Supreme Court of WA|2008-04-22|Before: Mr P, Hasluck J

BERRYMAN -v- HAMES SHARLEY (WA) PTY LTD [2008] WASC 59 (22 April 2008)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BERRYMAN -v- HAMES SHARLEY (WA) PTY LTD [2008] WASC 59

HEARD : 25, 26 JULY 2006 & 5 - 12 SEPTEMBER 2007

Contract and tort - Trade Practices Act 1974 (Cth) - Claim for loss of commercial opportunity - Nature of contractual obligations undertaken by defendant acting as architect and town planning adviser - Whether duty of care extends to the taking of positive steps beyond agreed professional task

Special qualities of plaintiff's site secured by planning consent for 12 months under current town planning scheme - Pending town planning scheme with reduced height limits - Expiry of existing consent while building plans being finalised - Plaintiff's project barred by gazettal of new scheme - Whether representations made by defendant as to viability of project - Extent to which defendant's duty of care affected by terms of contract and plaintiff's ambivalence about project - Defendant found to be in breach of common law and statutory duties in failing to warn or inform plaintiff about risk of gazettal

Whether sufficient causal link between misconduct complained of and loss suffered - Identifying and valuing loss - Likelihood of project being completed - Whether reasoning in Sellars case applies - Whether damages to be assessed at date of breach or date of trial - Assessment of damages for loss of opportunity - Amount of compensation payable to plaintiff reduced pursuant to reasoning in Sellars case - Payment of interest

1 The plaintiff, Peter Michael Berryman, was at all material times the proprietor of a property known as 20 Hensman Street, South Perth. The plaintiff contends in these proceedings that on or about 28 September 2000 he engaged the defendant company, Hames Sharley (WA) Pty Ltd, to provide services for the redevelopment of the subject property by the construction of three luxury multiple residential dwellings. The nature of the services to be provided and the exact terms of the contract are in dispute. However, in essence, the plaintiff alleges that as a consequence of certain actions and omissions on the defendant's part the project did not proceed with the result that the plaintiff is entitled to relief.

2 It was common ground at the trial that with the assistance of the defendant the plaintiff applied for and obtained a grant of planning consent from the City of South Perth dated 18 December 2001 for 'three grouped dwellings' (the planning consent). By condition 25 of the planning consent the validity of the approval was to cease if construction was not substantially commenced within 12 months. Construction did not commence within the prescribed period. Shortly afterwards a new planning scheme was gazetted with height restrictions that ruled out the possibility of obtaining a fresh planning consent and proceeding with the project in the form originally proposed. It was a central issue at the trial as to whether the defendant could be held responsible for an alleged failure to extend or renew the original planning consent.

3 The plaintiff did not proceed with the proposed or any form of development and continued to reside at the property. His claim for relief was directed essentially at an alleged loss of opportunity to proceed with the project. This required that his claim be defined with precision so that each party would be able to call expert evidence bearing upon the value of the property if the project had proceeded.

4 The matter was listed for trial initially on 25 July 2006. However, as a consequence of a significant controversy at that time as to the way in which the plaintiff's claim for damages was formulated, the claim was amended and the trial had to be adjourned. This allowed for further steps to be taken in relation to the presentation of expert evidence in response to the amendments. The matter was then relisted for trial. Both parties accepted that the burden of proof lay upon the plaintiff throughout to make out his claim upon the balance of probabilities.

5 The plaintiff described his personal circumstances as at mid 2000 in his witness statement (exhibit 45). He said that the property was his family home and he had lived there for over 30 years. He was the major shareholder of a company which owned and operated a business of car sales trading under the name and style of Berryman Car Sales. Through his business he had access to considerable financial resources.

6 In the course of his evidence at the trial the plaintiff said that he was essentially a self-made man. He had been operating his business, which was a second-hand or used car business, from caryard premises at 575 Newcastle Street in Northbridge. Cars were sold from those premises and he attended the premises six days a week. In August 2000 he decided to make enquiries about developing the Hensman Street property.

7 The plaintiff said in his witness statement that one of his neighbours was William George Hames who lived nearby at 29 Ridge Street, South Perth. The plaintiff had known Mr Hames since about 1970 as a neighbour and friend and as a person who had bought several vehicles from the plaintiff's car dealer business. He understood that Mr Hames was an architect and town planner. With that thought in mind, he approached Mr Hames and had an initial meeting with him in about August 2000 in the front room of the subject property in order to talk about a redevelopment project.

8 According to the plaintiff, 'the substance' of what he said to Mr Hames at that meeting was that he wanted to build a three-storey luxury home unit building on the property with one floor for each home unit and to the intent that the plaintiff would live in the top unit. He had not decided what he would do with the bottom and middle unit. He would consider renting or selling those units or retaining them all indefinitely with a view to leaving them to his children in his will. He had promised his late wife that the property would be left to their three children. That was why he had in mind three units so that he could leave one to each child.

9 On the plaintiff's account of what took place at the initial meeting, he asked Mr Hames if what he (the plaintiff) had in mind was the type of work Mr Hames did and, if so, whether he would do this project for the plaintiff. The plaintiff had never done this sort of thing before and did not know what to do and wanted to get it right. Because of the recent demise of his wife and some difficulties with his own health, he did not want to have any problems with the project and wanted Mr Hames to do all the necessary work. It was therefore important that Mr Hames handled the project from start to finish.

10 According to the plaintiff, the substance of Mr Hames' response was that he did the type of work required and would be pleased to handle the project for the plaintiff from beginning to end. He and his business, Hames Sharley (the defendant in these proceedings), had a lengthy experience doing projects of this type. The firm employed architects and town planners and could do all the work required to complete the project. Moreover, Mr Hames himself was a member of the City of South Perth's Town Planning Committee and its Design Advisory Board, so he knew all the right people and what was going on in the City. He said that Hames Sharley would prepare a site potential report. He advised the plaintiff to stay away from the City because, as a non-professional person, the plaintiff might upset the City and Mr Hames wanted to deal with the City himself to ensure the project ran smoothly.

11 I note in passing that Mr Hames, in his witness statement at trial, gave evidence that can be related to the plaintiff's evidence about these matters (exhibit D35). Mr Hames said that he holds the Degrees of Bachelor of Architecture (Hons) from the University of Adelaide and Master of City Planning and Urban Design from Harvard University. He has been working as an architect since 1960. He worked initially for institutions such as the South Australian Housing Trust and the Western Australian Housing Commission. In the early 1970s he and another architect, David Sharley, formed the firm which was destined to become the defendant company, known simply as Hames Sharley. Mr Hames has been a director of that company since 1983. He is a Life Fellow of the Royal Institute of Architects, a member of the Planning Institute of Australia and a Fellow of the Australian Property Institute.

12 Mr Hames said in evidence that in mid 2000 he had a discussion with the plaintiff at the premises of Berryman Car Sales in West Perth concerning a proposed redevelopment of the subject property. This led to a meeting at the plaintiff's house.

13 According to Mr Hames, the plaintiff said he was interested in constructing a three storey building with a view to retaining the top floor apartment and selling the lower two apartments. He wanted the apartment to be luxurious; classical in style; have large windows to take advantage of the views; have recess windows; have large balconies; have the bedroom located on the eastern side; have landscaped gardens and be white, cream or grey/blue in colour. He said also that he wanted the same feel to the apartment as his current house. The plaintiff wanted to be able to sit out on a balcony with a view of the river and read the newspaper, as he did in his current house. He wanted to develop the property because he liked the area.

14 According to Mr Hames, he told the plaintiff that a site potential report was required prior to commencing any work on the project because it was necessary to identify any potential problems which could arise as a result of the town planning regulations. He said that the defendant company was engaged initially to prepare a site potential report and proceeded to do so. Research for the report was undertaken by Darren Youens who was associated with the defendant company.

15 It emerges, then, that there were differences between the two principal witnesses as to where the initial discussion was held and as to the scope of the plaintiff's requirements. The plaintiff said he wanted Mr Hames to handle the project from start to finish. According to the defendant, he was asked initially to prepare a site potential report.

16 It was common ground at the trial that as at mid 2000 the applicable City of South Perth town planning scheme was TPS5 which permitted four 'grouped' dwellings to be developed on the site. A proposed TPS6 projected rezoning of the subject property from R35 to R25/40. This would reduce the opportunity to develop the site with four grouped dwellings and would enable only three grouped dwellings to be developed.

17 Mr Hames said in evidence that in 2000 he was aware that TPS5, as it affected South Perth, was under review and had been under review since 1998.

