221 It is further submitted by Mr Sirtes that even if the termination was lawful, Mr Makeig has accrued rights under the Kitchener Project Agreement (unaffected by any later termination of that agreement by Mr Batterham), namely the right to receive performance by Mr Batterham of a contractual obligation (that being to distribute to him 39% of the net profit from the on-sale of the lands). It is said that this right was acquired unconditionally by reason of Mr Makeig's performance of his obligations under the Kitchener Project Agreement - McDonald v Dennys Lascelles Limited (1933) 48 CLR 457 (at 467-477).
· Accrued Rights?
222 I consider below whether any allegation of breach has been sustained and whether, if so or otherwise, there was a repudiation by Mr Makeig of the Kitchener Project Agreement. First, however, I consider the accrued rights submission, which, as a matter of legal analysis, Mr Sirtes conceded was not without its difficulties.
223 It is clear that, as noted by Young CJ in Eq (as his Honour then was) in Redglove Projects Pty Limited v Ngunnawal Local Aboriginal Land Council & Anor (1005) 12 BPR 23,381, in the absence of agreement to the contrary the effect of termination of a contract (whether for breach or frustration or non-fulfilment of a contingent condition of performance) is that it operates prospectively so that accrued rights are not discharged (his Honour there referring to Westralian Farmers Limited v Commonwealth Agricultural Service Engineers Limited (1936) 54 CLR 361 at 379).
224 In the Westralian case, Dixon and Evatt JJ noted that on termination of a contract (under an express provision making it terminable) the question whether or not an inchoate liability became enforceable was governed by the intention of the parties.
225 Latham CJ in Westralian (though dissenting in the result) noted that where a contract conferred a right on a party on the happening of a specified event and the contract had been determined before that specified event happened, then, as a matter of reasoning supported by principle, the right which has not yet accrued will never come into existence. "A party endeavouring to enforce the obligation would fail because he was not able to prove that, while this contract was still alive, all the facts necessary to support his claim had come into existence" (at 370).
226 Here, I am not satisfied that under the Kitchener Project Agreement any right to participate in the net profits of on on-sale of the project was to accrue prior to a time when there was such a sale (at which time the existence of any net profits could presumably be determined). Up until that point it seems to me that at best Mr Makeig had a contractual expectation of (or perhaps a contingent right to) a share in profits.
227 Mr Sirtes explained the argument, in his oral submissions, as being that an accrued right arose once there was a decision to sell and submitted that I should infer that as at 9 January 2007 the parties had decided to sell.
228 There was, of course, no agreement between the parties at that stage for the sale to JPG or indeed to any other entity. Mr Makeig was aware that Mr Batterham was speaking to prospective purchasers at that time, and indeed was party to some of those discussions, but after 24 December 2006 any "decision" to sell can only have been one made unilaterally by Mr Batterham as he does not appear to have been in communication with Mr Makeig at that stage.
229 Given the findings I make below it is not necessary for me to determine whether Mr Makeig had any accrued rights as at January 2007. Nevertheless, as this was argued before me I note that I am of the view that the performance (whether competent or otherwise) of Mr Makeig's obligations up to the time of the purported termination of the contract in January 2007 did not give rise at that stage to any accrued right. The contractual right to receive a distribution from the proceeds of on-sale would have accrued only at such time as there had been an on-sale of the project. That did not occur, at the earliest, until March 2007 when the March Call Option Deed was executed.
230 Therefore, had the agreement been lawfully terminated by the Batterhams, I would have held that no right to receive profits had at that stage accrued to Mr Makeig (although there would still then have been an argument as to whether the Batterhams owed fiduciary obligations which prevented them from taking the full benefit of the subject matter of the joint project at that stage and, in any event, the Batterhams may at that stage have had to account for Mr Makeig's share of the partnership "property" ie the value represented by the work carried out with a view to achieving the project completion).
231 I turn then to the principal question whether Mr Makeig breached and/or repudiated the Agreement.
· Alleged Breaches
232 The alleged breaches (pleaded in paragraph 9D of the Second Amended Defence) also form part of the particulars of the alleged repudiatory conduct, but are supplemented in that regard by reference to the so-called "$450,000 issue", which was not alleged by way of breach of the agreement. I consider the alleged breaches by Mr Makeig in turn, noting that the Batterhams no longer press the breach of contract alleged in paragraph 9D(b) of the Second Amended Defence.
Failure to pay Council fees - (para 9D(a) Second Amended Defence)
233 Mr Batterham made payment of two sets of Council's fees in November/December 2006, those being (according to the Council) for lodgement fees and Public Exhibition fees (in connection with the LES). They were the second and third tranches of the fees earlier foreshadowed by Mr Moshage. They were broadly described as such in Emery Partners' letter of 9 January 2007. Mr Batterham says that he asked Mr Makeig to pay them and, when it was clear that Mr Makeig would not do so, he made the payments himself. Mr Batterham concedes that he did not later ask Mr Makeig to reimburse him for those amounts (at least prior to amending his pleadings to cross-claim for damages in respect of those fees). He regarded any such request as pointless.
