the maximum size for a Heavy Vehicle would be 12.5m. The response (from Mr Clint Atkins at Vesuvius) on 4 November 2009 was to advise that the minimum truck movements based on using a 12.5m rigid truck would be 8 per day but that realistically it would be more likely 10 to 12 a day. (I note that the project approval ultimately obtained on 15 August 2010 was for heavy vehicle access restricted to vehicles up to 12.5m in length unless otherwise agreed to by the Director-General in consultation with the RTA and the Council; truck ingress was restricted to Sylvester Avenue via Orange Grove Avenue and truck egress was restricted to left out onto the Pacific Highway.)

  2. By letter dated 29 October 2009, Rosier Partners advised Vesuvius’ solicitors that:

We are advised by Mr Prince, the property consultant to our client, that at an on-site meeting last Tuesday 27 October 2009, the Roads and Traffic Authority withdrew its objection to the use of access to and egress from the site by way of the Princes Highway. [emphasis added]

  1. By letter dated 18 November 2009, expressed to be without prejudice to their client’s default notice, Vesuvius’ solicitors enclosed revised drafts of the agreement to lease and annexure thereto in relation to the Sylvester Avenue Land.

  2. By letter dated 19 November 2009, Vesuvius’ solicitors issued a Termination Notice in respect of the Doyle Avenue Land.

  3. Relevantly, by letter dated 20 November 2009, referring to a meeting with the solicitors and with their client on 18 November 2009, V&M’s solicitors stated, among other things:

Default notice

We note that your client has terminated the agreement for lease. We acknowledge that there has been default under the terms of the agreement for lease and accept that it is terminated. However, this acceptance is entirely without prejudice to our client’s position that the default has been contributed to, waived and/or encouraged by your client and that the parties therefore have no continuing rights under the notice. Our client will vigorously oppose any proceedings which your client may commence pursuant to the default and termination.

Milestones for performance of the proposed Agreement to Lease

Before turning in any detail to all of the amendments which you propose to our draft Agreement to Lease, we feel that we should deal with what seems to be a threshold issue, namely the proposed new timelines for approval and construction.

In our letter to you of 19 December 2008, we said, amongst other things:

The Commencing date needs to be agreed. It is the unfortunate fact that the delays in finalising the arrangements force the Commencing date out. If the matter can be formalised before Christmas, our client could commit to a 31 March 2010 Completion date. Further delays beyond this will have the unfortunate effect of pushing the date further out.

…

… our client’s consistent position as to the likely timing of completion from the date of approval would be more than 12 months. Nothing has really changed to alter that, except your client now wants additional works (kerb and guttering to enable semi-trailers and B-doubles to exit the site to the Highway and a second storey on the office) which will extend rather than contract the time to be taken, and perhaps the fact that your client has only recently calculated the time which is required to effect its own fit-out works. However, it has never been suggested to your client that these time frames were elastic.

Given the consequences which your client seeks should flow from a breach, our client cannot agree to an unrealistic commencement date. It does this not only for its own protection, but also for your clients. It does not want your client to be lead to believe, by the fact of a legal commitment to particular dates, that milestones and completion can be achieved by those dates.

As to the milestones suggested by you, these are not consistent with our client’s intended method of construction. Our client is not inherently opposed to some form of measurement of timely performance by reference to specific milestones, but cannot accommodate those proposed by you client.

…

Rent

…

The rent will also need to increase to reflect the commercial cost of the provision of the additional office space, and of the provision of any additional facilities to accommodate B-Doubles onto and off the site as well as anything else which you client now seeks but which has not been the subject to previous agreement. We note that the need for assured B-Double access was not articulated to our client until quite recently and it was our client’s understanding that only semi-trailers would be needed to deliver to and from the site.

…

Conclusion

…

Our client … cannot, in its own interest as well as that of your client, commit to a completion date that is wholly unrealistic (which, with respect, your client’s proposal is).

Our client acknowledges that this may mean that your client seeks to be accommodated elsewhere and if that be the case, it does so with our client’s best wishes.

