Supreme Court of Tasmania|2010-10-27|Before: Tennent J, Eroc P

Blackley Investments Pty Ltd v Burnie City Council (No 2) [2010] TASSC 48 (27 October 2010)

CITATION: Blackley Investments Pty Ltd v Burnie City Council (No 2)

Equity - Equitable remedies - Rescission - Mistake.

Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422; Solle v Butcher [1950] 1 KB 671; McRae V Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377; Svanosio v McNamara [1956] HCA 55; (1956) 96 CLR 186; Leibler v Air New Zealand Limited (No 2) [1999] 1 VR 1; Eroc P/L v Amalg Resources NL [2003] QSC 74; Smith v Smith [2004] NSWSC 663, considered.

Judgment Number: [2010] TASSC 48

BLACKLEY INVESTMENTS PTY LTD v BURNIE CITY COUNCIL (NO 2)

1 These reasons relate to a dispute over a contract of sale entered into between the parties on 2 December 2003 for the sale and purchase of land on the foreshore at Camdale in Tasmania ("the land"). The Burnie City Council ("the Council"), as owner of the land, agreed to sell it to Blackley Investments Pty Ltd ("the Company") for $1,000,000. At the time of the contract, the land was zoned "Industrial". The Company proposed not only to buy the land, but also to develop it in a specific way. The contract contained provisions relating to a specific proposed development. The proposed development could only proceed if there were a change to the zoning, and a planning permit. It was agreed the Company would make an application to the Council, as the relevant planning authority, pursuant to the Land Use Planning and Approvals Act 1993 ("the LUPA Act"), s43A, to achieve the desired approvals. The contract provided that the sale was to be completed "within 90 days of a planning permit for the Development being issued as a result of a s43A application becoming effective in accordance with s43I." The terms of the contract expressly permitted the Company to terminate the contract in the absence of the permit, but no such right was given expressly to the Council. There was no term which expressly made completion of the contract conditional upon the issue of permits to develop the land in accordance with the proposed development.

2 The relevant s43A application was made but, while supported by the Council, was ultimately refused by the Resource Planning and Development Commission ("the RPDC"). The Company however did not exercise its right to rescind the contract, but sought to complete it. The Council refused to complete the contract, and purported to terminate it. The Company initiated court proceedings in which it sought specific performance of the contract or, in the alternative, damages for breach of contract. The Council opposed the making of any such orders, and sought a declaration that it had validly terminated the contract.

3 At trial, the Company's application was unsuccessful, there being a finding that there was an implied term in the contract that completion was conditional upon the issue of the relevant permit, and hence the Council was not obliged to complete. The Company appealed successfully to the Full Court, that court finding inter alia that no such implied term could be inserted in the contract, and the matter was remitted for re-hearing.

4 Following the decision of the Full Court and prior to the second trial, the Council amended its defence and lodged a counterclaim. The Company filed a reply. The relevant parts of both pleadings are set out in the table below:

Further, or alternatively, from on or about 3 October 2003 there were negotiations ('the negotiations') between the plaintiff and the defendant.

The Plaintiff admits that between 3 October 2003 and 2 December 2003 there were meetings between the parties but otherwise does not admit paragraph 26A.

The negotiations were conducted on the basis that settlement of the agreement would be conditional upon the approval of the amendment to the Planning Scheme and a planning permit for the development on terms acceptable to the parties.

The Plaintiff denies paragraph 26B and says that the meetings occurred between October 2003 and December 2003 before the contract was entered into with the signing of a written contract on 2 December 2003.

The Plaintiff agrees that discussions took place on or about 10 October 2003, 17 October 2003 and 20 October 2003 and says that:-

at a meeting on 10 October 2003 between Mr and Mrs Blackley on behalf of the plaintiff and Messrs Arnold, Earle and Young on behalf of the defendant at which conditional purchase contract was discussed. One of the issues was that settlement could only proceed if the approvals were obtained.

the discussions were not conducted on the basis that settlement of the contract would be conditional upon the approval of the amendment to the planning scheme and the planning permit for the development on terms acceptable to the parties; and

at a meeting on 17 October 2003 between Mr and Mrs Blackley on behalf of the plaintiff and Messrs Earle and Young on behalf of the defendant to discuss the provisions of a draft letter dated 17 October 2003 from Mr Stace to the defendant.

at a meeting on 20 October 2003 between Mr and Mrs Blackley and Mr Bartlett on behalf o the plaintiff and Messrs Arnold, Earle, Young and Stace on behalf of the defendant. There was a discussion concerning the terms of a letter dated 17 October 2003 from Mr Stace to Mr Arnold (a copy of which had been provided to the plaintiff). At paragraph 13 the letter stated 'The contract would be conditional on the grant of the Planning Scheme amendment and permit but if the [plaintiff] is not satisfied with any of the conditions imposed through that process then the purchaser may rescind the contract but forfeit the deposit of $50,000.00'. There was discussion about the deposit and an amendment to the condition accordingly, but otherwise no alteration to the proposed condition was raised, or agreed

in a telephone conversation on 31 October 2003 between Mr Bartlett for the plaintiff and Mr Stace for the defendant, in which Mr Stace said to Mr Bartlett words to the effect that he was essentially setting up a contract that was conditional on a planning permit. Mr Bartlett indicated that he accepted that.

In so far as it is writing [sic] it is contained in:

the letter 17 October 2003 from Mr Stace to the defendant, a copy of which was provided to the plaintiff in draft and discussed at the meeting referred to in sub paragraph (b).

a letter 24 October 2003 from the defendant's solicitor to the plaintiff's solicitor.

a letter 29 October 2003 from the plaintiff's solicitor to the defendant's solicitor.

[Further particulars to be supplied after discovery.]

By clause 14.4 of the agreement the plaintiff acknowledged that the defendant had only agreed to sell the property to the plaintiff on the basis that the plaintiff would complete at least half of the development (as defined) in the agreement) in accordance with the terms of the agreement.

Relying on the negotiations and the plaintiff's acknowledgment in clause 14.4 of the agreement, the defendant entered the agreement.