18 According to Mr Hames, he told the plaintiff that in his belief there was room to negotiate with the City of South Perth on the basis of allowing for 'multiple' dwellings to be built on the site in return for the retention of certain trees and increased open space left on the site. He explained that multiple dwellings are dwellings which are stacked vertically; grouped dwellings are side by side.

19 I note in passing that as at mid 2000 the height restriction on the subject property was 10.5 metres. Much of the surrounding area had a height limit of 7.5 metres. It seems that there was no discussion about height restrictions in the course of the initial exchanges. Mr Hames was aware that TPS5 was under review, but it was a matter of controversy at the trial as to when he personally first became aware that the new TPS6 would reduce the height limit on the subject property to 7.5 metres. It was a matter of controversy also as to whether the plaintiff was sufficiently informed and/or warned about the effect of the change.

20 It was common ground between the parties that prior to 1 September 2000, as a consequence of the initial discussions, the defendant company proceeded with the preparation of a site potential report and delivered the same to the plaintiff under cover of a letter dated 1 September 2000. It will now be useful to look at the terms of the 1 September letter (exhibit 1) and the first site potential report (exhibit 2).

21 The defendant's 1 September letter opens in this way:

Please find copy of our initial assessment of your site in regard to its development potential. Your indicated preference for 3 multiple dwellings will need to be negotiated with Council. The codes allow four grouped dwellings (which are side by side dwellings) whereas your requirement is multiple dwellings (ie. stacked vertically) is not defined under the R35 code.

Hames Sharley would be most pleased to act as your architect and town planner for this project.

We understand that it is your intention to build three luxury multiple dwellings to be held by yourself and you occupying the penthouse. Specific details will be developed once a formal commission is enacted.

Our planning services would include all applications and representations to Council in regard to this development application.

Our architectural services would include full service for the design, contract documentation, tendering and contract administration services for the project.

22 The defendant's 1 September letter went on to refer to the defendant company's base fee of 6% of the final or estimated costs of the works and indicated that certain specified proportions of the base fee would be recovered progressively at different stages. These stages were described as schematic design, design development, contract documentation and contract administration. It was said further that the firm rendered monthly accounts for services rendered.

23 In regard to secondary consultants, such as, civil, structural, mechanical and electrical engineers, quantity surveyors etc, the defendant recommended 'that these appointments be by yourself'. However, the defendant was willing to advise on the methods of engagement.

24 Mr Hames closed the letter by saying that his firm could provide the plaintiff with a building of quality which would enhance an excellent site.

25 The first site potential report included an introduction describing the lot size (1,212 square metres) and noted that the local authority was the City of South Perth. The local Town Planning Scheme zoning was said to be residential R35, the number of permissible dwellings was said to be four grouped dwellings, the plot ratio was said to be 'not applicable', the height limit was given as 10.5 metres.

26 The introduction contained an observation at par 1.1.10 to this effect:

The City of South Perth is currently in the process of reviewing their existing Town Planning Scheme. The site is proposed to be zoned R.25/40.

27 The first site potential report included this passage under the heading 'Comment':

The issues that are associated with this proposal are involved with height and impact upon the surrounding development.

A minor concern exists over a classification in the Residential Planning Codes of multiple or grouped dwellings. Multiple dwellings are not defined in the R.35 density code. A multiple dwelling is where any part of a dwelling is vertically above part of any other. It is anticipated that this can be negotiated with Council.

The attached development concept complies with the height requirements of the Town Planning Scheme and shows the possible development opportunities that exist on the site (See Attachment I).

The opportunity currently exists to develop the site for 4 grouped dwellings however the Draft Town Planning Scheme proposes that the site be zoned Residential R.25/40 which means that to achieve the higher codes you must comply with a number of criteria. These criteria are shown in Attachment II. An assessment of the criteria reveals that the site can only comply with 5 of the criteria which makes the maximum density available, under the draft Town Planning Scheme, R.25. R.25 enables only 3 dwellings to be developed. An opportunity for an additional dwelling will be lost if the draft Town Planning Scheme is enacted.

Visual privacy of the adjoining neighbours will be the biggest issue that needs to be addressed and this can be accommodated by taking advantage of the view to the south west.

28 I note in passing, as a matter bearing upon the central issues, that the first site potential report appears to accept that the development potential of the site could be adversely affected if the new TPS6 was put into effect. However, it is important to keep in mind that the adverse effect being spoken of was the loss of an opportunity for an additional dwelling rather than the loss of an opportunity to proceed in the manner being proposed, namely, the construction of three luxury multiple dwellings (that is dwellings stacked vertically).

29 There is a reference to height as an issue associated with the proposed development but there is no reference to a more specific issue that might arise if the relevant planning controls were amended to restrict the height of the building to 7.5 metres. The report simply notes that 'the attached development concept complies with the height requirements of the Town Planning Scheme'.

30 The first site potential report included indicative sketches for 'multiple dwellings' and various annexures bearing upon the nature of the planning controls. These included in Appendix II the Proposed Town Planning Scheme Standards in respect of Dual Density Coding: R25/40. It included also Appendix III which consisted of a document dated February 2000, bearing the heading 'Planning Policy No. P34 Residential Density - Interim Introduction of Proposed Town Planning Scheme No. 6 Provisions'.

31 The P34 policy document observed that the policy was applicable to all land within the City of South Perth where residential development is permitted. The policy objective was said to be to promote orderly and proper planning by introducing certain residential density controls 'contained within the latest version of the proposed Town Planning Scheme No. 6 endorsed by Council, which are essential to protect the integrity of the proposed Scheme'.

32 Clause 3(a) provides that in assessing applications for planning consent the Council (or its officers acting under delegated authority) shall have regard to the relevant density codings imposed by the No. 5 Town Planning Scheme as well as those to be imposed by No. 6 Town Planning Scheme.

33 Mr Hames said in evidence that he discussed this 'letter of engagement' with the plaintiff. He explained that, as indicated in the letter, the Hames Sharley services would be provided in stages. The plaintiff would have to engage secondary consultants such as engineers and quantity surveyors.

34 The plaintiff said in his witness statement that he read the defendant's 1 September letter and report. He noted that the letter made reference to a formal appointment. A day or so later he spoke to Mr Hames, asking him what the next stage was and what the approximate cost of the development would be.

35 According to the plaintiff, Mr Hames said that he was going away but would ask his associate Dean van Niekerk, to send out a more detailed proposal with a costing. By letter dated 18 September 2000 from Hames Sharley (being a letter signed by Dean van Niekerk) a proposal was put to the plaintiff in which it was said that the estimated cost of the project was $1.25 million to $1.5 million. Hames Sharley would charge $8,250 for their services in order to obtain planning approval for the project (exhibit 3).

36 Having regard to later events, it will be useful to look at the defendant's 18 September letter closely.

37 It commences by saying that a detailed brief 'is yet to be formulated' but it is understood that the plaintiff was giving consideration to building 'three luxury multiple residential dwellings' on the subject property. Specific accommodation and user requirements/preferences were to be established after a site visit with the plaintiff with topographical and physical constraints being identified at that time.

38 The 'scope of work' was described as being to prepare schematic design suitable for lodgement with the City of South Perth for development approval purposes. Town planning input to assist in this stage would be provided. The design was also to be used to establish an 'indicative estimate of likely construction costs'. The documentation associated with those services was then described and certain 'exclusions' were referred to which included 'other consultants (if required)'.

39 It seems that the defendant's 18 September letter was accompanied by a lengthy memorandum headed '20 Hensman Street, South Perth. Description of General Scope of Works for Stages of Work to Delivery of Product'. The defendant's Scope of Works document referred to the various specific forms of design that would have to be completed such as structural, mechanical, hydraulic and electrical design and referred at length to the provision of contract documentation services.

40 The plaintiff was unsure when exactly he received the Scope of Works document but to the best of his recollection it came with the letter of 18 September 2000. I am prepared to find as a fact that it did so. For ease of reference, when I refer to exhibit 3 or the defendant's 18 September letter it can be assumed that I am referring also to the defendant's Scope of Works document.

41 The plaintiff sent a letter dated 28 September 2000 to Hames Sharley saying that he had no problems with the proposed fee structure of $8,250 (exhibit 4). However, before he committed to the project he wished to find out what his rights were to 'the design, plans, approvals etc'. Mr Hames informed him by telephone that whatever work had been paid for by him would belong to him. The plaintiff said in his witness statement that he then accepted the proposal from Hames Sharley contained in 'its letters to me as we had discussed'. Mr Hames said words to the effect that he would have the drawings prepared for the project and discuss them with the plaintiff when they were ready.