If, nonetheless, your client wishes to proceed, it will necessarily need to be on terms which allow for a timetable such as that above. The fact that our client is contractually bound to complete by particular dates will not in any way prevent it from using its best endeavours to complete earlier and if your client manages to find ways by which that may be achieved then our client will welcome the assistance.

…

[emboldening added; underlining as per original]

  1. The response to this, by letter dated 23 November 2009 from Vesuvius’ solicitors, after noting the inability of V&M to build a facility within the time required by Vesuvius, was to the effect that Vesuvius would commence searching for another location to which to relocate. (It is clear that this is what then occurred, leaving aside the fact that some steps to locate alternate sites had already taken place by then, since Mr Swinbanks forwarded to Mr Armitage and Mr Donsante a resumé of potential options on 1 December 2009, commenting that it was to be read with a previous email of 27 November.)

  2. Following that 23 November 2009 communication, it appears that there was a meeting between Mr Prince and Mr Armitage (after which Mr Prince prepared some draft meeting notes which he emailed to Mr Armitage on 26 November 2009 seeking the latter’s comments). When Mr Armitage responded with comments to those draft meeting notes, Mr Prince’s response was a somewhat curt:

I have not read the below and will delete it. I have no further interest in this project.

  1. I would infer from this that, by then, Mr Prince at least regarded his arrangements as a consultant with V&M as being at an end (certainly there was nothing in writing suggesting that Vesuvius had taken any step to terminate, or considered itself in a position to terminate, Mr Prince’s involvement in the “project”).

Mr Armitage’s March 2010 “note to self”

  1. Before leaving the chronology of events, it is convenient here to refer in more detail to the note that Mr Armitage prepared (the “note to self” to which I have already adverted above). Mr Armitage says that he prepared this note in March 2010, over the course of about a month, after he appreciated that there was likely to be a dispute as to the matter.

  2. The note records (among other things) that: Mr Armitage returned from working in North Asia to become the general manager of Vesuvius’ Oceanic operations on 24 March 2008; his predecessor (Mr Evans) was involved in a court case against the company and not available to assist with a hand-over; one of his projects was to relocate the Bulli site to a site in Doyle Avenue by 2 February 2009; in mid-April he visited the site with Mr Prince and was “under impressed” with what he saw (noting that the plant was cramped, road access was difficult, and he envisaged that operating on the site “would be an OHSE nightmare”); and; on 11 May 2008, Mr Bikard (Vesuvius’ President of Manufacturing) and Mr Armitage visited the Doyle Avenue and Sylvester Avenue sites with Mr Prince.

  3. The note recorded that, on 14 May 2008, Mr Armitage and Mr Bikard agreed that the greenfield site was the “preferred option”; and that, on the same day, Mr Armitage informed Mr Prince by email of this and that he (Mr Armitage) wanted to be able to move into the new site by April 2009. The note further recorded that on 30 June 2008 he (Mr Armitage) emailed Mr Prince to tell him that he had now received approval for the new site and would contact the solicitors to let them know.

  4. Mr Armitage’s note then sets out various entries in relation to the process for development approval, request to extend the Bulli lease, and records that on 18 December 2008 Mr Prince asked to meet “over some final issues so the preparation of the lease documents could take place”. The note records that on 5 January 2009 Mr Armitage met Mr Prince and that:

The topic was who should pay for the consultants’ fees. It was agreed in general that Obnova would pay for the general reports and that [Vesuvius] would pay for the more specific reports.

Mr Prince was to get prices for various reports.

The planning application was to go in that week.

The pre-assessment, lodgment, NSW requirements and approval was to take about 3 months.

The completion date for the project was to be 1st April 2010.

  1. The note next records (as adverted to earlier) that on 16 February 2009 Mr Swinbanks started his role as the plant relocation project manager; that Mr Swinbanks visited the site in February 2009 and expressed his opinion that the site was not to his liking (he felt that it was too small, he did not like that there was no mains sewerage and he had concerns about the ability to have trucks depart via Princes Highway).