The Plaintiff denies paragraph 28A and says that at all material times it considered an alternative to a housing development such as a commercial or industrial development was available to it.

the plaintiff and the defendant entered into the agreement under the mistaken belief that the defendant had only agreed to sell the property to the plaintiff on condition that:

the plaintiff would obtain an amendment to the Planning Scheme and a planning permit for the development; or further or alternatively,

on the basis of the express acknowledgment in clause 14.4 - or alternatively:

the defendant entered into the agreement under the mistaken belief that it had only agreed to sell the property to the plaintiff on condition that:

the plaintiff would obtain an amendment to the Planning Scheme and a planning permit for the development; or further or alternatively,

on the basis of the express acknowledgment in clause 14.4.

The mistake was a serious mistake such that the defendant would not have entered into the agreement but for the fact that it was conditional upon:

the plaintiff obtaining an amendment to the Planning Scheme and a planning permit for the development; or further or alternatively,

the plaintiff completing at least half of the development (as defined in the agreement) in accordance with the terms of the agreement.

The defendant knew or ought to have known that the plaintiff was only entering the agreement under a mistaken belief.

The Plaintiff denies paragraph 28C - assuming the terms 'Plaintiff' and 'Defendant' are transposed.

The defendant repeats paragraphs 26B and 27 and says further that:

the plaintiff, by its agents Mr and Mrs Blackley were aware at the time that the letter referred to in paragraph 26B, particular (b) was discussed with Messrs Earle and Young that it was intended its terms would form the basis of a report to the defendant at its meeting on 21 October 2003.

at the time of the plaintiff's solicitor's letter referred to in paragraph 26B, particular (g) was sent the plaintiff was aware that the proposed terms of the agreement were encapsulated in that letter and the letter referred to in paragraph 26B, particular (f).

At no time did the defendant inform the plaintiff that it was entering into the agreement in the belief that it would be entitled to complete the agreement despite a failure to obtain an amendment to the Planning Scheme and a planning permit for the development on terms acceptable to the parties.

At no time prior to 6 September 2006 did the plaintiff inform the defendant that having entered into the agreement it considered itself entitled to complete the agreement despite a failure to obtain an amendment to the Planning Scheme and a planning permit for the development on terms acceptable to the parties.

At all times until 6 September 2006 plaintiff conducted itself in a manner consistent with the agreement having been made conditionally on:

the plaintiff obtaining an amendment to the Planning Scheme and a planning permit for the development; or further or alternatively,

the plaintiff completing at least half of the development (as defined in the agreement) in accordance with the terms of the agreement

The defendant repeats paragraphs 26A to 27 inclusive and 28C and says further that:

by letter 2 December 2003 to the defendant the plaintiff's directors represented to the defendant in effect that they were confident the development would proceed and be achieved as per the parameters they had agreed on and that were contained in the agreement. They noted the provisions of clause 16 to protect the defendant's position in being assured of the minimum development and associated time lines.

the plaintiffs cooperated with the public announcement of the sale and purchase of the property in which:

the defendant announced that it had entered into a conditional sale of the property to secure a multi million dollar show piece residential estate;

the defendant's objective in first purchasing the property to ensure that no further industrial operations would take place on the site was set out; and

The defendant's General Manager was quoted as saying the agreement stipulated several conditions that had to be fulfilled to enable the sale of the property and the development to proceed, including an alteration to Planning Scheme to permit the proposed development.

By its s43A application the plaintiff's planning consultant referred (amongst other things) made statements to the effect that:

the agreement included a stipulation that the property must contain the development (as defined in the agreement); and

'Final agreement of sale will be dependant (sic) on successful approval of a development application on this site.'

At all material times, the plaintiff has been unable to commence any of the development (as defined in the agreement) by reason of its failure to obtain an amendment to the Planning Scheme and a planning permit for the development on terms acceptable to the parties.

In the circumstances, the plaintiff is estopped from departing from the negotiations or the acknowledgement in clause 14.4, or relying on a construction of the agreement which is inconsistent with them, in order to claim that it is able to complete the agreement or that the defendant has wrongfully refused to do so.

Further, or alternatively, the plaintiff has secured for itself an advantage, namely an entitlement to compel performance of the agreement (if it is ready, willing and able to do so) despite its failure to obtain an amendment to the Planning Scheme and a planning permit for the development on terms acceptable to the parties.

In the circumstances it is unconscientious of the plaintiff to insist on performance of the agreement.

The defendant repeats paragraphs 26A to 32 of its amended defence.

Declarations that the contract between the plaintiff and the defendant made on or about 2 December 2003:

The Plaintiff denies that the Defendant is entitled to the declarations it seeks.

An order that all executed copies of the contract be cancelled.

5 The Company's contention is that, since completion of the contract was not conditional upon the issue of any permit for the proposed development, and it has elected not to rescind the contract absent that permit, it is entitled to complete the contract. It contends that, at all material times, it has been ready, willing and able to complete the contract, and, in those circumstances, it is entitled to an order of specific performance.

• the Company has not satisfied the Court that it is, or was, ready, willing and able to perform its obligations under the contract, and therefore it is not entitled to an order for specific performance;

• alternatively, by way of defence and counterclaim, there was a unilateral mistake on the part of the Council in that it erroneously believed that settlement of the agreement between the parties was conditional upon the approval of necessary permits to enable the development set out in the contract to proceed;

• alternatively, that the Company was estopped by conduct from asserting that settlement of the contract was not conditional upon the success of the s43A application; and

• alternatively, the Court's discretion should be exercised such as to refuse an order for specific performance of the contract.

7 In practical terms the Company's position was that, notwithstanding the terms of the contract, it was always the intention that it purchase the land, whether or not the development the subject of its proposal could proceed. The Council, on the other hand, maintained that it only agreed to sell the land to the Company if it developed the land in accordance with the identified proposal.

8 The contract was signed on 2 December 2003. It contained a number of definitions and several identified sections which dealt with different matters. The terms "Development" and "S43A application" were defined. "Development" was defined as "the development defined in clause 14.1" and "S43A application" was defined as "an application requesting the Planning Authority to initiate an amendment to the Planning Scheme to enable planning approval of the Development and for a planning permit for the Development in accordance with Section 43A Land Use Planning & Approvals Act 1993". Clause 8 dealt with the price and the deposit. The deposit was to be paid within seven days of the lodgement by the company "of the s43A application". Clause 9.1 provided for completion. It provided:

"This Agreement must be settled within 90 days of a planning permit for the Development being issued as a result of the s43A application becoming effective in accordance with s43I."