234 Mr Makeig says that he was not obliged to pay the fees but maintains that he had not refused to do so. Rather, he describes this as his "poker hand". He was maintaining the stance, viz a viz Mr Batterham, that he would not pay the fees unless his request for a written agreement from Council (for reimbursement of consultants' fees and also, it would seem, in respect of the $450,000 issue) was progressed. (This conduct is said by Mr Lever to amount to "unclean hands" so as to disentitle Mr Makeig to obtain any equitable relief.)
235 Failure or a refusal to pay the two sets of Council's fees could only be a breach of clause 4 of the Kitchener Project Agreement if the obligation to pay consultants' fees (or costs ancillary thereto) included Council's fees.
236 Clause 4, relevantly, provided that Mr Makeig:
agrees to pay all Consultants costs and other costs ancillary to consultant's services in a timely manner. (my emphasis)
237 The first issue of construction which has arisen in the context of this clause, is whether Mr Makeig was obliged, under that part of the clause extracted above (which I will refer to as the "Consultants' costs liability"), to pay fees rendered by the Council in late 2006 (totalling approximately $52,000) in connection with the lodgement of the LES required for the purposes of the rezoning application.
238 There was much scope for confusion or misunderstanding between Mr Makeig and Mr Batterham as to characterisation of the moneys payable to the Council because of the course which the project took (though no fault of the parties to the Kitchener Project Agreement).
239 By the time of entry into the Kitchener Project Agreement it was clearly understood that in order to achieve the rezoning of the Batterham Land it would be necessary to obtain rezoning of the whole Kitchener Precinct. In those circumstances, the obligation to pay "all Consultants costs and other costs ancillary to the consultant's costs in a timely manner" must have included consultants' costs or ancillary costs not only in relation to the rezoning of the Batterham Land (referred to in the course of the hearing as "spot rezoning") but also of the necessary preliminary steps (which I understand to be the preparation of an LES or LEP in order to effect the rezoning of the whole of the precinct). I do not understand Mr Makeig to contend otherwise.
240 In other words, properly construed, the obligation in clause 4 must have extended to payment of consultants' costs or fees irrespective of whether they were retained in relation to a so-called "spot" rezoning or in relation to the much wider rezoning application
241 However, that conclusion does not determine this issue in Mr Batterham's favour.
242 The question is whether or not the lodgement fees payable to the Council in late 2006 were "Consultants costs" or "costs ancillary to consultant's services".
243 It was contended by Mr Lever that they were, because of the fact that it was known that Council would be applying the fees paid to it towards the payment (or reimbursement) of consultants' fees for consultants directly retained by Council. I do not understand Mr Makeig to deny knowledge that, after mid 2006, the Council was paying the consultants it had directly retained.
244 However, in my view, it is not apt to describe an obligation to pay Council lodgement or other fees for a Category C rezoning (as those fees were clearly described both in the initial advices from the Council as to what fees would or might be payable and in the receipts issued by the Council) as payment of consultants' costs, even if what the Council proposed to do with the moneys so received (as the parties well realised) was to pay (or to reimburse itself for any earlier payment by it to) consultants directly retained by the Council. Nor can Council's fees of this kind be regarded as "ancillary" to the provision of consultants' services. I note the relevant Oxford English Dictionary definitions of "ancillary" as subservient or subordinate or as designating services that provide support to central services. I can see no sense in which the Council's fees could be said to bear such a relationship to consultants' services.
245 Reliance was placed by Mr Makeig on the position set out in Mr Batterham's letter of 1 March 2005 (in the context of the possibility that the Council might charge a large application fee) that "due to lack of funds on my behalf you may have to pay the fee but I have no problem with this cost being a charge against the project and being a reimbursement in full to you."
246 Although that letter predated the signed written agreement, it does indicate an understanding on Mr Batterham's part that there was a distinction between consultants' fees per se and lodgement or application fees (even though Mr Batterham, in the witness box, did not accept that they were two separate categories of fee and said that what Mr Makeig had told him, namely that on top of paying all the consultants' fees there would or could be an additional lodgement fee of $90,000, was incorrect). Moreover, it makes it clear that Mr Batterham at least at that stage was not anticipating that Mr Makeig would be obliged to pay up front the whole of the Council application fees and that he, Mr Batterham, would be prepared also to contribute to them. Mr Batterham sought to explain this as based on a misunderstanding by Mr Makeig as to the way Council intended to charge for the project. That may be the case but it does put what happened later in some context.
247 For his part, Mr Lever placed much reliance on the earlier 7 June 2004 letter as indicating that Mr Makeig well knew he was agreeing to assume responsibility for payment of all costs referable to the project and that "consultants" should be construed with that in mind. I accept that the 7 June letter contemplated payment of all fees (of whatever kind). However, that is not what clause 4 of the Kitchener Project Agreement says in its terms and, given the various iterations of the proposed financial arrangements between the parties, I do not accept that it is permissible to construe clause 4 by reference to what was said in a much earlier document (and one which was never, as far as I can see, accepted in its terms) even if the document could be said (which I doubt) to have been capable on acceptance of giving rise to a binding agreement.