  2. In June 2009, Mr Donsante was appointed Financial Controller for Vesuvius. Mr Armitage’s note records that Mr Donsante was “very negative” about the Sylvester site from first seeing it that month.

  3. Mr Armitage’s note records a meeting on 2 July 2009 in Bulli (with himself, Mr Prince, Mr Donsante, Mr Cox and Mr Fox) and that:

Mr Prince presented us with drawing [sic] of the Sylvester Ave site with various turning circles illustrating that it was possible to turn trucks round on the site with a view to exiting the site via Sylvester Ave. He was having problems with the RTA allowing us to exit the site directly onto Princes Hwy. He was told that one of the attractions of the site was that we had been told that direct access with B Doubles to Princes Hwy was possible. That if it was not now possible then it was a deal breaker. From an OHSE perspective we were not prepared to consider turning trucks around on site. …

  1. The note records that: on 11 October 2009, Mr Donsante emailed Mr Armitage proposing that they look at another site in Port Kembla; that on 12 October 2009 Mr Swinbanks, Mr Cox, Mr Fox and Mr Donsante visited that site and had a quick look at it; and that Mr Swinbanks emailed suggesting that they should be interested in taking a closer look at the site. Mr Armitage’s position at that stage (as recorded in the note), which he relayed to Mr Swinbanks, was that the first priority was to get planning approval for the Unanderra site (Sylvester Avenue) and that “when it goes through this is where we were moving too [sic]”. The note records that on 20 October 2009 Mr Armitage again told Mr Swinbanks that the focus was “with Unanderra”.

  2. Mr Armitage’s note then records that, on 28 October 2009, Mr Donsante asked Mr Swinbanks for building requirements to provide to Port Kembla owners to explore alternatives; and that on 2 November 2009, Mr Donsante received a tentative proposal from the owner of a site at Port Kembla but it was decided not to pursue it at that time, as the proposal was expensive and required the planning process to be undertaken again.

  3. The note then goes on to record various meetings in relation to the respective sites. First, a meeting on 18 November 2009 (at Doyle Avenue) with Mr Davidovic, Mr Armitage, Mr Donsante and the solicitors the purpose of which was said to be, inter alia, to terminate the Doyle Avenue lease, to highlight Vesuvius’ concerns about progress on the project, and “to present a new lease document that better reflected our needs and deleted items that were by now historical”. Second, a meeting on 19 November 2009 with Mr Davidovic, Mr Prince and others at Doyle Avenue at which it is said that Mr Prince “announced that certain essential pieces of equipment used in the Vesuvius process may be precluded from the EA approval”. The note records that following this meeting, Mr Armitage and Mr Davidovic had discussions in which Mr Armitage says that each expressed frustration with Mr Prince.

  4. The note records various steps being taken in relation to both the process for approval of the Sylvester site and assessment of other sites; a meeting between Mr Armitage and Mr Davidovic at Bulli on 30 November 2009 (in which Mr Armitage says he gave Mr Davidovic a list of items he needed confirming “for us to move forward” and says he told him that he still preferred to move to Sylvester Avenue); and further steps taken during the period through to March 2010.

  5. The note records that, on 25 February 2010, Mr Armitage instructed Mr Swinbanks to find suitable sites, go out to tender and come back to him with a recommendation as to which site to move to. Mr Armitage was cross-examined as to this so-called “tender” process (to which I refer in due course).

  6. The note records that on 2 March 2010 there was a meeting in Mr Armitage’s office with Mr Swinbanks and Mr Donsante that Mr Swinbanks presented the results of the tender; that Mr Swinbanks had looked at four sites “and invited four companies to tender including Mr Davidovic”; that the Port Kembla site was Mr Swinbanks’ recommended site and that Mr Armitage and Mr Donsante accepted that recommendation. The note goes on to record that:

Sylvester Ave was the second preferred site. It achieved this only by being the cheapest site.