9 Clause 14 was headed "The Development". Clauses 14.1 and 14.4 relevantly provided:

"14.1 The Purchaser's proposed development of the Property ('the Development') is as an integrated development of medium density housing comprising at least 70 dwelling units on individual fee simple titles or strata titles or a mix of both together with a small retail development and a restaurant or coffee shop. The maximum height of any building is not to exceed 3 storeys, but there is to be a mix of storey heights.

14.4 The Purchaser acknowledges that Council has only agreed to sell the Property to the Purchaser on the basis that the Purchaser will complete at least half of the Development in accordance with the terms of this agreement and that the provisions of clause 16 are reasonable to ensure the Purchaser's compliance with that requirement of Council."

10 Clause 15 of the contract was headed "Planning Approval". By cl 15.1, the parties acknowledged that "the Development" was prohibited under the relevant planning scheme. Clause 15.4 required the Company to promptly approach and obtain information from a number of entities about the possible impact of its development on the land and its surroundings. Other parts of cl 15 required the Company to keep the Council informed of its progress with discussions required pursuant to cl 15.4. Clause 15.6 gave the Company the right to rescind the contract before lodgement of any s43A application, if the responses it received as a result of the approaches required by cl 15.4 indicated requirements on any future permit which would be so expensive to adhere to that they would jeopardise the financial viability of the proposed development. If the Company chose to rescind the contract in those circumstances, it would lose a non-refundable part of the deposit, but otherwise the contract would be at an end.

11 If the Company did not elect to rescind the contract as permitted by cl 15.6, it was required to lodge a s43A application with the planning authority (in the first instance this was the Council) within six months of the date of the contract. Clauses 15.9 and 15.10 in effect required the Company to ensure that any application that it made was competently and effectively prepared and pursued. Clause 15.10.1 imposed an obligation on the Company to include in its application a draft amendment to the planning scheme which was consistent with terminology, style and layout of the remainder of the existing scheme. The Company was required to use all reasonable endeavours to obtain the necessary amendment to the planning scheme and the planning permit. Clause 15.12 permitted the Company to rescind the contract within 21 days of the occurrence of any one of four events listed. In effect, the Company could rescind the contract if its s43A application were unsuccessful.

12 Clause 16 of the contract was headed "Purchaser's Development Obligations". Clause 16.1 provided, in part, that the Company was required to complete certain parts of "the Development in respect of which the planning permit is granted, including infrastructure and landscaping ('the Approved Development') within the following time periods ...". Clause 17 placed restrictions on the Company's capacity to transfer any title, I infer, issued in respect of any approved development, unless all the Approved Development on that particular title had been completed in a manner required by cl 16.2.

13 The Council purchased the land in or about 1995. A meat works, previously operating from the site, had closed down. The Council carried out remedial works which included clearing, planting of vegetation and rehabilitation of penguin habitats. The buildings on the site had been, to all intents and purposes, demolished. The land is situated between the main road leading west out of Burnie and the sea, and part of it is adjacent to the Cam River. On the other side of the highway from the site is a mix of housing and light industrial uses. The Council purchased the land so that it could have some control over its future use.

14 In about 2003, Mr. and Mrs. Blackley, who had previously undertaken some development projects, were looking for another development opportunity. They were aware of the Camdale site. On 3 October 2003, Mr. Blackley, on behalf of the Company, wrote to the Council expressing interest in the purchase of the land. His expression of interest contained the following:

"Our interest is to develop a sea frontage residential/commercial complex that will enhance the Burnie Municipality ..."

15 After the submission of the expression of interest, discussions commenced between Mr. and Mrs. Blackley, on behalf of the Company, and council officers. On 10 October 2003, Mr. and Mrs. Blackley met with Mr. Arnold, Mr. Young and Mr. Earle. Mr. Arnold was the general manager of the Council, and Mr. Young and Mr. Earle were officers of it. Notes were made of that meeting by Mr. Young. In those notes, it is recorded that Mr. and Mrs. Blackley were told of the Council's purchase of the land in October 1995, that the Council was keen to avoid re-use of the land as industrial, that the Council, as owner, could influence the future use of the land, and that there had been some concerns received from the public about the possible future use of the land. In his evidence, Mr. Blackley agreed that he had been told all of those points, save that relating to re-use as industrial. Initially, he said he was positive no statement had been made about avoiding re-use as industrial land. When pressed and asked if that might have been said, he responded "It may have been, but it doesn't - not in my mind." He was asked if he had any memory of it, and he said he did not.

16 Mr. Young's notes were admitted into evidence by consent. He was not challenged in cross-examination as to their accuracy. Given the uncertainty inherent in Mr. Blackley's evidence about this point, that Mr. Blackley was relying on memory of a meeting which took place seven years before, that Mr. Young's notes were contemporaneous and he was not challenged as to their accuracy, I accept that Mr. and Mrs. Blackley were indeed told at that meeting that the Council was keen to avoid re-use of the site for industrial purposes. Mr. Young's evidence was also that the "driving force" behind the Council's purchase of the land was to avoid a re-use of the site as industrial. It was indicated quite firmly, he said, that the Council was not prepared to see the land developed as an industrial site.

17 On 15 October 2003, Mr. Young sent an email to Mr. Brian Stace, the solicitor for the Council, outlining the sorts of conditions the Council wanted in any contract. In part, he said:

"5 The Purchaser must lodge the Building Application with BCC within xxx period of months of the Settlement Date.

6 The Purchaser must substantially commence the construction of the development within xxx months of the Settlement Date, and have at least 50% of the development completed within xxx of the Settlement Date.

(If points 5 and 6 above are not fulfilled, BCC to have an option to take possession of the site upon return by BAC of the purchase price less any costs associated with re-securing possession of the property)".

18 On the same day, Mr. Blackley spoke to his solicitor, Mr. Bartlett. Mr. Blackley indicated that he wanted

• a right to renege on the contract at his option,

• a right to resell before settlement.

There was a discussion about a need to relocate penguins, that there would be a need for rezoning, that the Council would do all in its power to assist with the development and rezoning, and that it was proposed there be a deposit of $20,000 paid upon the signing of the contract with the balance of $980,000 to be paid upon development approval.