248 The Council itself treated the payments made by both Mr Makeig and Mr Batterham as referable to a Category C rezoning application (Ex J). Mr Batterham's suggestion in the witness box that the Council did not have the ability as an accounting matter to record payments by reference to reimbursement of consultants' fees (T 454) seems to fly in the face of the description of Council's fees given by Mr Moshage in May 2005 (Ex A 132.1) (comprising $30,000 as a rezoning lodgement fee; $35,000 as a fee payable after Council's resolution to prepare the draft LEP; $15,000 prior to exhibition of the plan; and $10,000 thereafter once the Council proceeds to gazettal). With minor increases, each of those phased fees was in due course charged by the Council. I cannot accept the submission (put to me admirably forcefully by Mr Lever) that the four tranches of fees paid to the Council (the time and amount of which seems to have accorded with the four phases of fees described as Category C rezoning fees) were nevertheless a separate fee payable in connection with the LES. There seems to me nothing to suggest that the fees so paid were not exactly what the Council said they were (and what the Council itself described as rezoning fees).
249 In any event, whether or not these were Category C rezoning or a separate LES lodgement fee seems to me to be beside the point. In neither case can they easily be seen as falling with the description "Consultants Costs".
250 The debate in relation to consultants' fees was clouded by reference to the issue as to what was meant by the indication given by one of the Council officers (Mr Bo Moshage) in or about August 2004 (and repeated in about September 2005) that if Mr Batterham and Mr Makeig proceeded to effect the rezoning of the precinct, the Council would be likely to agree to reimburse to them part or all of the consultants' fees at some later stage, out of funds generated by reason of s 94 contributions.
251 There does not seem to be any real dispute that a statement to that effect was made by Mr Moshage on one or more occasion. Thereafter, it would seem that Mr Makeig was pressing to have that agreement recorded in writing and that Mr Batterham was resisting this, because he considered it would cause him some embarrassment (Mr Batterham having previously been a Councillor and apparently not wishing to suggest he doubted the word of the Council officers). Mrs Makeig gave evidence that Mr Batterham's response to her query as to this issue in late November 2006 was that it was "not necessary". Mr Batterham was prepared to trust Mr Moshage (and/or the General Manager of the Council, Mr Bernie Mortomore) to act in accordance with what had been said.
252 Leaving aside for the moment what became the rather vexed issue (the $450,000 issue) between the parties of Mr Makeig's desire to seek payments (or reimbursements) by Council in respect of his (and Mr Batterham's) personal services for the precinct rezoning, I cannot see that as a matter of construction of clause 4 the consultants' costs liability extends to liability for payment of lodgement or application fees to Council in respect of the rezoning application for the Kitchener Precinct or any subsequent development application in relation to the Batterham/Vowles Lands, nor could they be said to be costs "ancillary to consultant's services".
253 Council did not in its records describe these as other than rezoning fees. The fact that the Council might have used such revenue to pay external consultants retained by it in relation to the Kitchener Master Plan or LES seems to me to be irrelevant. It surely cannot have been the case that the parties intended that whether or not Mr Makeig was personally liable to pay certain costs (Council fees) would depend on what the recipient (the Council) was going to do with them. That would produce an uncertain and potentially arbitrary result.
254 Mr Lever asked, rhetorically, who was to pay the Council fees if not Mr Makeig? The difficulty with rhetorical questions is that one is tempted to proffer an answer. In this case, however, it seems to me that whether or not there is an answer to that question is beside the point. There may have been many aspects of the underlying joint venture or undertaking which required resolution by consultation and agreement in good faith between the parties and which, failing agreement, might have caused the project to fail (or to be frustrated). Certainly, Mr Makeig conceded that it was essential, if the rezoning were to succeed, for the Council fees to be paid and that, if pressed, he "probably" would have paid them. This does not mean he was obliged to do so or had admitted that he was so obliged.
255 The reality of the matter (fortunately for Mr Makeig as it turned out) seems to be that the Council (rather than leaving the parties to the election they had made to run the rezoning process at their own cost and then to seek reimbursement out of s 94 contributions, which seems to have been one of the two available modes of proceeding as understood and explained with some force by Mr Batterham in the witness box) decided (not in late 2004, when DIPNR first wrote to it, but some time later in early 2006 - whether under perceived pressure at that stage from DIPNR; or to avoid any accusation of impropriety in the process; or otherwise) that it was incumbent on the Council itself to take over (and thereafter retain directly the consultants necessary to progress) the precinct rezoning process.
256 By mid 2006, the retention of consultants (and consequential liability for payment for consultants) was metaphorically taken out of Mr Makeig's hands. That does not provide a basis on which now to rewrite the parties' contract so as to impose on Mr Makeig a liability for which it did not in terms provide.
257 This occurrence might have given rise to an interesting argument as to frustration of contract, perhaps if it were suggested that the whole performance of this contact became something fundamentally different from that which had been contemplated (though, unlike the situation in the Brisbane City Council v Group Projects Pty Limited (1979) 145 CLR 143, this change, it would seem, rendered the contract less onerous for at least one of the parties (Mr Makeig) to perform). Certainly, I discerned a flavour (from Mr Batterham's indignation in the witness box) that he regarded it as unfair that Mr Makeig should obtain some form of windfall if permitted to share in the increased value of the Lands without having expended as much as might have otherwise been the case but for the Council's intervention. However, such an argument was neither pleaded nor argued before me.