It was agreed that our preferred location was Port Kembla and we would seek to agree a lease for this site.

The third and fourth place tenderers were to be informed by myself. [the note records that Mr Armitage did this by letters on 3 March 2010]

It was decided to keep Sylvester as a back up unless the preferred Port Kembla site fell through

  1. The note also records a meeting on 30 March 2010 at Bulli (the site of the land the subject of the ARV lease) between Mr Armitage and Mr Davidovic (with a third party, Mr Di Donato, “as a witness”); at which it is said that Mr Davidovic wanted Mr Armitage to sign a letter to the Department of Planning “telling them that Prince consulting acted on behalf of ourselves plus Davidovic and that we were committed to the completion of the assessment process”. (Corroboration of this is available in the form of a letter signed by Mr Davidovic to that effect, with space for a signature by Vesuvius left incomplete.) Mr Armitage’s account is that he would not sign the letter until the solicitors looked at it. Mr Armitage’s note then records, among other things, that he told Mr Davidovic if he did not get the deposit back for Doyle Avenue “we would be taking legal action to recover it” and that “we were heading to court and should not be talking”. The note records a subsequent telephone conversation on 20 April 2010 with Mr Davidovic, in which Mr Armitage asserts that Mr Davidovic threatened him. The note records that it was agreed by he and Mr Donsante after that incident that “under no circumstances were we prepared to consider any of Mr Davidovic’s properties as an option”.

  2. For Mr Zugic, it seems to be suggested that this was a self-serving note (it being pointed out that some aspects of the note were not included in the affidavits sworn by Mr Armitage and Mr Donsante in the proceedings – namely, those relating to the tender process).

  3. Pausing here, much of the content of Mr Armitage’s note (which Mr Armitage readily accepted was prepared in contemplation or anticipation of a dispute between the parties), is consistent with contemporaneous documents (which will speak for themselves and to which I have already referred). I accept that there is a risk that the interpretation placed by Mr Armitage on the events recorded in the note might be self-serving, consciously or otherwise, since the note was prepared at a time when Mr Armitage considered that there would be litigation, and when (on Mr Armitage’s account, though this is disputed by Mr Davidovic) he considered that he had been subjected to an unacceptable threat from Mr Davidovic. Nevertheless, I consider that the note is useful as a relatively contemporaneous record of Mr Armitage’s recollection of events (though I treat it with a degree of caution, as indeed I do all of the respective witnesses’ oral accounts of events wherever that account is not corroborated by contemporaneous documents).

2010 Proceedings

  1. In 2010, Vesuvius commenced proceedings against V&M (2010/84991). In those proceedings, Vesuvius obtained summary judgment on its claim to be entitled to be repaid the security deposit of $560,000 paid pursuant to the Deed of Options for Lease in respect of the Doyle Avenue Land (see Vesuvius Australia Pty Ltd v V&M Davidovic Pty Ltd [2011] NSWSC 539 at [28]-[47] per Biscoe AJ).

  1. Second, as to the so-called “tender process”, both Mr Armitage and Mr Donsante were cross-examined as to what had occurred in this regard. It is apparent from the documentary evidence that there was not a formal tender process of the kind one sees in relation, say, to government tenders. However, it is also clear that what was being undertaken was a review of potential alternative sites and a comparison of the suitability of those sites with that of the Sylvester Avenue Land (as apparent from the memorandum that was prepared). I consider that the reference to this as a “tender process” might in some respects be inapt but that it does not amount to the creation of a “false narrative”.