42 According to Mr Hames, his firm had been engaged to produce schematic designs suitable for lodging with the city of South Perth for planning consent.

43 It seems that from September 2000 to about mid 2001 the plaintiff liaised with Mr Hames about the project. During this period Hames Sharley prepared drawings which were shown to the plaintiff. According to Mr Hames, the plaintiff commented upon the plans from time to time and changes were made. At one stage the plaintiff went to Melbourne to study apartment buildings he admired, and in due course provided Hames Sharley with photos of the same. By letter dated 26 March 2001 Hames Sharley informed the plaintiff that the preliminary construction cost estimate was approximately $1.89 million but this was indicative only (exhibit 5).

44 The defendant's 26 March letter enclosed drawings which purported to bring together the ideas for redevelopment of the site upon the basis that the areas of the apartments were 269 square metres with balconies being additional to that area. These were said to be large apartments and were in the luxury category in regard to size. The 'preliminary construction cost estimate' was said to be approximately $1.9 million. This estimate was 'indicative only' and would depend on final finishes and equipment selection as well of final areas of the apartments.

45 The defendant's letter asked the plaintiff to review the plans. It said that on the plaintiff's receipt of his comments and approval the documents would be used to commence discussions with the City of South Perth which, in the event of a positive response, could lead to completion of the 'schematic design stage' of the units and lodgement of the documents for a development approval.

46 Between August and December 2001 the plaintiff received correspondence from Hames Sharley and had discussions with Mr Hames about the progress of the application for planning approval. The plaintiff also paid fees referable to the design process. In due course, Mr Hames gave him an application for planning consent. This described the proposed development as 'three grouped dwellings' with an approximate cost (excluding land) of $2.2 million. The estimated time of completion was said to be 'asap upon approval'. The application for planning consent was signed by the plaintiff and dated 29 October 2001 (exhibit 7).

47 The application form was then submitted to the City of South Perth by Hames Sharley under cover of a letter dated 31 October 2001 (exhibit 8). The covering letter enclosed documentation relating to the Council's earlier approval of the project 'in principle'.

48 By a faxed letter to the City of Perth dated 9 November 2001 updated copies of certain of the drawings, namely, SKO4 and SKO5, were forwarded to the City of South Perth together with a copy of the survey of the property (exhibit 9). These drawings reflected changes referable to a report that had been obtained concerning the preservation of trees on the property.

49 It was common ground between the parties that the application was approved by the City of Perth. The grant of planning consent described the determination date as 18 December 2001 in respect of 'three grouped dwellings' (exhibit 10).

50 I note in passing that although the plaintiff's 31 October application and the planning consent employed the language of TPS5, and spoke of three 'grouped' dwellings, the consent in fact allowed for three multiple dwellings, that is, three apartments stacked vertically. In the manner foreshadowed by Mr Hames in the first site report this outcome had been negotiated with Council by making provision for the retention of certain trees upon the property. This appears from a letter from Hames Sharley to the City of South Perth dated 3 August 2001. According to that letter the Residential Planning Codes (Part 3 - Grouped Dwellings) stated that 'under exceptional circumstances it is possible to permit a development involving dwellings partly or wholly above another to be classified as grouped dwellings' (exhibit 6).

51 The same letter noted that the 'existing Town Planning Scheme identifies this and the surrounding lots as having the potential to develop to a maximum height of 10.5 metres, which is the height proposed in the development application'. It was this letter that had led to the Council's earlier approval of the proposed development 'in principle'. The letter was signed not by Mr Hames but by Darren Youens on behalf of Hames Sharley.

52 The 18 December planning consent was granted subject to 26 conditions a number of which have an important bearing upon the matters in issue. In particular, the conditions included the following:

The finished floor level for the main portion of the ground floor unit shall be a maximum of RL 27.60. The remainder of the dwelling, which has various levels throughout, shall also be reduced by 390mm accordingly.
All existing trees intended to be retained as indicated on the site plan and addressed in the arboricultural report shall be identified for retention on the Working Drawings and on the required landscaping plan and shall be protected prior to and during construction, and shall not be removed without the prior approval of the Council. At a suitable distance away from the base of the trees, protection zones shall be established by means of installation of sturdy temporary barrier fences to prevent entry by construction staff, heavy mechanical machinery and the storing of building materials and soil.
The validity of this approval shall cease if construction is not substantially commenced within 12 months of the date of grant of Planning Consent.

53 The planning consent concluded with a so-called 'Important Note' to the effect that:

This Planning Consent is NOT an authorisation to commence construction. A BUILDING LICENCE MUST BE OBTAINED from Council's Building Services Department prior to commencing any work of a structural nature

54 The importance of this note was highlighted by the use of bold print and being placed in a special box at the end of the planning consent form.

55 Let me now turn to the 'attached plans' the subject of the application and the related 18 December planning consent.

56 It was common ground at the trial that the planning consent plans were the three coloured sketch plans marked 40893 SK03 rev G, SK04 rev F and SK05 rev D showing three multiple or stacked dwellings on the property that had been forwarded to the City of South Perth. These sketch plans formed part of exhibit 9.

57 SK03 is described as the site plan. The other two plans show the north, south, east and west elevations, and the basement car park plan. The dimensions of the uppermost or penthouse unit (unit 3) are given as 'floor area 267 m2, entry 31 m2, balcony 6m2'. The position of various trees on the site are depicted.

58 I pause here to note that although the 18 December planning consent plans are to scale and measurements are provided, they were, according to Mr Hames, simply schematic design plans prepared for the purpose of obtaining planning consent only.

59 Having regard to Mr Hames' evidence, and the evidence of Mr Davison from Pindan Constructions, I accept, and so find, that the exhibit 9 planning consent plans could not be regarded as contract or working drawings sufficient to obtain a building licence or to commence construction. It is a matter of controversy, which I will come to later, as to whether these were plans from which the proposed building could be accurately costed. On the defendant's case, Hames Sharley had completed the scope of work defined by the agreement between the parties, namely, the firm had completed schematic design plans suitable for lodgement with the City of South Perth for development approval purposes. Further, as foreshadowed by Mr Hames in his earlier correspondence, various consultants had to be appointed before contract or working plans and specifications could be finalised.

60 It appears from earlier discussion that in order to obtain planning approval in principle Hames Sharley had managed to persuade the plaintiff to commission an arboricultural report as a means of obtaining the Council's dispensation concerning a multiple dwelling development on the subject property. According to Mr Hames, the plaintiff said that he did not want to pay for such a report, but eventually recognised that it had to be provided to assist the Council in considering whether to approve multiple dwellings. Indeed, the plans submitted to the Council initially had to be modified in order to accommodate the recommendations in the report. The arboricultural report was mentioned in condition 18 of the 18 December planning consent.

61 Further, by letter dated 20 December 2001 Mr Bercov, the Manager of City Planning at the Council, advised Hames Sharley that in addition to conditions set out in the planning consent the Council had resolved that two lemon-scented gum trees on the property were to be included within the registry of Tree Preservation Orders and the plaintiff's agreement was required in that regard (exhibit 28).

62 Mr Hames said in his witness statement that in January 2002 he met with the plaintiff to discuss the planning consent and the conditions that had to be attended to. He emphasised that the conditions had to be complied with because the Council had granted the plaintiff approval for multiple dwellings rather than grouped housing and on the basis of protecting the amenity of the area. The plaintiff protested, saying that he was not going to lower the level of the structure or put the trees in the Register. He felt that he ought to be able to do what he wanted with the trees.

63 By letter dated 18 January 2002 the plaintiff wrote to Mr Hames as follows:

I am still concerned that the Council wants to reduce the base level of the new structure by approx 300mm. I do not believe this is a reasonable request taking into account that the present structure has been in place for many decades.

However if the Council is prepared to reconsider this particular provision I would be more than happy to discuss the inclusion of the two particular lemon scented gums on their tree register. (exhibit 11)

64 Mr Hames said in his witness statement that he then had a further discussion with the plaintiff and made it clear that the plaintiff was not in a position to barter with the Council in that way. The conditions were non-negotiable. Further, as to reducing the floor level of the ground floor, this was a comparatively small matter which could be re-evaluated once the engineering drawings were obtained.

65 According to Mr Hames, at about this time also the plaintiff said that he wanted a balcony to take advantage of the river views, although the proposed balcony overlooked a neighbour's house. Mr Hames drafted a letter to be signed by the neighbour indicating that he had no objection to the proposal.