258 The amounts paid by Mr Batterham in November and December 2005 were phase 2 and 3 lodgement fees (Annexures A and B to affidavit of Mr Batterham sworn 1 December 2008). Mr Makeig had no obligation under the agreement to pay them and is not in breach as a result of the fact that he did not.
259 If, as I consider to be the case, the Council lodgement fees were not covered by clause 4, then it was in due course for the parties to reach agreement as to how they should be borne. Mr Makeig appears to have assumed (T 333/334) that they would be shared in proportions reflective of their profit share in the project. If that were to be the case, his actions were consistent with that. However, whether or not that was ultimately agreed by Mr Batterham, Mr Makeig's actions in not tendering payment of the Council's fees in December 2006 were neither a breach of clause 4 nor a repudiation of the Kitchener Project Agreement.
Failure to pay surveyors fees - (para 9D(b) Second Amended Defence)
260 This relates to an invoice addressed and issued to Mr Batterham by Marshall Scott Surveyors, being a firm of surveyors that Mr Batterham himself retained for the project. Mr Batterham accepted in cross-examination that the invoice was never sent to Mr Makeig and that Mr Makeig never had the opportunity to pay it. Mr Batterham accepted that Mr Makeig was unaware of the invoice on 9 January 2007 and said, "it should have been in there [the 9 January 2007 letter, ie as an allegation of breach]."
261 This claim was doomed to failure at the outset. Failure to pay a consultant's invoice cannot have possibly amounted to a breach by Mr Makeig of the Kitchener Project Agreement, if Mr Makeig was not at the relevant time aware of the invoice. It was withdrawn as an allegation of breach (and an allegation of repudiatory conduct) on the making of written submissions by Mr Lever at the close of the evidence.
Failure to pay "full" Vowles option fees - (para 9D(c) Second Amended Defence)
262 The second issue of construction arising in respect of clause 4 is whether Mr Makeig was obliged, under that part of the clause extracted below (which I will refer to as the "Vowles' fee liability") to pay the whole of the option fees for the Vowles' Land (including fees payable to extend the option period, those being the Additional Call Option Fee provided for under the Vowles' Option Agreement and a later extension fee not provided for expressly under that agreement); and, indeed, whether the Vowles' fee liability was prescriptive at all or, rather, simply recorded an agreement which had been reached and which had, as at 25 March 2005, already been performed, ie it was no more than descriptive of the position.
263 Clause 4, after addressing the payment of consultants' costs and other costs ancillary to consultants' services, went on to say that Mr Makeig:
Agreed to pay and has paid costs relating to the incorporation of [the Vowles Land] …, comprising the Option Fee, the land clearing costs and the survey fees. (my emphasis).
264 The construction of this part of clause 4 seems to me more problematic.
265 First, there is a question as to what, if any, significance can be attached to the change in tense ("agreed to pay and has paid") in this part of the clause from that used ("agrees to pay") in the earlier part of the clause dealing with the consultants' costs liability.
266 Had the clause been drafted or reviewed by legal representatives acting for the respective parties then it might perhaps be easier to conclude that the change in tense was intentional (not because of any inherent superiority in the drafting by lawyers of agreements as such, but because it might have been expected that each party's legal representatives would pay a close eye to the detail of the language in which their clients' respective obligations were expressed). However, despite Mr Williamson's recommendation, no lawyers were retained to review the draft agreement.
267 It is not disputed that as at 25 March 2005 (and as at 5 March 2005 when the Kitchener Project Agreement was drafted), the "Option Fee" (as defined in the Vowles Option Agreement) had been paid by Mr Makeig (T 295.45-296.4; 309.43-47; 417.48 and 418.20); as had survey fees of $3,300 and land clearing fees of $2,640 in relation to the Vowles Land (Ex J pp 4, 6-8 and 10). There is therefore no awkwardness occasioned by reading this part of the clause purely as descriptive of the situation as it was as at 25 March 2005 (and not as imposing any ongoing obligation on Mr Makeig's part). (Mr Batterham accepts that the clause was a correct statement of the position in that regard (T 417), though I did not understand this to be any acceptance of the construction contended for by Mr Makeig.)
268 If (as seems to me to be the case) the ordinary grammatical meaning of the words "agreed to pay and has paid" (contrasted with the words "agrees to pay") is to acknowledge both the fact that Mr Makeig had agreed to pay certain costs and that he had done so, (such that no further obligation was imposed on Mr Makeig in that regard) then it might be thought that there was no purpose to be served in including this part in clause 4, as it would have no meaningful work to do.
269 As Mr Lever pointed out, there is nothing in the Kitchener Project Agreement which deals with the apportionment of costs as between the parties in relation to the Vowles Land. Nevertheless, it may have been considered prudent by the parties to record what the state of play was in respect of Mr Makeig's contribution of costs relating to the incorporation of the Vowles Land into the project (particularly if, as Mr Makeig says is the case, and as Mr Batterham's subsequent conduct appears to confirm, the parties were to share the costs as well as the profits, if any, of the increase in value referable to the Vowles Land, on a 50/50 basis).