19 The next day Mrs. Blackley outlined to Mr. Young in an email what her and her husband's thoughts were for the development. She wrote:

"The development will provide medium density housing on individual titles in combination with strata titled units. The housing development will allow for a small retail development together with a restaurant and coffee shop overlooking the Cam River. The housing development will be based on current best practice models which optimize the site while providing both private open space and retaining public amenity for this area. Options to be explored will include low rise residential development towards the north with a medium rise of 2 to 3 storey buildings towards the south. This will allow the southern buildings to enjoy the vistas while providing a lower density footprint over the site than otherwise may have occurred."

There was no indication in that email that Mr. and Mrs. Blackley had any type of development in mind other than a residential one with some commercial aspects.

20 Both Mr. Blackley and Mr. Bartlett were aware at this time that there was shortly to be a meeting of Burnie City Council councillors. Mr. Arnold wanted to be able to put before the councillors some detail about the proposed arrangement with Mr. and Mrs. Blackley so that he could obtain instructions about how he might proceed. Mr. Stace, on behalf of the Council, produced a letter dated 17 October 2003 which was sent to Mr. Arnold with the intention that a copy be supplied to Mr. Blackley. The terms of that letter were as follows:

"17 October 2003

Paul Arnold

General Manager

Burnie City Council

PROPOSED SALE OF CAMDALE SITE TO BLACKLEY INVESTMENTS PTY LTD

This letter has been produced under extreme time limits but after extensive discussions with Mr Young and Mr Earle.

The intention is to provide an outline to you, and potentially to Councillors, of how the proposed sale could be structured so as to achieve outcomes required by Council.

I also intend that you provide a copy of this letter to Mr Blackley so that he can provide a written response in time for the Council meeting on Tuesday night. I expect that written response to be in the form of a 'letter of comfort' which indicates in principle approval of the proposal and perhaps indicates particular issues which would need to be the subject of considerable further negotiation. The combination of this letter and that letter would not create a legally binding agreement between the Council and the developer but provide a 'personal' or 'commercial' commitment on the part of both the Council and the developer to work towards a binding agreement as soon as practical along the general lines suggested in this letter.

1 The land concerned is contained in Certificates of Title Vol 65830 Folios 1 and 2. That is slightly over 83/4 of an acre, I understand that it is the land formerly known as the Camdale Meatworks. Mr Young can provide copies of the Title plans. All the land lies to the north of the railway line.

2 The purchase price would be $1m plus GST. I assume that the developer is registered for GST purposes and that therefore the result will be GST neutral for both parties. However, and this is an issue that I have not discussed with Mr Young and Mr Earle, there are GST issues to be resolved in negotiations and in the contract as it may be to the developer's benefit if the Council were to exercise the option available to it under the GST Act tot elect the 'margin scheme'. I expect that doing so would be tax neutral to the Council but I would need to consider that in more detail later.

3 I understand that the General Manager has discussed a deposit of $20,000 with Mr Blackley. A 10% deposit is normal and I consider that in this case a deposit of at least $50,000 would be required to adequately 'secure' the contract - especially given the time period that will apply between signing of the contract and completion.

4 The land is zoned industrial, the proposal has been described by Mr Blackley as

'medium density housing on individual titles in combination with strata titled units'. The housing development will allow a small retail development together with a restaurant and coffee shop overlooking the Cam River. The housing development will be based on current best practice models which optimise the site while providing both private open space and retaining public amenity for this area. Options to be explored will include low rise residential development towards the north with a medium rise of 2-3 storey buildings towards the south. This will allow the southern buildings to enjoy the vistas while providing a lower density footprint over the site than otherwise may have occurred.'

Virtually all that is prohibited under the current zone.

5 I understand that the concept has been described as being similar to the wharf side development in Launceston. While I understand that the concept is in its infancy, my expectation is that the developer would construct all buildings before selling them so as to ensure a consistent high quality of result and appearance and mix of uses.

6 The current zoning is obviously incompatible with that proposal. There is no single zone within the Planning Scheme that would permit all of those uses, and the closest match (Residential C) still prohibits restaurants and shops,. It will therefore be necessary for the applicant to apply for an amendment to the Planning Scheme and consequent permits.

7 The very strong preference of both Mr Earle and myself (that is, our advice to Council) is that the required planning approvals be obtained through a combined permit and Scheme amendment process in the manner provided for under Sections 43A to 43M LUPA. Briefly this is a process which avoids the sequential process of an amendment to the Planning Scheme followed by a permit application with both of those processes potentially involving the equivalent of an appeal. It replaces those 2 consecutive processes with one combined, concurrent process that provides for the equivalent of appeal rights to the RPDC on both the Scheme amendment and the permit. It saves time, it saves costs for all concerned and in this case allows the Council and the RPDC to look at the final product - which makes the success of the application much more likely and the protection of important aspects of the site more achievable.

8 There are several methods by which the Planning Scheme could theoretically be amended to allow for the proposed development through a combined amendment and permit process. The current preference of Mr Earle and myself is for a removal of the land from the current zone and a specific set of provisions written for the land - perhaps called the Camdale Special Zone (or something like that) - that is, a new zone. However it is felt that it is appropriate to leave it to the developer to decide on the best method of achieving the required amendment to the Scheme after due consultation with Council's planners.

9 The contract will therefore require that the purchaser submit an application to the Council under Section 43A to amend the Scheme in the manner set out in that application and for a grant of the permit with respect to the whole of the proposed development. That application is to be prepared and pursued by the purchaser at the purchaser's own cost. In doing so, the purchaser will need to address the special issues affecting the property including:

• traffic access to the requirements of the Department of Infrastructure Energy & Resources;

• access across the railway line to the requirements of Tasrail;

• penguin habitat protection and other similar issues to the requirements of the Department of Primary Industry Water & Environment;

• deal with the requirements of the State Coastal Policy (and all other Policies);

• deal with any provisions of the Scheme that remain applicable;

• provide a full draft of the Scheme amendment in terminology and style that is consistent with the existing Scheme;

• generally prepare a professional and fully supported proposal that can satisfy the statutory requirements and obligations of the Council and the Resource Planning & Development Commission with respect to this land.

10 The contract will specify that nothing in the contract derogates from the Council's obligations as a planning authority and the purchaser is to pay the Council's normal fees with respect to such an application.