66 Further, by letter dated 26 February 2002 Mr Hames wrote to the plaintiff seeking instructions to engage a firm of quantity surveyors, HW & Associates, to give an indicative cost estimate of the project (exhibit D23) mentioning that their fees would be $2,400 exclusive of GST. The enclosed letter from the quantity surveyors indicated that costing a project of this kind was a sophisticated exercise whereby a detailed estimate would be 'broken down into approximately 25 elements such as external walls, roof, floor finishes etc so that it can clearly be seen where costs would occur. Within each element all items of work will be measured and priced separately in detail'. Where details were not available (such as structural and services designs) it would be necessary to make assumptions based upon experience and talking to other consultants or subcontractors.

67 Mr Hames did not receive a response to the 26 February D23 letter so he spoke to the plaintiff by telephone and was told that the plaintiff refused to appoint a quantity surveyor. The plaintiff allegedly said that he did not want to spend the money.

68 I pause to say that the plaintiff did not refer to the 26 February D23 letter concerning the appointment of quantity surveyors and there was no evidence in rebuttal. Thus, I find that the evidence given by Mr Hames about this matter is correct.

69 Mr Hames went on to say that, after speaking to the plaintiff, he wondered how Hames Sharley could advance the job without an indicative cost estimate. He believed that the only way to advance the project was to appoint engineering consultants.

70 As to this phase of the relationship between the parties, the plaintiff in his evidence at trial presented a slightly different picture. He said that the various conditions were acceptable to him, although he did ask if anything could be done about condition 17. This led to steps being taken to get the consent of neighbours. The plaintiff understood from what Mr Hames said that to satisfy condition 25 concerning the 12 month time limit all that was required was demolition of the house and the laying of the cement pad for the ground floor unit.

71 The plaintiff said in evidence that the letter dated 18 January 2002 (exhibit 11) was written by him at Mr Hames' suggestion in an attempt to 'trade off' with the Council, by agreeing to have specified trees placed on the Preservation Register in exchange for the Council agreeing to vary the height limits in condition 17. He was concerned about the conditions concerning reduction of the level and the trees but he did not say at any stage that he was not prepared to comply with the same. It was his belief at this time that there were no problems with the planning consent and he was well on the way to developing his property as permitted by the consent.

72 Under cross-examination the plaintiff said that he was not minded to appoint a quantity surveyor at this stage because building plans had not been finalised and there were outstanding matters to be attended to.

73 I feel obliged to say in passing that I cannot easily accept that at this stage the plaintiff truly believed that he was well on the way to developing his property as permitted by the 18 December planning consent. There is no independent evidence or contemporary document reflecting or providing grounds for any such belief. In fact, the surrounding documents and circumstances are to the contrary. The plaintiff had been told by the defendant that he would have to engage third party professional consultants, including quantity surveyors, in order to advance the project. He had declined to appoint the quantity surveyors and had not taken any step towards the appointment of professional consultants.

74 The plaintiff said in his witness statement that in March 2002 the plaintiff's son was negotiating for the purchase of a property at 11 Ridge Street adjoining the subject property. The plaintiff's son acquired the site in question soon afterwards with funds provided by the plaintiff. Thus, the plaintiff effectively controlled the combined properties being Lot 2 (20) Hensman Street and Lots 4 and 5 (11) Ridge Street, South Perth. This caused him to discuss with Mr Hames what could be done to develop the land as one parcel. He then requested Mr Hames to provide another site potential report.

75 It was common ground at the trial that Hames Sharley prepared and delivered a second site potential report dated March 2002 concerning the combined lots (exhibit 12).

76 The second site potential report noted that the three residential lots in question gave rise to an L-shaped configuration. The purpose of the report was to outline the planning controls governing redevelopment and to investigate how amalgamating the lots might increase the overall development potential of the land for strata title development. The report noted at par 1.1.3 that the existing zoning of the three lots was residential R35. The City of South Perth was currently reviewing existing TPS5 which was to be superceded by TPS6. The new scheme proposed a residential coding of R25/40.

77 The second site potential report at par 1.1.8 to par 1.1.12 dealt with development potential under TPS5 and development potential under TPS6. The report emphasised that the potential of the three lots was likely to reduce with the introduction of the City's TPS6. If the current potential of the properties was to be secured a subdivision application had to be submitted to the planning commission 'as soon as possible'.

78 The report contained further observations concerning the timing of the new scheme. It noted that TPS6 had been a work in progress since 1998. The report continues in this way:

With the introduction of any new Scheme there will be a period of overlap. This is where the current Scheme continues to have the force of law and yet the authority refers to the proposed Scheme as a 'seriously entertained planning proposal' and has regard to the provisions therein.

TPS No.6 has already been advertised and is currently being readvertised with modifications requested by the Hon Minister for Planning and Infrastructure. After this round of advertising the Scheme will again be forwarded to the Hon Minister for final approval. Given that the proposed Scheme has progressed this far, the City regards it as a seriously entertained planning proposal.

If a development application was submitted now, for either Lot 2, 4, or 5, the City would assess the application in accordance with the proposed zoning, being R25/40. This is outlined further in the City's policy P34, (attached as Appendix 3)

79 Importantly, for present purposes, the report goes on to note at par 1.1.11 and par 1.1.12 that the maximum building height prescribed by the current town planning scheme is 10.5 metres. However, as to proposed development controls, the City of South Perth had advised that specific development controls relevant to the lots would generally not change with the introduction of the new scheme, though a number of interpretations of the scheme and certain policies may have been reworded.

The maximum building height prescribed by the Scheme will be 7.0 metres.

The proposed Scheme also refers to the provisions of the Residential Planning Codes.

81 The second site potential report suggested that there was benefit in amalgamating and re-subdividing the subject properties. However, for present purposes, it is not necessary to explore the reasoning in the report because the proposal did not proceed further.

82 Before leaving the report, I note that in the final paragraph the author of the report asserted again, having regard to the likely introduction of TPS6, that if the current potential of the properties was to be secured a subdivision application should be submitted as soon as possible.

Evidence concerning the site potential reports

83 The plaintiff was cross-examined at some length as to what he knew about the possibility of changes to the relevant planning controls. He confirmed that he read the first site potential report and observed a reference to the City of South Perth being in the process of reviewing their existing town planning scheme and related comments, although he probably did not understand the observations concerning R Codes. He acknowledged that he received the second site potential report but said that he did not read it in detail (ts 230).

84 The plaintiff conceded that he knew that there was a current town planning scheme, being TPS5, but did not know that there was a proposed scheme, TPS6 (ts 232). According to him, he read the second site potential report but did not take it in. He could not recall reading the passage at par 1.1.12 of the second site potential report to the effect that under the new scheme the maximum building height prescribed by the scheme would be 7 metres (ts 235).

85 It is clear from the plaintiff's answers under cross-examination that he decided not to proceed with the venture concerning the three lots, but not necessarily because of any information or reasoning contained in the second site potential report.

86 I pause here to note that the second site potential report was said by the defendant to be relevant because that report spelled out clearly to the plaintiff that if TPS6 came into force his project for three multiple dwellings on the subject property - Lot 2 (20) Hensman Street, South Perth - would be adversely affected because the maximum building height prescribed by TPS6 would be 7 metres.

87 On the defendant's case, the second site potential report made it clear also that TPS6 might come into force in the near future. This meant that, if anything had to be done with a view to ensuring that TPS5 was the operative point of reference, it had to be done 'as soon as possible'.

89 It seems that in mid 1999 the plaintiff had formed a relationship with the proprietor of a design business in Subiaco, Rosemaree Cunningham. They were closely involved with each other at the time the 18 December planning consent was obtained and for several years thereafter, although they did not cohabit.

90 It was clear from the evidence given by the plaintiff and Ms Cunningham at trial that the plaintiff trusted Ms Cunningham and respected her judgment about matters of interior design and the layout of buildings. She began to play an increasingly important role in assessing plans relating to the project and in communicating with Mr Hames and others at Hames Sharley. There was some evidence before me that as matters concerning the project progressed she became an informal or de facto 'project manager' on the plaintiff's behalf.

91 At about the time that the plaintiff was giving consideration to the second site potential report Ms Cunningham took it upon herself to approach a building firm known as River Stone with a view to obtaining a budget estimate for the construction of the proposed development on the subject property, that is, three luxury multiple units on the property at 20 Hensman Road, South Perth.

92 By letter dated 27 March 2002 Diane Wainwright, a building and design consultant at River Stone, provided a budget estimate based on the concept sketch provided and upon River Stone's standard level of specification (exhibit 13). It was said that the cost of the development should fall within the $1.5 million to $1.7 million range. The standard specification was said to include all working drawings, engineer's plans, building licence fees, construction and site costs.