270 Secondly, the term Option Fee is not defined. Of some relevance, in determining the prescriptive or otherwise content of this part of the clause, may be the ambit of the term "Option Fee". Under the Vowles Option Agreement, this term is defined as being the sum of $13,500. The amount payable if there were to be an extension of the Call Option Period was a separate fee defined as the "Additional Call Option Fee". If "Option Fee" in clause 4 relates only to the option fee which by then had already been paid, then the case for construction of clause 4 as descriptive in this regard must be strengthened.
271 It was submitted by Mr Lever that the mechanism by which the call exercise period could be extended made it clear that the Additional Call Option Fee (of $5,000) was a component of the Option Fee. I do not accept that submission. The Vowles' Option agreement provided for separate fees each for a separate purpose (albeit both relating to the option) - one way the price payable for the grant of the option; the other the price payable if the grantee wished to have a further six months in which to consider whether to exercise the option.
272 By contrast with the reference to consultants' costs ("all Consultants costs"), this part of clause 4 does not say "all" costs relating to the incorporation into the project of the Vowles Land, nor does it say "all option fees" or "all amounts payable by way of option fee". Moreover, the Kitchener Project Agreement (clause 3) notes that an additional fee would be payable to extend the Option exercise period and the reference to "additional fee" is not used as a capitalised term (or brought expressly within the Option Fee which clause 4 says has been paid by Mr Makeig). There is no doubt that, as a matter of fact, no additional fee was paid until June 2006. On the face of the document, there is no reason to rewrite the clause in order to expand the reference to a paid option fee to include further (unpaid) additional option fees above and beyond the "Option Fee" which Mr Makeig had paid as at 25 March 2005.
273 Mr Makeig's evidence (which I did not understand ultimately to be challenged in this regard, although there was some issue taken by Mr Lever as to his credit on this point) was that he did not have a copy of the Vowles Option Agreement when he drafted the Kitchener Project Agreement and had only seen an earlier draft (on which he commented) for a couple of nights before it was signed by BBL. I find it difficult to accept that, when drafting the document which became the Kitchener Project Agreement some two or three months later, Mr Makeig intended a capitalised reference to "the Option Fee", referred to in the past tense, to include other fees (not even described in the Vowles Option Agreement as the Option Fee) payable under the Vowles Option Agreement, even if those fees also related to the option.
274 It is submitted that I should also take into account, as part of the matrix of facts at the time of execution of the Kitchener Project Agreement, the fact that both Mr Batterham and Mr Makeig agreed in the witness box that it was their expectation or hope that the rezoning would be completed before the expiration of the Call Option Period (T 294.25-31; 418.36-47). I think little, if any, weight can be placed on this, given that the parties presumably accepted that the agreement should cover whatever the position might turn out to be in relation to the rezoning. Mr Batterham, for his part, says that it was his sincere hope when he entered into the Kitchener Project Agreement that no future option fees would be payable because the process would be complete over the 18 month period "but [I] was not overly optimistic" (T 419).
275 On balance I find it significant that the wording of this part of clause 4 refers to a single "Option Fee" (and not to all option fees, unlike "all consultants" costs); that there was no attempt in the Kitchener Project Agreement to incorporate all contributions in relation to the Vowles Land, and that there is a clear contrast between the language (particularly the tense) in which the earlier consultants' costs liability is framed as opposed to the later Vowles' fee liability.
276 I construe the Vowles' fee liability, in accordance with the ordinary grammatical meaning of the words used, to mean that the parties were thereby recording that Mr Makeig had agreed to pay and had paid the option fee of $13,500 payable under the Vowles Option Agreement (as well as certain survey and land clearing costs relating to the Vowles Land) and not as imposing an obligation on Mr Makeig to pay any further option fees that might have become payable including any Additional Call Option Fees under the Vowles Option Agreement. In other words I construe the words as descriptive not prescriptive.
277 Even, if I am wrong in that construction, and Mr Makeig was in breach by not tendering the full Additional Call Option Fee in mid 2006, I am not satisfied that such a breach in the circumstances amounted to a repudiation (in the sense of renunciation) by Mr Makeig of the Kitchener Project Agreement. I accept that Mr Makeig genuinely believed that the arrangements between him and Mr Batterham did not oblige him to pay the full amount of any additional option fees. Therefore, on this hypothesis, any breach was based on a mistaken construction of the contract. Further, it was one apparently shared or acquiesced in by Mr Batterham (who conceded in cross-examination that he had assumed that Mr Makeig would want a 50/50 split and had raised not a skerrick of complaint as to this arrangement (T 419)).
278 Insofar as complaint is made as to the refund of half the initial payment, which the parties recorded Mr Makeig as having agreed to pay and as having paid, it cannot seriously be contended that Mr Batterham (having voluntarily acceded to or gone "along with" a request to repay it whatever the basis for that request) (T 418; T 422) can now rely on it as either a breach of the agreement or renunciation thereof.