11 All development on an area of the foreshore (yet to be defined - but it will need to be defined in the contract) which includes the main penguin habitat is to be prohibited, except for any development which enhances the protection of the penguins or is at least compatible with their protection. That restriction is to be protected by a Part 5 LUPA Development Agreement registered on the Title. To the extent that it is compatible with the protection of the penguin habitat, public access is to be provided to the foreshore.

12 All infrastructure, including sewerage, stormwater, water, access roads and internal roads are to be fully funded by the developer.

13 The contract would be conditional on the grant of the Planning Scheme amendment and permit but if the purchaser is not satisfied with any of the conditions imposed through that process then the purchaser may rescind the contract but forfeit the deposit of $50,000. If, once the contract becomes unconditional and the purchaser accepts the conditions, and the purchaser does not then complete the contract, the normal terms would apply to the effect that the deposit is forfeited and the Council is entitled to resell the property and sue the purchaser for any loss occurring as a result.

14 The contract should not otherwise be conditional. In particular it should be 'unconditional' with respect to finance.

15 The purchase is to be completed by payment of the balance purchase price (including any GST) within 30 days of the grant of the permit as a result of the combined permit and amendment process.

16 I am instructed that the Council does not wish to sell the land to find that the proposed development does not occur. It seeks a high quality residential development with some facilities for the public including a restaurant/café/coffee shop so as to make a private profit making development also one of attraction to the general public in defined public access areas, while protecting the environment and other important aspects of the site. Council is seeking a substantial, quality development that is an asset to the community. The following timetable and associated controls and penalties is designed to achieve that.

17 A proposed timetable is as follows - where each of the times indicated are calculated from the time on which the preceding event occurred (not the time on which the preceding event was due, if that is later):

17.1 Contract to be signed - I expect that negotiations will take at least 2-4 weeks.

17.2 Lodgement of the complete documentation for the application for the combined Scheme amendment and permit - 3 months (I expect that this amount of time will be required to enable the purchaser to prepare a properly professional proposal - however, depending on the current state of the purchasers preparation longer may be required - so this will need discussion before the contract is signed).

17.3 From application to grant of the permit - so that the condition is not fulfilled if the permit is not granted and effective within this time period - 9 months. (I am dealing with a very similar application at the moment, and on discussion with the RPDC I would expect that even if there is significant community opposition the process could well be completed within 6 months. I am allowing 9 months to allow the maximum opportunity for the purchaser to pursue the approval and for Council to properly consider it).

17.4 From grant of an effective permit to settlement - 30 days.

17.5 From settlement until the completion of works to at least the value of 5% of the estimated total value of the development in respect of which the permit is granted - 6 months.

17.6 Completion of 10% of the dwelling units identified in the permit to occupancy standard with all associated pathways and landscaping of units and associated infrastructure - a further 6 months.

17.7 For each further 10% of units in a similar fashion as para 17.6 until 50% of the units have been completed, a further 6 months for each 10% (but where the percentage is considered cumulatively, so that an 'over-achievement' in an earlier time period still counts in the later time period). (That is, 50% of all the proposed units are to be completed within 2.5 years of settlement.)

17.8 The proposed restaurant/coffee shop/café is to be provided within 3 years of settlement

18 If the purchaser proposes a staged development prior to the signing of the contract, then the post settlement timetables will be adjusted to meet the requirements of that staged development as long as a similar result is achieved.

The intent of these time periods, and in particular the requirement for development to reach a certain stage, is to ensure that Council does not simply dispose of a strategically valuable piece of land to find that it sits idle or that the proposed development is never really achieved. For that reason there will be penalties for non-compliance with that time scale as follows:

19.1 If the purchaser does not lodge the application as required by para 17.2 above to the standard required by para 9, the Council has the option of terminating the contract and retaining the deposit.

19.2 I have indicated in para *13 the consequences of failure to settle if the condition is fulfilled.

19.3 If the first 5% of value of works is not completed to the standard required within the first 6 month period after settlement, then the Council may elect either to impose a daily penalty of $1,000 until it is so completed, or to require the transfer of the land back to the Council with the Council refunding to the purchaser the purchase price less the deposit and any associated costs.

19.4 For the timetable to be achieved after that 6 months, a daily penalty of $1,000 per day for any period of non-fulfilment.

20 The timetable post settlement is also to be secured by way of:

20.1 a Part 5 LUPA Development Agreement registered on the Title in priority to any mortgage which in addition is to be provide (sic) that Council may take action for a Court order for specific performance of the contract; and

20.2 personal guarantees from the company's directors.

21 The purchaser is not to sell any part of the purchased property unless:

21.1 that part has been fully developed in accordance with the proposal provided for in the permit; or

21.2 with Council's prior written approval which can be withheld if the Council is not satisfied that the proposed transferee has the capacity (technically, managerially and financially) and proven commitment to quality to complete the proposal with respect to that sold land or to enhance the overall project.

Again, this requirement is to be protected by a Part 5 LUPA Development Agreement registered on the Title.

22 Unless the Council has already done so, the offer in the above terms should be subject to a 'due diligence' assessment of the developers capacity (technically, managerially and financially) to carry out the proposed project within the time limits and to the quality expected.

I emphasis that the above points have been put together under extreme time limits to illustrate to Council the nature of the controls that it can impose both as contracting party and as planning authority with respect to this development and the processes that will be required to bring it to fruition and ensure that it is brought to fruition. They are at this stage (illegible) cepts only open to negotiation with the purchaser, but the principles that lie behind them are ones from which Council should not be part without some offsetting requirement if Council wants to ensure to the extent reasonably possible that a quality development along the lines proposed by Mr Blackley actually occurs and is completed on this site. There will certainly be other provisions in the contract - I hope that within the very short time I have had to consider this matter that I have identified all the more important ones - but I cannot guarantee that.

23.1 Mr Blackley on behalf of his company agrees in principle, but in a non legally binding way, to purchase the land on similar terms to the above;

23.2 acceptance (or otherwise) by Council of the above in principle - which means that 'in principle' but in a non legally binding way, Council agrees to sell the land on terms similar to those outlined above to Mr Blackley's company;

23.3 once those 'in principle agreements' are in place, there will be the requirement for a significant degree of consultation between appropriate Council officers and the purchaser and his advisors to identify with more precision the nature of the development so that I am then able to draft contractual terms which are realistic with respect to the proposed development and then negotiate those with the solicitor for the purchaser.