93 I pause here to note that after some controversy at the trial the River Stone estimate was admitted as an exhibit for the limited purpose of establishing that such an estimate was received. It was thought to be relevant as a piece of evidence serving to explain later conduct by the plaintiff. The author of the River Stone estimate was not called as a witness and a ruling was therefore made by me, pursuant to evidentiary rules concerning the exclusion of hearsay and evidence of opinion (otherwise than by a qualified expert), that the letter could not be received as evidence to establish the truth of the matters asserted, especially as to the likely cost of the development.

94 The plaintiff presented evidence from Kerry Rix who was the principal of the building firm known as Site Project Management Pty Ltd to say that, following an approach from the plaintiff in May 2002, he costed the project at $2,354,926.60 all inclusive.

95 The plaintiff agreed under cross-examination that in May 2002 he gave Hames Sharley plans for the project to a Mr Rix of Site Project Management Pty Ltd or SPM and asked him to provide a budget estimate. He could not recall receiving an estimate from Mr Rix in the sum of $2,354,926.60. Mr Rix made it clear that he would not build the apartments so the matter was not taken further.

96 Under cross-examination Mr Rix was of the view, to the best of his recollection, that he probably provided the plaintiff with a verbal estimate that the project would cost between $2.3 million and $2.5 million (ts 374). He did not have any further involvement with the proposed development. Mr Rix confirmed that to provide an accurate costing and to obtain a building licence he would have required a full set of working drawings. He acknowledged that the steps to be taken or process to go through in order to move from the sketches with which he had been provided to a building licence could be about six months (ts 376).

97 According to the plaintiff, in early April 2002 he had a conversation with Mr Hames in which he made it clear that he was not interested in proceeding with the venture addressed by the second potential report. However, he did wish to proceed with the project on the subject property. He asked Mr Hames to get on with the drawings so that the plaintiff could get the building licence from the City of South Perth.

98 Further, the plaintiff referred to the figures obtained from River Stone and asked Mr Hames to account for the difference between the building costs estimated by River Stone at $1.5 million and the building costs foreshadowed by the Hames Sharley letter dated 18 September 2000 of $1.25 million to $1.5 million. The plaintiff said that he needed more accurate figures so that he could go to his bank and request a loan for the required amount.

99 The plaintiff allegedly made it clear also that henceforth Mr Hames should talk to Ms Cunningham about everything concerning the project. The plaintiff and Ms Cunningham were going to travel to Melbourne in May 2002 to look at developments of a similar kind with a view to picking up ideas concerning the finishes and external appearance of the units as the plaintiff had decided that he would live in the top floor unit.

100 Mr Hames is alleged to have replied that in order to go to the next stage Hames Sharley would have to prepare more detailed design drawings. In addition, he would get a quote from a builder and would send the plaintiff a cost proposal for the next stage of the works.

101 This evidence was contested by Mr Hames at the trial. He said in evidence that he had worked with Ms Cunningham on another project. He knew of her role as a designer and of her relationship with the plaintiff. He accepted that she became increasingly involved in the project as a spokesperson for the plaintiff. However, according to Mr Hames, he did not know that the plaintiff, with her assistance, had asked for and obtained an estimate from River Stone. He did not see the River Stone letter until after the present proceedings had commenced.

102 Mr Hames said in evidence that by May 2002 he had become increasingly frustrated with the lack of progress on the project. Engineers and a quantity surveyor had to be appointed in order to advance the project. With that thought in mind, he spoke to the plaintiff and suggested that Pindan Constructions be retained. The plaintiff was reluctant to proceed in that way because he thought that Pindan, being a big company, was likely to have high overheads and be too expensive. Nonetheless, Mr Hames said that he proceeded to approach Pindan with a view to obtaining a budget estimate for no charge on drawings that Hames Sharley had prepared.

103 It was common ground at the trial that by letter dated 21 May 2002 Pindan by its Business Development Manager, Scott Davison, provided what was described as a 'budget estimate submission' (exhibit 14).

104 Scott Davison gave evidence at the trial of the action as a witness called by the plaintiff. He said that Mr Hames asked him to give an estimate for the project upon the basis that the owner wanted to build upmarket dwellings. At that time Pindan was involved in construction of the Princeton Apartments which were to be finished to the standard of upmarket residences and it was decided that these could be used as a benchmark 'but with a bit extra'. He then personally prepared an estimate based upon a reasonably high standard of finish to fit in with the quality of the proposed development. He said in evidence that in 2002 estimates which he provided were reasonably accurate within 5% to 10% of firm prices.

105 The 21 May Pindan estimate was $2,007,500 'for the complete construction of three high quality residential apartment units over three levels on an undercroft carpark including all site works'. The estimate was said to be based upon the Hames Sharley preliminary plans numbered 40893 SK03 rev G, SK04 rev F and SK05 rev D and associated discussions. It was said to be 'an indicative budget estimate only' based upon square metre rates, preliminary documentation and was subject to confirmation. According to attached documentation the budget estimate was valid for a period of 90 days only from the date of the estimate. No allowance had been included for any cost escalations. No allowance had been included for any design or consultancy fees, disbursements or contingency sum. Further, no allowance had been included for any demolition works or clearance of the site.

106 Mr Davison said in his witness statement that Pindan did not usually become involved in the process of obtaining a development approval or building licence. Usually an owner provided the approval and building licence and Pindan then negotiated a contract with a firm price.

107 He said further that when a contract has been signed, the client has established that it has the required finance, and the building licence is available, then, within an agreed timeframe, usually in the order of four to six weeks, Pindan commences work on site.

108 Mr Davison estimated it would have taken 12 to 18 months to build the proposed units, depending on supply of materials and labour. The estimate provided was the building cost of Pindan, GST inclusive. The owner would have incurred further costs for an architect and other consultants which he estimated to be 10% of the amount of the Pindan building costs, which were outside of Pindan's direct control or contract. The owner would also have incurred financing, sales and marketing expenses.

109 Mr Davison said further that if the owner had entered into a building contract with Pindan in late 2002 or early 2003 the price for the building would have been the estimated $2,007,500 plus 5% to 10%. If the owner had contracted with Pindan and provided a clear and unobstructed site, with the existing building demolished, and met all of Pindan's requirements, then Pindan would have probably commenced work on site, with a construction period of between 12 to 18 months.

110 I pause here to note that on the plaintiff's case at trial this evidence was relied upon to support an inference that in the absence of the defendant's alleged breach of duty building work on the subject property could have been commenced early in 2003 and been completed in or about November 2004. Accordingly, the plaintiff's particulars of claim, and much of the valuation evidence on both sides, was directed to the value of the subject property as at November 2004, including reference to hypothetical development exercises calculated by reference to such a date, and the Pindan estimate.

111 Under cross-examination Mr Davison confirmed that the Pindan estimate was produced in response to instructions from Mr Hames. He did not meet the plaintiff or Ms Cunningham then or at any time thereafter. The Pindan estimate was 'indicative information' so it was by no means a firm quotation and it was not something that Pindan would enter into a building contract with. It was a 'reasonable approximation' of what you would expect the building to cost. There would be a lot of work to do, including discussions with the client, to arrive at a firm quote.

112 Mr Davison went on to say that the plans he had seen were very preliminary. There were no architectural structural details and no confirmed or finished schedule. He could foresee months of negotiation work with the architect or the client to come to a fixed point where he would be prepared to give a fixed price quote.

113 More particularly, he would need structural drawings, confirming the actual structural details, such as suspended slabs and load-bearing walls. These would normally be provided by a structural engineer. Service drawings would be provided by hydraulic, electrical and mechanical engineers. Bearing in mind what he had at May 2002 it would probably be not less than six months to reach a point at which he could give a fixed price quotation. It was considerations of this kind that lay behind the comment as to exclusions that the budget estimate was valid for 90 days only. It was not an estimate to be accepted for the purpose of a contract (ts 363).

114 By letter dated 28 May 2002 Hames Sharley delivered the Pindan estimate to the plaintiff (exhibit 15). Mr Hames said in his covering letter that, as discussed, in order to advance the project more detailed design documentation was now required. He went on to describe the work to be completed as follows:

Detailed Design : Scope of Work

Detailed design takes the approved sketch design and develops and adds detail, refinement and clarification to all aspects of the design. The work of other consultants is coordinated and integrated with the architectural design and documentation.

An updated estimate is prepared.
The client's approval is sought before proceeding to documentation.