  2. True it is that some of the aspects of the so-called tender process (as recorded in Mr Armitage’s “note to self”) are not supported by the evidence – in particular, the suggestion that Mr Davidovic had been invited to participate in a tender, as such. However, there is little doubt but that there were discussions at the time during the period both before and after Mr Donsante’s arrival as to the terms on which a lease arrangement for the Sylvester Avenue Land could be concluded; and it seems unarguable that by early January 2009 in the discussions with both Mr Prince and with Mr Davidovic, what Vesuvius was identifying were the terms it considered necessary for it to proceed with a lease of the Sylvester Avenue Land. Whether or not Mr Davidovic appreciated it at the time, therefore, and I accept that his case is that he did not, it is apparent that what Vesuvius was doing (after the email from V&M’s solicitors in which they conveyed V&M’s best wishes for Vesuvius if it chose so to do, if not before) was conducting an informal comparison of alternative sites.

  3. Third, to the extent that it was suggested that the emphasis placed by Vesuvius during the discussions at the end of the project on the need for access to and from the Princes Highway by “B-doubles” (or for 24 hour, 7 day a week access) was something that was manufactured by Vesuvius at the conclusion of the leasing negotiations, again I cannot accept this. I would accept that it may not have been clear at the outset precisely what was contemplated by Vesuvius in terms of heavy vehicle access (something for which it might be excused when one has regard to the difficulty of elucidating precisely what Mr Prince himself understood by the term – see his cross-examination at T 141-143). However what was clear was that from a relatively early stage what Vesuvius wanted to ensure was the ability for heavy vehicles to be able to access the leased premises from the Pacific Highway (see the traffic engineer’s report which makes clear that such access was envisaged back in 2007 even before the Doyle Avenue agreement for lease was entered into).

  4. As to the working 24 hours, 7 days a week issue, some weight was sought to be placed for Mr Zugic on statements reportedly made by Mr Armitage at a public meeting at council chambers on 28 March 2010, as being inconsistent with a requirement that there be access to the site 244 hours, 7 days a week (see for example the debate in the course of evidentiary objections at T 23-24). I admitted that evidence subject to weight and relevance but ultimately I place no weight on the fact that something may have been said at a public meeting suggesting that less than 24 hours’ access might be required for the site insofar as this is said to establish that there was not a legitimate reason put forward for the decision not to proceed with a lease of the Sylvester Avenue Land. Even if that had not been a “deal-breaker”, it is apparent that by early 2009 there was a level of dissatisfaction with the progress that had been achieved in relation to the likely occupation date for the site and I have concluded that this was a genuine reason for Vesuvius to have decided not to proceed with the proposed lease.

  5. I thus do not accept that the evidence establishes (even assuming it to be open to Mr Zugic in the absence of a pleaded allegation to this effect to raise such an issue) that there were false subterfuges carried on by Vesuvius in the way that Mr Zugic has suggested. The highest that the evidence rises in this regard is that there was a decision seemingly made towards the end of the parties’ relationship that V&M would not be informed of the decision that had then been made to the effect that the Port Kembla site was now the preferred site (so as to leave the Sylvester Avenue Land as a fall-back if the Port Kembla site fell through). By that stage, however, the costs and expenses in relation to the planning approval process had largely been incurred (and in any event Vesuvius met its agreed share of those costs and expenses).

  6. Finally, I should make clear (as earlier noted) that I make no finding (nor is it necessary to do so) as to the reference in Mr Armitage’s “note to self” concerning the making by Mr Davidovic of a threat to him in relation to the matter. It is not appropriate to do so in circumstances where it is not necessary for the determination of the issues in the proceedings.

  7. Turning to the particular representations alleged, as to the First Sylvester Representation, I accept that Vesuvius represented that it would lease the Sylvester Avenue Land, broadly on the terms of the Sylvester Proposal, and that it would not be proceeding with (or, perhaps more relevantly, would not hold V&M to), the lease of the Doyle Avenue Land. I do not accept that Vesuvius represented that it would do so “come what may”, or that it would do so in the absence of the parties reaching agreement as to the precise terms of the substitute lease. Nor do I consider that the email communications on which Mr Zugic relies could reasonably have conveyed to someone in V&M’s (or Mr Davidovic’s) position that this would be the case. The conduct of the parties, through their solicitors, makes clear that it was always understood that whatever the new arrangement was it was to be documented.