Failure to pay engineering consultants' fees - (para 9D(d) Second Amended Defence)
279 The evidence discloses that Mr Makeig had not paid in full amounts claimed by Harper Somers O'Sullivan, a consulting firm retained by him to provide engineering services in relation to the project until after default judgment was entered for the amount claimed - and, even then, only did so by way of instalments.
280 Mr Makeig clearly held very strong views that no amount was owing (T 83.15-27). Mr Ian Murphy of Harper Somers O'Sullivan, who was called to give evidence by Mr Batterham, accepted in cross-examination that (regardless of what Mr Murphy thought about those views) Mr Makeig had expressed to him certain views as to why the fees were not payable in full.
281 Ultimately, Mr Makeig was sued for the outstanding sum of $2,400; default judgment was entered against him; and he elected to pay by instalments.
282 Did Mr Makeig fail to pay the invoice in a timely manner? It was put to me that clause 4 did not oblige Mr Makeig blindly and submissively to pay all consultants' costs if he held views that they were (for example) excessive or otherwise not owing; that he had every entitlement to spend his money judiciously (particularly as it was a sunk cost); and that he was, in effect, entitled to dispute the magnitude of fees claimed if he disagreed that the work in question had in fact been undertaken or was necessary or thought it had been uneconomically performed.
283 I accept in principle that clause 4 could not oblige Mr Makeig to pay invoices without reference to their validity or reasonableness. To use an extreme example he could not be liable to pay invoices falsely issued by consultants or grossly inflated invoices which could not on any view be sustained by the consultants. It must have been open to Mr Makeig to dispute consultants' fees (at least if that dispute was raised bona fide). Nevertheless, in this instance, whatever the genuineness of Mr Makeig's initial dispute as to the Harper fees, he did not pursue that dispute; default judgment was entered against him and he paid the judgment debt by instalments (since he conceded he was in no hurry to pay a debt which he did not accept had merit (T 341.40)). I therefore have real doubts as to whether it could be said that Mr Makeig had complied, in this instance, with his obligation to pay consultants' costs "in a timely manner". The invoice was rendered on 14 December 2005 (Ex A p 144). Default judgment was entered on 22 December 2006. The debt was then paid by instalments.
284 What does "in a timely manner" mean? It must, I think, mean reasonably promptly in all the circumstances. Mr Batterham accepted that the same standards should apply in relation to the payment of invoices by Mr Makeig as he accepted for himself. That raises an interesting issue, since Mr Batterham was perfectly prepared to accept Mr Mortomore's offer to defer payments by the Council to "as late as possible" as they came across his desk (T 547).
285 However, whatever Mr Batterham's own conduct, I consider that the failure to pay the Harper Somers O'Sullivan invoice in full as soon as or as soon as reasonably practicable after Mr Makeig decided no longer to contest the debt, whatever the reason he chose not to contest it, cannot be said to be payment in a timely manner. On balance I consider Mr Makeig to have breached clause 4 in this instance. No damage was shown to have been suffered by the Batterhams as a result of that breach. Whether any other consequences (in terms of alleged repudiation) might flow from that breach, I consider later.
Failure to pay Ecotone - (para 9D(e) Second Amended Defence)
286 Ecotone was retained as a consultant to provide ecological consulting services for the project. There was a dispute as to the fees claimed by Ecotone. It was contributed to by reason of confusion by Mr Makeig as to the basis on which Ecotone had tendered for a number of different tasks. Mr Makeig considered that he was being overcharged. He subsequently accepted (and communicated this to Ecotone) that he had made a mistake and said he believed he owed Ecotone further funds (Ex 1 at 691-692) and suggested a meeting or discussion to resolve the issue. A number of invoices were rendered by Ecotone of which, as at May 2005, an amount of $4,329.38 (attributed to the last of the invoices) was outstanding.
287 Mr Wilson, an environmental consultant from Ecotone, swore two affidavits and gave evidence in the proceedings. He did so at the request of Mr Batterham's lawyers, after he had contacted Mr Batterham to see if the latter could assist him obtaining payment.
288 Mr Makeig can perhaps be forgiven for disputing the basis of the fees charged by Ecotone since Mr Wilson was himself also apparently confused to some extent. Mr Wilson, in his first affidavit, affirmed on 2 July 2008, deposed that his firm had prepared "the required impact assessment and issued an account in respect of that". Mr Wilson, in his second affidavit, affirmed on 4 March 2009, (referring to his earlier "sworn" affidavit, by which I assume he was referring to the one he had earlier affirmed), corrected this statement to acknowledge that there was never actually a report prepared for the Batterham Land.