We will also require the appointment of secondary consultants such as civil, structural, mechanical and electrical engineers in order to incorporate their detailed design and advice into the building. This will then allow us to accurately assess the cost and building complex.

This work will then allow a more accurate cost estimate to be completed as it will determine much of the issues of design as we have discussed and will also determine the specification in regard to materials and quality of finishes.

Once that has been determined and agreed by yourself the subsequent stages are Contract Documentation, Tendering of the works and Contract Administration.

The fee to complete the Detailed Design stage of works will be $24,900 (twenty four thousand nine hundred dollars).

We can commence this work when you require and it would take approximately 6 weeks to complete.

115 The letter enclosed a document headed 'Description of General Scope of Works for Stages of Works to Delivery of Product'. This corresponds to the Scope of Works document mentioned earlier. The list included reference to various forms of design work such as architectural, structural, mechanical and hydraulic indicating in most cases that a separate consultant was required.

116 The list went on to refer to contract documentation services in which respect, at par 5.15, the list refers to the need for a building application consisting of preparation of documents by the architect for lodgement with the relevant authorities for building approval. Further, the list ran on to refer to tendering and negotiating services and contract administration.

117 I feel obliged to observe at this point that the plaintiff and/or his 'representative' Ms Cunningham did not seem to be in the habit of responding in writing to letters or reports submitted to them. They generally made no attempt to summarise in written form what had been discussed or decided upon at any of the meetings. Certainly, on this occasion it appears, and I so find, that the plaintiff did not provide any written instructions in response to the 28 May Hames Sharley letter.

118 In his witness statement the plaintiff asserted that the plan of action including the fee of $24,900 specified in the defendant's 28 May letter was acceptable to him. He did not suggest that he or Ms Cunningham took any steps to appoint secondary consultants or that he instructed Hames Sharley to proceed accordingly. Moreover, there is no evidence in writing to that effect.

119 According to the plaintiff, at about the date of the defendant's 28 May letter, he told Mr Hames that he was happy with the upgraded proposal and for him to proceed with the work. He and Ms Cunningham went to Melbourne in May 2002 and took photographs of buildings which had finishes they liked. They had a further meeting with Mr Hames upon their return.

120 The plaintiff said in evidence that this further meeting took place in early July 2002. Mr Hames showed him drawings prepared by Hames Sharley. He gave Mr Hames the photographs he had taken in Melbourne and asked him to consider those when preparing the next set of drawings. According to him, he asked Mr Hames how the project was going and whether he thought they were running out of time to comply with the planning approval. Mr Hames allegedly replied that time was not a problem and if it became a problem he would get a 12 month extension of the planning approval. The plaintiff could not point to any document or other evidence corroborating his version of this meeting.

121 Ms Cunningham asserted in her witness statement that she and the plaintiff travelled to Melbourne in May 2002 and took photographs of a number of apartment buildings for the purpose of getting ideas for the design of the proposed apartments. In her statement she did not comment directly upon the Pindan estimate and related events such as the request for a quote given to Mr Psaros. She simply asserted that from mid 2002 to mid 2003 she attended a number of meetings with the plaintiff, Mr Hames and others from Hames Sharley at which the plans and drawings for the project were considered.

122 According to Ms Cunningham, changes were discussed. Mr Hames or others from Hames Sharley, undertook to make alterations. By this process the design of the proposed units was advanced. She said in evidence that she did not take notes of the meetings. She recorded the dates of meetings in an electronic form on her computer but those records have now been deleted and cannot be retrieved.

The Hames evidence concerning the 28 May letter

123 Mr Hames in his witness statement and evidence at trial presented a different picture. According to him, after receipt of the Pindan estimate, he conveyed to the plaintiff that the project could not be progressed unless engineers were appointed to allow completion of the design development stage and to bring the project to the contract documentation stage. He said that once the contract documentation stage was completed tenders could be called for or negotiations undertaken directly with a builder. It would take a period of six to eight weeks for the design development and then Hames Sharley would have to produce the contract documents which would take approximately 12 weeks.

124 According to Mr Hames, the plaintiff said that he did not want to appoint engineers. He did not want to proceed yet. Then, in July 2002, the plaintiff phoned Mr Hames and said that his mates had recommended he speak with Danny Psaros of Psaros Developments regarding the project. He had in mind to obtain a quotation from Mr Psaros to undertake the construction. If Mr Psaros was appointed, it was contemplated that the role of Hames Sharley in the project would come to an end.

125 The plaintiff asked whether Mr Hames would have an issue if Psaros took over the project. According to Mr Hames, he said that he did not have an issue, and agreed to accompany the plaintiff and Ms Cunningham to inspect a development in Cottesloe which had been undertaken by Psaros.

126 According to Mr Hames, there was a meeting on site at an apartment development in Eric Street, Cottesloe which was being built by Psaros Developments. Mr Hames was accompanied by a fellow architect from Hames Sharley, Mark Popplewell, who had become involved in the preparation of drawings by Hames Sharley. The meeting led to a confirmation by Mr Hames, for the plaintiff's benefit, that the Psaros development was of a quality equal to the proposed development and an arrangement for the drawings prepared by Hames Sharley to be handed over to Mr Psaros so that the latter could take over the project.

127 By this time, after lengthy periods of what Mr Hames described as 'client inactivity', it seemed to Mr Hames that the project lacked a sense of purpose. After handing over the drawings to Mr Psaros, he believed that the Hames Sharley brief in relation to the project had come to an end.

The plaintiff's property listing and bank application

128 The plaintiff said in evidence that at about this time (mid 2002) an estate agent from the firm Paxton Hoad mentioned that the building company Multiplex could be interested in buying the subject property. This led to the plaintiff giving the agent authority to sell dated 3 July 2002 at $1.825 million. According to the plaintiff, he was then told that Multiplex was not interested and that was the end of that matter. The land was never offered for sale to the public nor advertised and it was not his intention to do so.

129 The plaintiff said also that at about this time, based on the cost estimate received from Pindan, he made an application to borrow $2.5 million from the Commonwealth Bank to build the units. By letter dated 29 July 2002 the bank gave approval in principle to such a loan for two years at 7% (exhibit 17).

130 The plaintiff was cross-examined about his application to the Commonwealth Bank on 22 July 2002 for finance and the suggestion contained in his letter that the building would be completed and marketed over an 18 month period, and the facility cleared at this point. He said that this came about because a particular person had indicated that if he decided to sell one of the units she would be interested in purchasing a unit. He agreed, as indicated above, that a few weeks earlier he had listed the property for sale (in its undeveloped state) for $1,825,000. The exclusive agency agreement signed by the plaintiff dated 3 July 2002 was received in evidence (exhibit D3).

131 The plaintiff agreed under cross-examination that he did not deal with Pindan in relation to its estimate; this was done by Mr Hames (ts 251). He agreed that he received the Pindan estimate with the 28 May Hames Sharley letter. He agreed that he did not give the instructions sought by Mr Hames in that letter concerning the appointment of secondary consultants (ts 252).

132 These exchanges occurred between the cross-examiner and the plaintiff concerning the position in mid 2002:

You personally never contacted Pindan, did you?---No.

You didn't contact them in May 2002 when the budget estimate was being obtained by Mr Hames?---No, I didn't.

And you did not contact them at any time thereafter?---Not that I recall.

Not after you were not going to go ahead with Psaros in August 2002, you didn't go back to Pindan?---No, I did not.

After you got the quote from Zorzi in December 2002 or January 2003, you didn't go back to Pindan then?---No I didn't; no.

So as at August, or as at early September 2002, isn't the position this: the estimates for carrying out the work to achieve what you wanted were getting higher?---That's correct.

They had reached a point by that stage where they were unacceptable to you?---Certainly two of them were.

And because they were unacceptable you had to then further consider whether you were going to go ahead. Correct?---I certainly considered it but never changed my mind. (ts 283)

133 It was common ground at the trial that in mid 2002, after his receipt of the Pindan estimate, the plaintiff attended a meeting at the Eric Street apartments that were being built by Psaros Developments. This led him to asking Mr Psaros to provide him with a quote for the three proposed multiple dwelling luxury apartments to be constructed on the subject property in South Perth. It remained a live issue at the trial as to whether these events or anything said or done by the plaintiff amounted to a termination of the contractual relationship between the plaintiff and Hames Sharley.