  8. The difficulties to which Vesuvius points (as to what would have been the lease terms under such a representation) make abundantly clear that it could not reasonably have been assumed that there would be a binding arrangement until the lease documentation was signed.

  9. As to the Second Sylvester Representation, this was in my opinion no more than a statement in the course of negotiations as to when the lease documents were expected to be concluded and signed (and an acceptance at that stage of a later occupation date than had been contemplated earlier).

  10. I am not persuaded that either of the pleaded representations was sufficiently clear as to give rise to an estoppel nor do I consider that reliance could reasonably have been placed on there being any binding representation as to entry into such an agreement in the absence of final documents.

  11. As to reliance, it is clear that it is for a plaintiff to show that it has acted in reliance upon the relevant representation or assumption. There is no presumption of reliance; reliance is a fact to be found (Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 (Sidhu v Van Dyke) at [58] per French CJ, Kiefel, as her Honour then was, Bell and Keane JJ – a case of proprietary estoppel). There it was made clear that it is not necessary that the relevant assumption be the “sole inducement operating on the mind of the party setting up the estoppel” (Sidhu v Van Dyke at [71] (emphasis added)); rather, it need only be a “contributing cause” (at [71]-[73] per the plurality; [90] per Gageler J (again, emphasis added)). (As to what it is necessary for a plaintiff to prove in this respect, see the discussion in E Co v Q [2018] NSWSC 442. It is not necessary here to explore any divergence in the judicial approaches to this issue (see the authorities there discussed), as I do not accept that the claim based on the making of the relevant representations is here made out.)

  12. As to detriment, it must be established that the plaintiff has suffered or will suffer detriment if there is departure from the relevant representation (or induced assumption) upon which the plaintiff has acted (namely, that detriment will follow if the defendant is permitted to act inconsistently with any representation or expectation it has encouraged or otherwise to deny the truth of any assumption in which the defendant has acquiesced). Although the questions of reliance and detriment are distinct, they are interwoven, and it is clear that “[t]here can be no real detriment if the party asserting the estoppel would have been in the same position in any event” (Sidhu v Van Dyke at [92] per Gageler J; quoting Dixon J, as his Honour then was, in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674; [1937] HCA 58). Since I have found no actionable representation capable of sustaining the pleaded assumptions on which the pleaded detrimental reliance was placed, it is not necessary to consider the argument as to whether V&M was ready, willing and able financially in any event to perform the agreement (including whether, as a matter of law, this is a requirement of such an estoppel claim, noting that Mr Zujic has not pressed any submission to the contrary).

  13. I have thus concluded that the estoppel case is not made good in either of the ways it has been pleaded.

Issue 4 – Relief

  1. I have noted above the different ways in which the claim for equitable compensation was particularised. In light of the conclusion I have reached the question of compensation does not arise.

  2. Had the issue of compensation arisen (in other words had I been persuaded that the estoppel causes of action had been validly assigned, and that one or both of the estoppels had been made good) there would (as Mr Zugic accepts) be a question as to whether, as a matter of discretion, relief should be granted in Mr Zugic’s favour.

  3. Particularly in circumstances where the costs and expenses in relation to the Sylvester Avenue project approvals appear to have been met in accordance with the agreement reached between the parties, it is by no means apparent to me that it was unconscionable for Vesuvius to withdraw from the proposed leasing arrangements at a time when the terms of the proposed lease for the Sylvester Avenue Land had not been finalised and when there had been continuing delay in the project and issues had arisen as to the suitability of the site (whether ultimately they could have been resolved or not is another matter).