289 Although Mr Wilson referred in his second affidavit to a number of phone calls following up the outstanding amount, and accepts that he had at least one telephone conversation with Mr Makeig in relation to the fees outstanding in about April 2006, it was not until cross-examination that he acknowledged that a suggestion had been made by Mr Makeig to him in relation to resolving the issue of the alleged debt. In the witness box Mr Wilson said that Mr Makeig had suggested that more work might come his way for future jobs "you know, we might be able to get some further work out of him in the future if we just sort of left this outstanding amount" (T 512). He described this as a "carrot" held out to Ecotone to forget about the outstanding (apparently disputed) account. Mr Wilson gave evidence that this was never formalised. He appears to have been prepared to allow a bit of time to pass to see if further work would eventuate. He accepts that he did not tell Mr Makeig he was unhappy with that proposal (T 515). When no other work "turned up", Mr Wilson decided he was not happy with the "arrangement" (T 512). Mr Wilson says he then pressed for payment of his account. However, there is no evidence, other than the assertion made by him for the first time in the witness box, that he pressed for payment at that stage from Mr Makeig (as opposed to contacting Mr Batterham for payment) (T 512.19-32; 512.44 - 513.3).
290 I am not in a position to determine how much, if any, of the outstanding claim was properly due. The respective quotations were for set amounts for at least two of the tasks (although the latter quote seemed to suggest it was an upper limit and that actual costs might be less because of synergies between the two tasks). The third quotation was not for a fixed sum but apparently on a "do and charge" basis. I have no information as to precisely what was done or the basis on which it was charged. I accept that Mr Makeig was bona fide in taking issue with the accounts.
291 Interestingly, perhaps, although Mr Batterham eventually paid the outstanding amount in full (with an annotation on the cheque butt dated 2 December 2008 "should have been paid by the conman") he did not do so when he first learnt (in January 2007) that the Ecotone account had not been paid, nor did he do so after it was made apparent to him by Mr Wilson that any earlier arrangement to sort out the debt (of the kind which he says Mr Makeig had told him was in place) had failed to eventuate. The account was not paid until December 2008, after Mr Wilson had sworn an affidavit in the proceedings at the request of Mr Batterham's solicitor.
292 In light of the explanation given by Mr Makeig as to his concern that there was an overcharge and the tacit "understanding" apparently reached with Mr Wilson on the telephone to the effect that Mr Wilson might be prepared not immediately to press for the full amount claimed (in the hope or expectation of more work coming to him), and in the absence of any cogent evidence of a subsequent later claim for payment I am not satisfied on the evidence before me that there was a breach by Mr Makeig of clause 4 in this instance.
General allegation of failure to perform
293 It was submitted by Mr Lever that Mr Makeig had failed "miserably" in the performance of all three obligations imposed on him by clause 4. I have considered above the alleged breach in relation to the payment of disputed consultants' costs (and Council's fees) and the full Vowles Land Option Fees. The third area in which it is said that Mr Makeig failed miserably to perform was in managing the project.
294 This seems to be a criticism based largely on the time taken in achieving rezoning (something largely, if not wholly, attributable to the obstacle posed by the need to incorporate the whole of the Kitchener Precinct into the CWSS).
295 The "hiatus" or delay in Mr Makeig engaging consultants to progress the project from mid 2006 when the Council took over the project (at which time Mr Batterham conceded there was nothing for Mr Makeig to do) and late December 2006 (when the LES was finally handed over to Council - this being the first time since mid 2006 that one might reasonably have expected Mr Makeig to resume an active project management role in terms of retaining consultants for the next stage of the project), cannot be said to amount to a failure on Mr Makeig's part to perform his obligations (even though it was repeatedly invoked by Mr Batterham as an example of Mr Makeig's failure to perform his obligations).
296 Although Mr Glendinning expressed surprise at the length of time taken from December 2006 for the rezoning to be gazetted (something which I understand by the date of the hearing was imminent and, but for any unforeseen event, was expected shortly thereafter to happen), it does not appear that any such delay could fairly be attributed to Mr Makeig (he having been summarily dismissed from the project in January 2007).
297 The manner in which Mr Makeig dealt with Council staff was also criticised. Evidence was given by Ms Juliet Grant (a town planner then working with Mr Glendinning) that he was rude and "condescending" in his communications, although she was unable to recall any specific examples of the treatment of which she complained. Mr Glendinning acknowledged that Mr Makeig's manner could be difficult and said he had received complaints from others dealing with him, but seems to have no trouble himself working with Mr Makeig. The manner in which Mr Makeig referred in his correspondence to Ms Wells (whom he criticised in no uncertain terms) supports the view that he could be condescending and harsh at least in his treatment of those whose competence he queried (and perhaps also of those with whom he simply disagreed).
298 Mr Makeig seems (even on what may be the limited evidentiary material before me in this regard) to have been a party (whether as plaintiff or defendant) to a surprisingly large number of litigious matters over the last few years - with Harper Somers O'Sullivan, with Mr Vandescheur (to whom I refer shortly in these reasons), and with Mrs Tucchen (a former client who sat in court closely observing the conduct of this hearing), even apart from the various the Land and Environment Court matters to which he referred. Nevertheless I cannot draw from that (or from his somewhat testy manner on occasion in the witness box) any inference that he was difficult (or so difficult) to deal with in project development matters such as to have (by his manner alone) breached the Kitchener Project Agreement.