134 The Psaros response to the plaintiff's request is contained in a letter to the plaintiff dated 15 August 2002 (exhibit 32). The letter included a passage to the effect that a reliable 'budget estimate' to erect and complete the development would be $2,713,538. In order to provide the estimate it was assumed that the level of finish required would be of a standard equivalent to the Psaros Eric Street development. The estimate included a project management fee of $130,000 which covered the cost of secondary consultants and related architectural and design documentation which would be managed and co-ordinated by Psaros.

135 The Psaros measurement of sketch plans provided by Hames Sharley revealed in summary form interior areas as follows: undercroft (315.59), ground level (295.41), first floor (302.18), second floor (302.18). Mr Psaros said in his 15 August letter also that he had taken the liberty of making some fundamental design suggestions including the deletion of four covered carparking bays, an increase in the basement size and changes in the design of the basement.

136 The Psaros letter concluded by asserting that if the budget estimate was acceptable the programme outlined by him would permit a start on the site in mid January 2003. The steps envisaged by the programme were a letter of intent to be signed by the parties, a meeting with the architect to arrange handover of the project and an understanding of planning approval conditions, documentation and liaison with consultants which would take approximately 10 to 12 weeks. An application for building licence was to be submitted to the Council by the third week in November. Estimates would be firmed up and a building contract would be available for signing prior to Christmas. Demolition was to commence in the first week of January 2003 with the builder to take site possession on the third Monday in January if demolition was complete.

137 I note in passing that in outlining the programme of action, Mr Psaros observed: 'We assume that planning approval has been granted'. Further, he said that any planning condition/revised documentation was to be prepared and submitted by the architect to the South Perth Council. Fees associated with that phase of work had not been allowed for in the estimate. This suggests that in the course of instructing Mr Psaros the plaintiff had not drawn his attention to the existence of the 18 December planning consent, and the important condition 25 that building work had to be substantially commenced within 12 months of the approval.

Cross-examination of plaintiff as to Psaros letter

138 Under cross-examination, the plaintiff's recollection was that he inspected the Eric Street apartments with Mr Psaros and the latter's friend Mr Unmack. However, he did recall an occasion when Mr Psaros turned to Mr Hames in his presence and asked whether he was prepared to make available the drawings that Hames Sharley had prepared so that Psaros could take over the project. The plaintiff recalled Mr Hames saying that he was prepared to allow that to be done (ts 255). He could not recall the details of the conversation. He believed that Mr Hames did in fact provide the drawings to Psaros.

139 The plaintiff agreed under cross-examination that he asked Mr Psaros to prepare a budget estimate. However, having looked at the Psaros estimate, and after taking some advice from Mr Hames: 'I decided to stick with him' (ts 257). 'The Psaros estimate quote was too dear' (ts 258). The plaintiff agreed that while he was dealing with Mr Psaros there was nothing that Mr Hames was expected to do (ts 258). The plaintiff agreed with the cross-examiner's proposition that Mr Hames was 'out of it' for the time being. The plaintiff added 'until I had made up my mind, correct' (ts 259).

Cross-examination of Mr Hames as to Psaros letter

140 Under cross-examination Mr Hames agreed that he was never specifically told by the plaintiff that his role (the Hames role) had come to an end because the plaintiff was looking to Mr Psaros for further action. However, this was the inference Mr Hames drew because he had been asked to hand over his documents upon the basis that Psaros was going to prepare the working drawings and carry forward the project, with the result that there was no further role in the matter for Hames Sharley (ts 562). Mr Hames confirmed that the plaintiff did not show him the 15 August Psaros estimate and he never knew at what figure Psaros had priced the project (ts 545).

141 I find as a fact that the plaintiff did not reply to the Psaros letter and did not have any further dealings with Mr Psaros. However, there is a contested issue as to how this came about.

142 The plaintiff said in his witness statement that at some time between 15 August 2002 and 3 September 2002 he saw Mr Hames in his office in Subiaco and showed him the quote contained in the Psaros letter. Mr Hames allegedly responded to the effect that the price was too dear, the plaintiff and Ms Cunningham should look at a development in Fremantle built by Pindan, a result of that kind could be produced for the plaintiff by Mr Hames and Pindan, more detailed costs would be discussed in detail at their next meeting.

143 According to the plaintiff, he accepted this advice and said that he wanted Mr Hames to carry on with the project. The plaintiff had not been seriously in negotiation with Psaros but had only wanted to get a check on the various costings. At about this time he requested and obtained a valuation from Simon Martin to the effect that the three units would be worth $4.35 million upon completion, and this valuation gave him further comfort about the proposed development. Ms Cunningham's witness statement did not refer to these matters.

144 On the other hand, Mr Hames said in his witness statement (at par 296) that on 4 September 2002 the plaintiff told him that he did not want Psaros to proceed with the project. He did not provide Mr Hames with any reasons as to why he did not want to deal with Psaros. Until discovery in these proceedings Mr Hames was unaware of the Psaros quote or the conditions mentioned in the Psaros letter.

145 Mr Hames said further in his witness statement that in September 2002 Hames Sharley were 'recommissioned by Peter'. Under cross-examination, Mr Hames described the course of events in slightly different language by saying that at that time he was engaged to 'restart the project'.

146 I must now look at certain crucial issues arising out of events that are said to have taken place in early September 2002, that is, a little more than three months prior to expiry of the 12 month period prescribed by the grant of the 18 December planning consent.

147 The plaintiff alleged at par 16 of his statement of claim that between 18 December 2001 and 18 December 2002 the plaintiff proceeded with the project. The claim referred to the obtaining of estimates and said further that the agreement was varied so that Hames Sharley agreed to prepare detailed design drawings and other documents for the project as proposed in the Hames Sharley 28 May letter for an additional fee of $24,900.

148 It was said further in the claim that at a meeting between the plaintiff and Mr Hames on or about 3 September 2002 at the office of the defendant the plaintiff told Mr Hames that he was prepared to demolish the existing home on the property and to lay a concrete pad for the project so as to comply with condition 25 in the planning consent, but the plaintiff did not cause that work to be done because in response Mr Hames said it was not necessary.

149 The plaintiff pleaded further at par 17 of the claim that at the alleged 3 September meeting Mr Hames told the plaintiff in substance that to comply with condition 25 in the planning consent required demolition of the home and laying the concrete pad for the project, but there was no need for the plaintiff to undertake that work because the defendant would take care of getting a 12 months renewal or extension of the consent, and so there was no need to worry about the expiry date of 18 December 2002.

150 The plaintiff pleaded further that as a consequence of the alleged 3 September meeting the terms of the agreement were varied so that Hames Sharley agreed to make an application to the City of South Perth for a renewal or extension of the consent.

151 The defendant at par 8 to par 12 inclusive of its statement of defence denied these allegations. In essence, it contended that the plaintiff refused to satisfy the conditions of the 18 December planning consent concerning a reduction in the floor height (condition 17), placement of trees on the registry of tree preservation orders (condition 18), a substantial commencement of construction within 12 months in order to preserve the validity of the approval (condition 25).

152 In its pleading the defendant referred also to the events mentioned earlier in these reasons for judgment concerning a revision of plans, the commissioning of the second site potential report and the provision of the Pindan estimate. The defendant went on to plead that, notwithstanding requests by Hames Sharley, the plaintiff did not authorise Hames Sharley to engage the services of a quantity survey or (letter dated 11 January 2002) or of professional engineers (letter dated 29 May 2002) to enable the defendant to complete drawings to a standard adequate to obtain a building licence and to satisfy the conditions in the planning consent.

153 I note in passing (as to a matter of detail) that by letter dated 11 January 2002 Hames Sharley sought instructions from the plaintiff as to a letter from the next door neighbour. By 26 February D23 letter Hames Sharley sought instructions as to the appointment of a quantity survey. As to that matter I will henceforth refer not to the 11 January letter as pleaded but to the 26 February D23 letter from Hames Sharley to the plaintiff.

154 The defendant pleaded also (by par 10.5) that by the second site potential report the defendant informed the plaintiff that the draft of TPS6 proposed a building height reduction for the subject property to 7 metres by reason of which the plaintiff knew, or ought to have known, that the property remained subject to the possibility that the plaintiff's ability to construct a three storey building of the kind proposed might be reduced by reason of the plaintiff's failure to authorise the engagement of professional engineers. Further, the plaintiff did not enable Hames Sharley to secure the right for the plaintiff to be able to construct a three storey building on the property under the 18 December planning consent.

155 The defendant pleaded also (at par 11.3 (5 and 6)) that new R Codes were introduced by the state government on 4 October 2002. This and substantial changes requested by the plaintiff and Ms Cunningham during October and November 2002 required that the project drawings be modified. Further, the defendant alleged that on 29 November 2002 the plaintiff and Ms Cunningham took the plans away with a promise to have a last look and provide an 'all clear' in January 2003. However, the plans were only returned in April 2003 with a request to complete changes and then to resubmit for new planning approval.