  4. I cannot accept that the loss of the Doyle Avenue Land rent for the relevant period is a loss that should be borne by Vesuvius. The appropriate starting point in an estoppel case is that the “prima facie entitlement” to relief is framed on the basis of the assumed (or expected) state of affairs (see Verwayen at 442, 445-446 per Deane J; Giumelli v Giumelli (1999) 196 CLR 101 (Giumelli) at [42]-[50]; Donis v Donis (2007) 19 VR 577; [2007] VSCA 89 (Donis v Donis) at [19] per Nettle JA, as his Honour then was, (Maxwell ACJ and Ashley JA agreeing); Delaforce v Simpson-Cook (2010)78 NSWLR 483; [2010] NSWCA 84 (Delaforce) at [63]-[65]; and Sidhuv Van Dyke at [82]-[86] per French CJ, Kiefel, Bell and Keane JJ) (though I acknowledge that some of these authorities were cases of proprietary estoppel). A not wholly unresolved point is whether the concept of the “minimum equity” has been discarded in the context of promissory estoppel (as well as in the context of proprietary estoppel). Be that as it may, in Sidhu v Van Dyke, the High Court explicitly framed the question of remedy (there, as noted, a case of proprietary estoppel) by reference to the “requirements of good conscience” (at [83]). That is not, of course, an appeal to idiosyncratic notions of fairness. The concept of good conscience is given content incrementally, by close attention to the facts and reasoning of the cases. The current holistic approach to relief for an equitable estoppel is in my view well encapsulated in the following passage from the judgment of Allsop P (Giles JA agreeing), as his Honour then was, in Delaforce at 485:

Equity will look at all the relevant circumstances that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character.

  1. What is made clear by cases such as Giumelli and Sidhuv Van Dyke is not only that any prima facie entitlement is to be framed by reference to the assumed or expected state of affairs but also that, in assessing the relief to be granted, proportionality of the remedy to the prejudice or detriment is a relevant consideration (and as recognised in Delaforce at [4], this consideration is sometimes of considerable importance). In Rodda v Ian Rodda Pty Ltd [2015] SASC 95 (see also Rodda v Ian Rodda Pty Ltd (No 2) [2015] SASC 128, again a proprietary estoppel case) , Nicholson J said at [305]:

Whilst it is not the case that the court should search for the “minimum equity” to do justice in the circumstances and it is not a case of assessing or measuring or weighing the detriment minutely in order to convert it into some equivalent of cash or kind, there must be a sufficient proportionality of any interest or remedy ultimately granted when compared with the prejudice or detriment suffered by the plaintiffs and the overall justice of the case.

  1. In the present case, had the claim of promissory estoppel been made good, on the basis of a representation of one or other the kinds alleged (both of which assume that there were final agreed terms on which the Sylvester Avenue Land lease could have proceeded or at least that the essential terms of the lease were agreed or could be implied even if others were still subject to agreement), to “make good” the relevant expectation would be difficult in the present case (as entry into the leasehold arrangements was predicated on completion of building works in relation to the site that have not taken place).

  2. In those circumstances, I consider that the appropriate relief would, at its highest, have been to make good the costs thrown away in relation to the development application process that was undertaken in relation to the Sylvester Avenue Land (bearing in mind that Vesuvius has already bourne part of those costs), and I would refer the matter to a referee to determine those costs. I would not have ordered compensation by reference to the Doyle Avenue Land lease, which V&M of its own choice agreed should be surrendered (albeit in the expectation that a lease arrangement would or could be concluded with Vesuvius), with the concomitant risk that an arrangement in relation to the Sylvester Avenue Land might never be concluded.

  3. As it is, however, this issue does not arise.

Conclusion

  1. For the reasons above, the plaintiffs’ claim should be dismissed. I see no reason why costs should not follow the event.

Orders

  1. Accordingly, I make the following order:

  1. Dismiss the plaintiff’s claim with costs.

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Decision last updated: 21 February 2020

Most Recent Citation
Cases Citing This Decision

8

Penya v Penya [2025] NSWSC 805
Mills v Dodds [2025] NSWSC 396
Lucas v Salman [2022] NSWSC 1301
Cases Cited

57

Statutory Material Cited

1

Vesuvius Australia Pty Ltd v V & M Davidovic Pty Ltd [2011] NSWSC 539
Sidhu v Van Dyke [2014] HCA 19
E Co v Q [2018] NSWSC 442