21 Mr. Bartlett went through that letter with Mr. and Mrs. Blackley. He made notes of the matters which were of particular concern to them. For example, they did not want to pay the deposit suggested by Mr. Stace, and wanted to be able to get their deposit back if they did not proceed. As to point 5, Mr. and Mrs. Blackley wanted the capacity to on-sell parts of the development off the plan prior to completion of construction. Mr. Blackley also indicated to Mr. Bartlett that he wanted to be able to draw up plans and specifications for the whole project and to then bring in a partner, as in a sub-purchaser, to assist with funding. Mr. Bartlett was unable to recall whether at that point Mr. and Mrs. Blackley identified a possible partner, although he said that they did so before the contract was signed. That potential partner was identified as Mr. Alan Caratti. Mr. Caratti was identified as a large industrial landholder in Western Australia.

22 Mr. and Mrs. Blackley made no suggestion, by reference to point 13, that they did not agree with the contract being conditional on the grant of the necessary planning scheme amendment. By reference to point 14 however, they indicated a preference that the contract be conditional. By reference to point 15, they were also interested in a staged payment arrangement. As to point 16, Mr. Bartlett's note of his instructions from Mr. and Mrs. Blackley was "Agree no own land if can't develop". Mr. Bartlett was asked what that actually meant. After an objection by counsel for the Council, Mr. Bartlett was asked what was actually said by Mr. and Mrs. Blackley. His initial response was, "Either Colin or Vanessa must have said to me that they didn't want to own the land if they couldn't develop it. That was on, the background of whatever use they could financially make a go of." After a further objection, and yet a further question when Mr. Bartlett was asked what he had actually been told, he said "They told me that if they couldn't develop housing they would fall back to industrial." Mr. Bartlett's notes of this attendance were in evidence. They do not record anything about instructions about this possible fall-back position.

23 At point 19 in his letter of 17 October, Mr. Stace dealt with penalties for non-completion of the project within particular timeframes. Mr. Bartlett recorded that his instructions were that Mr. and Mrs. Blackley were unhappy with any such penalties. Another issue noted was the unwillingness of Mr. and Mrs. Blackley to give personal guarantees for the obligations of the proposed purchaser, which was the Company.

24 On 20 October, Mr. Bartlett and Mr. and Mrs. Blackley went to a meeting at the Council offices attended by Mr. Arnold, Mr. Young, Mr. Earle and Mr. Stace. Mr. Bartlett made notes of what was discussed at the meeting, which appears to have been an exercise of running through Mr. Stace's letter. There was nothing in Mr. Bartlett's notes to suggest either he or Mr. and Mrs. Blackley had told Council representatives that, if their proposed housing development could not proceed, they still wanted to buy the land and proceed with an industrial development. Indeed, there is a note to the effect that, once the road and rail requirements were known, if the cost of required work was too high, Mr. and Mrs. Blackley wanted an option to terminate the contract and walk away. There were also notes about Mr. and Mrs. Blackley having the option to build only part of the development and convert the balance to parkland if the market altered and they could not feasibly sell all the units they had planned.

25 The meeting of councillors was held on 21 October. Mr. Arnold and Mr. Young gave a powerpoint presentation to those councillors, which embodied, in part, the description of the development that Mrs. Blackley had provided. In that presentation, the proposed development was identified as:

"medium density housing on individual titles, in combination with the strata titled housing units, with the housing development to allow a restaurant/coffee shop and small retail development overlooking the Cam River. Development along similar design lines to the Launceston Seaport Development".

26 A number of photographs of the Seaport Development were shown to the meeting. These were supplied by Mr. Blackley. Another slide was headed "Conditional Purchase Contract". It contained four dot points as follows:

"• $20,000 Options/Deposit Fee on signing of Contract (non refundable);

• $30,000 Balance Deposit Fee payable following receipt by Purchaser of the following approvals:

Ø DIER re traffic access to and from the Bass Highway

Ø TASRAIL re rail line crossing requirements

Ø DPIWE re penguin habitat

• Purchaser at their cost to pursue combined process of (1) seeking an amendment to Burnie Planning Scheme to facilitate development as proposed on the site, including provision of all documentation, and (2) being granted a 'Planning Permit'.

• Only when the forgoing approvals have been obtained, Purchaser to pay Council balance of the purchase price $950,000 (plus GST) to settle Contract, to be paid within 60 days of scheme change/permit approval."

27 The presentation included a proposed Council resolution drafted by Mr. Arnold and Mr. Young. Councillors passed that resolution. It was in the following terms:

1 Endorses the General Manager's action in pursuing the prospective sale of the Council property at Camdale (PID 6184656 - 3.149 hectares) to Blackley Investments Pty Ltd to enable a medium density residential development with café/coffee shop/restaurant on a concept similar to the Launceston Seafront Development Project;

2 notes the private valuation of $800,000 obtained from property valuers Johnston, Eastaugh, and Hearps;

3 approves the property sale and authorizes in accordance with Section 177 of the Local Government Act 1993 the sale of the Camdale property for One Million Dollars ($1,000,000) on terms similar to those outlined to Council at this meeting by the General Manager; and

• confirm that 'decision to' Blackley Investments Pty Ltd in a non-legally binding manner;

• proceed to negotiate and enter into a legally binding Sale of Land Contract covering the property sale and encompassing the development parameters as presented to this meeting; and

• on behalf of Council enter into a 'Confidentiality Agreement' with Blackley Investments Pty Ltd and associated parties, with respect to the existence of the proposal and all negotiations and agreements, until the execution of the contract."

It is clear from that resolution that what the members of the Council were authorizing the general manager to do was negotiate a sale which would produce a particular development, namely that which had been outlined to them. There was no authorization to negotiate a sale of the land generally and for the purpose of some form of industrial, or indeed any other, development in the event the proposed development did not proceed.