156 Put shortly, then, it emerges from a review of this part of the pleadings that, on the plaintiff's case, the plaintiff was ready, willing and able to do whatever was required to comply with the crucial conditions of the 18 December planning consent before it expired and gave Hames Sharley sufficient instructions to preserve the plaintiff's position under the planning consent.

157 It is said that the defendant breached the contractual and other duties to which it was subject by failing to carry out its obligations and by representing to the plaintiff that an extension or renewal of the 18 December planning consent could be and would be obtained so as to preserve the plaintiff's position.

158 Hames Sharley denies these allegations and denies that the representation complained of was made.

159 For ease of reference, I will refer to the various evidentiary issues encompassed by this part of the pleadings as the 'planning consent compliance issue'. More particularly, I will refer to the plaintiff's plea as to what was allegedly said by Mr Hames at a meeting on 3 September 2002 about the obtaining of an extension or renewal of the 18 December planning consent within the prescribed time as the 'alleged 3 September representation issue'. I will call the various statements allegedly made by Mr Hames to the effect that Hames Sharley would take care of getting a 12 months renewal or extension of the planning consent, as pleaded at par 17 of the statement of claim, the 'alleged 3 September representation'.

160 It is against this background that I must now look at the events preceding the expiry of the 18 December planning consent in more detail.

161 The plaintiff said in his witness statement that in late August, or early September, he had engaged Andrew McDonald of Perth Demolition to demolish the home on 11 Ridge Street so the land could be subdivided and sold. At this time he discussed with McDonald demolition of the house on the subject property at 20 Hensman Street, South Perth. McDonald told the plaintiff it would be a difficult house to demolish because he could not use the concrete right of way to get access as the work would damage the right of way which was being used by other people. It would therefore be necessary to build a temporary road from Hensman Street. McDonald quoted the plaintiff $10,000 to demolish his home if the work was done at that time.

162 The plaintiff said further (at par 72) that he and Ms Cunningham met Mr Hames in his office on or about 3 September 2002 to review detailed design drawings. During the meeting he informed Mr Hames about his exchanges with the demolition contractor. Mr Hames said that it was not necessary for the plaintiff to now demolish his home or lay the concrete pad because he (Hames) could get a 12 months renewal or extension of the 18 December planning consent. The plaintiff need not worry about expiry of the consent on 18 December 2002 because Mr Hames would take care of getting the consent renewed or extended for 12 months.

163 According to the plaintiff they then discussed changes to the project plans, being changes that Mr Hames said could and would be made. A time was fixed to view the revised drawings on 27 September 2002 in accordance with a timetable suggested by Mr Hames. Prior to the proposed meeting the plaintiff received a letter dated 26 September 2002 in which his bank gave him approval for a facility of $2.8 million to assist with the development of the subject property (exhibit 18).

164 The plaintiff said that following the meeting on 27 September 2002 he received a faxed letter from Hames Sharley dated 4 October 2002 enclosing drawings which had been revised: 'as a result of our meeting of 27 September 2002' (exhibit 35). The author of the letter, Mr Popplewell of Hames Sharley, requested that he be advised of anything missed or of any other plan changes required as Hames Sharley intended to begin the elevations and three dimensional modelling of the building the next week. Notes on the attached plans indicated that on all three floors the walls were to be adjusted to widen a central corridor, ground floor landscaping features were to be added in, a new glazing alignment was to be made on the first floor to match the new alignment on the ground floor below, the balcony on the second floor was to be reshaped, certain columns in the basement were to be deleted and realigned.

165 The plaintiff said that he and Ms Cunningham were away from Perth on holidays in the second half of October 2002 but at the end of that month they had a meeting with Mr Hames in which minor changes were discussed. Following that meeting Ms Cunningham provided the plaintiff with a faxed letter from Hames Sharley dated 4 November 2002 written by Mr Popplewell noting that the total balcony area shown for the second floor level was dependent on the balcony around the living room/dining room being equal in size to that currently shown on the first floor plan (exhibit 36). At about this time the plaintiff received a fee claim No 2 from Hames Sharley dated 31 October 2002 for $9,130 (exhibit 37). The plaintiff paid this account a month later on 29 November 2002.

166 The plaintiff said in his witness statement that in early December 2002 he met Mr Hames. During the meeting Mr Hames said that as a result of the implementation of new residential building codes the drawings required some minor changes to a few doors and windows. In early 2003 he received an invoice from Hames Sharley dated 20 December 2002 being fee claim No 3 for $8,250 (exhibit 38). He and Ms Cunningham were on vacation away from Perth from about 20 December 2002 until mid-January 2003 with the result that the invoice first came to his attention in January.

167 I note in passing that both these invoices referred to the Hames Sharley letter of 28 May 2002 in advancing a claim for 30% completion of detailed design (No 2 dated 31 October) and 60% completion of detailed design (No 3 dated 20 December).

168 It was common ground at the trial, and I so find, that no application for an extension or renewal of the planning consent was lodged by or on behalf of the plaintiff by any party prior to expiry of the 12 month period prescribed by the planning consent on 18 December 2002. The planning consent therefore expired or, putting it another way, ceased to be effective. The project could not proceed unless a new planning consent was obtained by the plaintiff. That required the plaintiff's signature on the relevant application form.

169 Under cross-examination the plaintiff said that his recollection of events going back seven years was 'fair to good' (ts 221).

170 The plaintiff was cross-examined at some length as to whether, in or about October 2001, prior to the grant of the 18 December planning consent, he gave detailed instructions or specifications to Mr Hames as to his requirements for the project, that is, the number and the nature of the various rooms and living areas, and the nature of the finishes. The tenor of his evidence was that various matters of detail were discussed but not all. However, he reiterated the assertion at par 28 of his witness statement that he gave Mr Hames specifications for a development in Eric Street, Cottesloe dated October 2001 to assist Mr Hames to understand what he wanted.

171 When pressed, the plaintiff acknowledged that he obtained the so-called 'preliminary specification' from the building company Psaros Development. It was put to him that there was a reference in the final paragraph on the first page of the 15 August Psaros letter (exhibit 32) to 'a copy of the specification brief and monetary allowances which is on a par with Eric Street, Cottesloe'. The plaintiff appeared to concede that the Eric Street specification may have come with the Psaros letter or at about that time. He could not remember when exactly he provided it to Mr Hames (ts 249).

172 I have to say that the answers given by the plaintiff, when considered in conjunction with the Psaros letter itself, lead me to conclude, and I so find, that the Eric Street specification, albeit dated October 2001, was not passed by the plaintiff to Mr Hames towards the end of 2001, prior to grant of the 18 December planning consent, but was first received by the plaintiff on or about 15 August 2002 as an enclosure with the Psaros letter.

173 The cross-examiner pressed the plaintiff as to whether he gave Mr Hames a copy of the 15 August Psaros letter and, as to that, his answer was: 'Not that I can recall' (ts 249). He confirmed this later, saying that Mr Hames was not given a copy of the Psaros 15 August letter because: 'It wasn't his business' (ts 289). 'It had nothing to do with Mr Hames' (ts 272).

174 It was put to the plaintiff by the cross-examiner that he did not give the Psaros quote to Mr Hames because by that time the plaintiff was dealing direct with Psaros and Hames Sharley was effectively out of the picture. This was denied by the plaintiff. He denied also that if the Psaros terms were acceptable to him he intended to proceed via Psaros to complete the design and to build the development (ts 249).

175 Under cross-examination the plaintiff agreed that he gave Ms Cunningham the job of project manager in approximately September 2002. The plaintiff himself had a less direct involvement once she had assumed that role (ts 261). He left it on the basis that she would report back to him.

176 The plaintiff agreed under cross-examination that during the course of September 2002 he told Ms Cunningham that he was becoming frustrated with the project. It was at that stage that he, in effect, made her the project manager (ts 286). He agreed that Mr Hames did tell him during the course of September and October 2002 that he would need another development approval because amongst other things there had been changes to the plans (ts 286). According to the plaintiff, Mr Hames did not say there would have to be a fresh application.

BERRYMAN -v- HAMES SHARLEY (WA) PTY LTD [2008] WASC 59 (22 April 2008)

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BERRYMAN -v- HAMES SHARLEY (WA) PTY LTD [2008] WASC 59 (22 April 2008)

Legislation Cited (3)

Cases Cited (34)