299 In that regard, I note that Mr Batterham had at the start of the project been told that Mr Makeig had a particular "methodology" of dealing with councils (which seems to have involved not accepting "no" for an answer) and had not cavilled with this either then or when, early in the project, Mr Makeig had stridently criticised the competence of Ms Wells on the Council's staff. Mr Batterham (in August 2005) had in fact praised Mr Makeig's "forceful nature" when "happily" giving a reference for him in the Vandescheur proceedings.
300 In terms of the success of Mr Makeig's project management, up to August 2005 at least, Mr Batterham had no complaints and thought the project was progressing well; by December 2006 the project was sufficiently advanced that there was interest in the project from more than one potential purchaser; and by 23 January 2007 Mr Batterham had been offered a price for the "project" which he accepts exceeded his expectations. Mr Batterham described Mr Makeig in December 2006 as the "main driving force" behind the imminent rezoning and even though he now asserts that this was a knowingly false statement (inconsistent with his earlier acceptance in the witness box that what he wrote could be taken as the truth) and no more than "flattery", I consider it more likely that Mr Batterham did believe that Mr Makeig deserved credit for the progress of the project.
301 Mr Sirtes submits (and I accept) that the position of the project as at January 2007 was hardly a sign of a miserable failure of project management skills (whether or not Mr Batterham has yet realised the full financial benefit under the JPG arrangements). While that may beg the question of who was in fact responsible for the results achieved, at the very least it is inconsistent with Mr Makeig having impeded the progress of the project.
302 Whether or not Mr Makeig was (as he may well have been) a difficult, rude or condescending person to deal with (as asserted, without any particularity by reference to actual events, by Ms Grant)), and whether he was arrogant, aggressive or antagonistic, as was Mr Batterham's view by late 2006, this of itself does not amount to a breach of the Kitchener Project Agreement. Others, such as Mr Glendinning, apparently remain prepared to work with Mr Makeig (and Mr Glendinning was quick to concede that he does not work with or for people for whom he is not comfortable to work). There was certainly no basis on which I could form the view that Mr Makeig's manner (however difficult it may have been) had caused any impediment to the project.
303 Although not relied upon as a breach per se, there was also criticism of Mr Makeig's conduct in pressing Council for a written agreement in relation to the reimbursement of consultants' costs out of later s 94 contributions. Mr Glendinning was firm in his view that the Council would have had authority at that stage to enter into an agreement to that effect (even if such an agreement might have been couched in a conditional fashion). However, whether or not Council would have power to do so seems to me to be beside the point. It is difficult to see how there could have been any breach on Mr Makeig's part of the Kitchener Project Agreement simply by reason of the fact that Mr Makeig suggested (and/or even regularly pressed) Mr Batterham to have such an agreement recorded in writing.
304 Nor does it seem to me that there is any real basis to suggest that the fact that Mr Makeig was pressing to do so in any way actually impeded the progress of the project. Mrs Makeig gave evidence that in a meeting with Mr Batterham on 24 November 2006 he explained that he trusted Mr Mortomore and told her "You will embarrass me if we press them [Council] for a written agreement" (T 162). This is consistent with the trust which Mr Makeig recalls Mr Batterham having expressed as to the Council honouring its earlier promises. It does not suggest that the project would in any way have been prejudiced had a request been made that the arrangement be put in writing.
· Repudiation
305 In Koompahtoo, their Honours Gleeson CJ, Gummow, Heydon and Crennan JJ, noted (at 135) that the term "repudiation" may be used in different senses: that of "renunciation" of one's obligations under the contract and that where there is a breach justifying termination:
First it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. Secondly, it may refer to any breach of contract which justifies termination by the other party. (footnotes omitted)
306 In the second situation (breach) what must be found is either a breach of an essential term, or a serious breach "going to the root of the contract" of an intermediate term, being a breach which deprives the innocent party of the benefit under the agreement.
307 In Koompahtoo whether a contractual term is an essential or non-essential term, is described (at 137) as an objective test:
The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered in to the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor.
308 Mr Lever relied upon Mason J's description in Progressive Mailing House v Tabali Pty Limited (1985) 157 CLR 17 at 33, - citing Shevill v The Builders Licensing Board (1982) 149 CLR 620 at 625-626 as to how repudiation is to be made out:
What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.
309 He accepted that repudiation must satisfy the test of seriousness and that it was a question of fact whether the promiser was unready and unwilling to perform its contractual obligations.
310 In considering any breaches of clause 4, and insofar as Mr Lever may be asserting repudiation in the sense of termination for breach (rather than renunciation as I have understood his submissions), I am of the view that while the obligation on Mr Makeig's part to pay consultants' costs (and other costs ancillary to consultants' services) would have the necessary quality of essentiality, I do not see the obligation to pay those costs "in a timely manner" as having that same quality. In other words, while a failure or blanket refusal to pay consultants' fees properly due in respect of the project would in my view have amounted to breach of an essential term of the parties' agreement, giving rise to a right to terminate for breach, I am not satisfied delay in payment of itself would give rise to a right of termination.
Alleged repudiation by Mr Makeig
311 Each of the breaches considered above was particularised as the alleged repudiatory conduct by Mr Makeig, together with the so-called "$450,000 issue".