28 Mr. Stace wrote to Mr. Bartlett on 24 October 2003, advising that the proposal had been to a Council meeting and had been approved in principle. He then went on to set out what he believed were the terms of the proposed deal, as they had been negotiated to that point. Mr. Bartlett went through that letter with Mr. and Mrs. Blackley. Point 13 read as follows:

"13 The contract would be conditional on the grant of the Planning Scheme amendment and permit but if the purchaser is not satisfied with any of the conditions imposed through that process then the purchaser may rescind the contract but forfeit the initial deposit of $20,000. If, once the contract becomes unconditional and the purchaser accepts the conditions, and the purchaser does not then complete the contract, the normal terms would apply to the effect that the entire deposit of $50,000 is forfeited and the Council is entitled to resell the property and sue the purchaser for any loss occurring as a result. (Also, if your client finds the likely requirements of DIER, Tasrail and DPIWE too onerous, your client can rescind the contract prior to lodgement of the application and forfeit the $20,000)."

Mr. Bartlett's note of Mr and Mrs Blackley's response was "You not sure - cld go industrial".

29 At point 16 in his letter, Mr. Stace said the following:

"Council does not wish to sell the land to find that the proposed development does not occur. It seeks a high quality residential development with some facilities for the public including a restaurant/café/coffee shop so as to make a private profit making development also one of attraction to the general public in defined public access areas, while protecting the environment and other important aspects of the site. Council is seeking a substantial quality development that is an asset to the community. The following timetable and associated controls and penalties is designed to achieve that."

Mr. Bartlett's note of his instructions in relation to that point was, "OK".

30 Mr. Bartlett, after his discussions with Mr. and Mrs. Blackley about that letter, responded to Mr. Stace in writing. He did not refer to either points 13 or 16 from Mr. Stace's letter. He made no mention in that letter of any possibility that Mr. and Mrs. Blackley would consider developing the property within the existing industrial zoning capacity if their housing proposal was not approved. Indeed, the only matter addressed in that vein was that the Company wanted some confirmation they would only have to complete half the project if events overtook them. A discussion took place between Mr. Stace and Mr. Bartlett on 31 October. In that, Mr Bartlett recorded in note form that Mr. Stace said to him:

"No clause to limit sell-off to someone. You proposed no sell off without full development...only sell if....your attitude your client wants to deal with us (& capacity etc) but no one else. Intents not to give our bloke to make a killing to sell-off and you lose control. You say could be fly-by-nighters. You thought your formula protects both."

He then records himself responding to Mr. Stace by saying:

"Our client wants total freedom and you say want total veto."

In the same discussion, Mr. Stace sought some background and financial information about the Company. This was provided by Mr. Blackley to Mr. Bartlett and passed on to Mr. Stace in the middle of November. It consisted of a summary of assets and liabilities of the Company.

31 A contract was subsequently prepared by Mr. Stace and sent to Mr. Bartlett. Over the period between then and when the contract was ultimately signed, the possibility of another company being nominated as purchaser arose. It was one which had Mr. Blackley and Mr. Caratti as directors. It had, however, no assets of any significance. The Council would not agree to its involvement without a guarantee in writing from Mr. Caratti, and that was not forthcoming. On 2 December 2003, Mr. and Mrs. Blackley wrote what was described as a "letter of comfort" to the Council which they provided before signing the contract. In part, that letter said:

"As we have already clearly explained, we have firm confidence that the project will proceed and be achieved as per the parameters we have agreed upon, and that are set down in the Sale of Land Contract. We note the safeguard provisions that have been built into Clause 16 of the Contract to protect the Council's position in being assured of the minimum development and associated timelines."

32 The Company duly lodged a s43A application with the Council in its capacity as the planning authority. The Council initiated the draft amendment sought by the Company, and approved the proposed permit to allow the "Development" to proceed. The matter then went to the RPDC. On 21 July 2006, the RPDC rejected the draft amendment and refused the permit. There is no suggestion that this was through any fault on the part of either the Company or the Council. On 9 August 2006, the solicitors for Mr. and Mrs. Blackley wrote to the Council asking for an extension of time within which to give a notice of rescission in accordance with cl 15.12 of the contract. This was sought to enable them to consider the option to seek a judicial review of the decision of the RPDC. The Council granted that extension. No judicial review application however was made. On 16 August 2006, Mr. Stace, on behalf of the Council, wrote to Mr. Bartlett, and sent the same letter to Mr. and Mrs. Blackley. The letter said inter alia:

"I point out that if your client persists in its attitude that the Contract remains enforceable with respect to a sale allowing industrial development, and if your client was somehow successful in a Court Action enforcing such a right, then Council would certainly enforce its rights under clauses 16.5 to 16.7 ..."

It is clear that, by this stage, Mr. and Mrs. Blackley had communicated to the Council that they wanted to proceed with the contract and complete an industrial development.

33 On 18 August 2006, Mr. Stace wrote to the Company in the following terms:

"Blackley Investments Pty Ltd

PO Box 270

WYNYARD TAS 7325

BURNIE CITY COUNCIL - CAMDALE CONTRACT

I am instructed by the Burnie City Council to advise you that it considers the contract between you and it for the sale of land at Camdale (described in the contract as being lots 1 and 2 on sealed plan 4357) as having lapsed, come to an end or otherwise automatically terminated.

Alternatively, if that has not occurred, then Council gives notice that it rescinds the contract.

Without limiting the grounds for the above, they include:

Ø implied terms in the contract

Ø the impossibility of performance of the contract

Ø frustration of the contract

Ø breach of the contract by you

and while reliance is made on the entire contract and circumstances I refer particularly to clauses 9.1, 14, 15.11, 16 and 17.

This letter has been addressed directly to you in accordance with clause 3.3 of the Contract. I am forwarding a copy, plus a without prejudice offer, to your solicitors, Bartletts."

34 The Company did not accept that the Council had any right to rescind the contract. It elected to affirm the contract and, on 6 September 2006, forwarded a Notice to Complete. That notice was in the following terms:

"1 That the purchaser is ready and willing to accept title to the property situate at Camdale in Tasmania and described in the folio of the register Volume 4357 Folio 1 and 2 and to pay to you the full purchase price thereof in accordance with an Agreement for Sale dated 2nd December 2003.

2 You are required to complete the sale by handing to Bartletts Barristers & Solicitors, the Solicitors for the Purchaser Certificate of Titles Volume 4357 Folio 1 and 2 and an executed transfer on or before the 29th November 2006 at 4:00pm and in this respect time is of the essence of the contract.

3 The Purchaser appoints 3:00 pm on the 29th November 2006 at the office of Bartletts Barristers and Solicitors Level 1, 63B Wilson Street, Burnie in Tasmania as the time and place of completion.

4 Unless you complete within the time specified in this Notice the Purchaser will be entitled to terminate the Contract and pursue their other rights at law and in equity."

35 By letter dated 13 November 2006, the solicitors for the Council advised the Company's solicitors as follows:

"... Council considers that:

(a) it is not obliged to complete the contract; and

(b) your letter 6th September 2006 to us and the Notice to Complete are of no effect; the Council having successfully terminated the contract on or about 18th August 2006.

My client has terminated the contract and does not intend to reinstate it."

36 Mr. Blackley was cross-examined at some length about the negotiations he was involved in, and his understanding of the contract ultimately signed. He was taken through Mr. Stace's letter of 17 October 2003. He was referred in particular to cl 19 in that letter which provided:

"The intent of these time periods and in particular, the requirement for development to reach a certain stage is to ensure that the Council does not simply dispose of a strategically valuable piece of land to find that it sits idle or that the proposed development is never really achieved."

The only development which, at that point, had been proposed to Council was the residential/commercial one proposed by Mr. and Mrs. Blackley. It was put to Mr. Blackley that the proposed development Mr. Stace was there referring to was that already outlined to council officers by he and his wife. Mr. Blackley refused to concede that was the case, and said that he would have put another proposal. He then suggested that Mr. Arnold had told him that, if the proposed development did not happen, they would have the right to do another development. With respect, Mr. Blackley was either demonstrating significant naiveté or he was not telling the truth. I make no particular finding either way. The authority Mr. Arnold obtained from councilors, a few days after Mr. Stace's letter was written, was limited. It was to proceed to a deal involving a particular proposal. There was no evidence that position was different a few days before the meeting. It was not suggested to Mr. Arnold when he gave his evidence that he had told Mr. Blackley he could do another development.

37 Any such advice from Mr. Arnold would have been inconsistent with the position taken by Council representatives up to that point. Further, it is patently clear from Mr. Stace's letter that the proposed development to which he was referring in cl 19 was the development already proposed by Mr. and Mrs. Blackley, and referred to earlier in the letter, and not just any development that Mr. and Mrs. Blackley might choose to put up. In the circumstances, I do not accept that Mr. Arnold gave any advice to Mr. Blackley that he would be able to develop the land in effect as he saw fit, subject of course to planning approval, which might include development of an industrial nature.

38 Counsel for the Council cross-examined Mr. Blackley about the meeting he and others attended on 20 October. Mr. Blackley conceded that he understood that Mr. Arnold had to go to a council meeting on 21 October and convince them the proposal was a good idea. He accepted that the ultimate aim was to have a residential development on the site and that, at no stage, was it suggested at that meeting that, if the Company could not do its proposed development, then it would go ahead with an industrial one. It was put to Mr. Blackley that, had that been raised, the Council would have baulked at the proposal. He responded that he did not know, because the issue had not been raised.

39 Mr. Blackley again, with respect, demonstrated what I will kindly describe as a level of disingenuousness in another exchange under cross-examination about the development of the land. The exchange followed an identification that a s43A application needed to be made so that the Company could do the particular development it had identified. The exchange was as follows:

"And that's the one that the Council had indicated to you that it would lend it's support to?.....That's correct.

And no other development?...No other development was put forward-

That's right?...- for them to view.

That's right. Thank you. And to your knowledge, certainly before the contract was entered into, the only time that the matter was effectively taken to the Council, was that meeting of the 21st of October?...To my knowledge, yes.

So, sorry to labour this, but that entails does it that, after the 21st of October but before the 2nd of December when the contract was signed, your belief was that the Council had given its imprimatur a contract along the lines that we looked at this morning. Yes?...Yes.

Yes. And that would entail rezone and development?.....It would.

And that development, that is the mixed use commercial/residential?....A development.

I know. What had been put to the Council?.....What had been put to the Council was that development was our preferred development. But it is a development."

That was the first mention of the so-called "preferred" development. It was not a concept that anyone said had specifically been put to any Council officer.

40 Mr. Blackley was also questioned about the content of a press release issued by the Council within a few days of the contract being signed. He had said the contents were acceptable prior to its release. In that release, the Council said the following:

"The Council had purchased the 3.2 industrially zoned site in 1999 following the closure and demolition of a Hawkridge meat abattoir with the objective of ensuring that no further industrial operations took place on the site."

41 Despite accepting that, Mr. Blackley told the Court that it was not clear to him at that stage that the Council had only entered into the contract on the basis that it would have a residential development. In his mind, he still had a fall-back position, although he did not ever communicate that to the Council. What is clear from all the evidence is that, at no stage prior to the execution of the contract, or indeed it seems up to the rejection of the proposed development by the RPDC, did Mr. or Mrs. Blackley or their solicitor, Mr. Bartlett, raise with any representative of the Council or its solicitor that they had a fall-back position in the event that their proposed development did not gain approval, and that was to continue with the purchase and develop the land for an industrial use.

42 Mr. Arnold gave evidence about his understanding of the contract. He thought that the contract was a conditional one in the sense that there was to be a development in terms of that proposed, or nothing. He did not really turn his mind to the possibility that the RPDC might reject the proposal. Mr. Young gave similar evidence. Clearly, they relied on Mr. Stace's advice.

43 The Council contends that it entered into the contract with the Company under a mistaken belief that the contract required the Company to obtain approvals in respect of a specified development and that, if it did not obtain those approvals, the contract would be at an end. That is, settlement was conditional upon a successful s43A application. Further, it mistakenly believed the contract guaranteed it the development identified by the Company as described in the contract.

44 The contract contained no specific clause entitling the Council to rescind the contract in the absence of a successful s43A application outcome. The Full Court found no such clause could be implied. The contract did however expressly provide:

- that settlement was to take place within 90 days of the planning permit for "the Development" being issued as a result of a successful s43A application;

Blackley Investments Pty Ltd v Burnie City Council

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (277 paragraphs)

Blackley Investments Pty Ltd v Burnie City Council (No 2) [2010] TASSC 48 (27 October 2010)

Parties

Legislation Cited (2)

Cases Cited (5)