Neale v Ancher Mortlock & Woolley Pty Ltd

Court of Appeal (NSW)|2014-02-27|Before: Barrett JA, Gleeson JA, Leeming JA

Judgment 1BARRETT JA: In District Court proceedings brought by the present respondent as plaintiff against the present appellant as defendant, his Honour Judge Curtis ordered judgment for the respondent in the sum of $96,163.93 inclusive of interest, dismissed a cross-claim brought by the appellant against the respondent and ordered that the appellant pay the respondent's costs, such costs to be assessed on a party-party basis until 24 September 2012 and on an indemnity basis thereafter. 2The issues in the District Court were, in summary, whether, under the provisions of a contract for the provision of architectural services by the respondent to the appellant, certain elements of the agreed fee had become payable by the appellant and whether the respondent's conduct, in certain respects, fell short of the standard required of a reasonably skilful and prudent architect. The judge decided both questions adversely to the appellant. 3On appeal, the appellant challenges both aspects of the judge's decision. He maintains that, on a correct construction of the contractual provisions, the particular fee element was not payable and that plans and other documents prepared by the respondent were unsuitable and inadequate for the purposes for which the respondent was retained to prepare them. The appellant also challenges the costs order made against him. 4The respondent, for its part, seeks to uphold the judgment on the basis adopted by the primary judge and on an alternative basis stated in a notice of contention to which I shall come.

The contract 5The parties' contract was contained in three linked documents - one titled "Architectural Engagement Scope of Works and Services", the second a letter of 29 July 2009 from the respondent to the appellant and the third an annexure to the letter describing documents to be prepared and delivered by the respondent to the appellant in fulfilment of the professional assignment. The contract was entered into on or within a few days after 30 July 2009. 6The second of these documents described the scope of the work as: "The scope of the project is for the design and preparation of a Part 3A detailed concept plan (masterplan) application/EA for approximately 200 apartments with associated parking and site works, together with a project application/EA for Stage 1 for approximately 25 apartments located adjacent to Avon Road." 7It then set out "phases" in which the work was to be undertaken. It is sufficient, for present purposes, to set out the headings of the descriptions of the first two phases: "Phase 1 - Pre-Design Investigation, Briefing and Concept Options" "Phase 2 - Masterplan Concept Design" 8The third phase was described as follows: "Phase 3 - Part 3A Concept Plan (Masterplan) and Stage 1 Project Application/EA Submission

Develop Masterplan and Stage 1 concept design, incorporating the Department of Planning's pre lodgement comments;
Incorporate final secondary consultant input;
Prepare EA submission documentation as required in the DGR's and manage the input and submissions of the secondary consultants. Note that the Environmental Assessment report is prepared by the Urban Planner;
Submit the documentation to DOP for the Test of Adequacy (TOA);
Issue the final submission."

9Under the heading "Fee Proposal" the following appeared: "The fee proposal is based on a 14-16 week programme to design and prepare a Part 3A detailed concept plan (masterplan) application/EA for approximately 200 apartments with associated parking and site works, together with a project application/EA for Phase 1 for approximately 25 apartments located adjacent to Avon Road. The estimated overall construction cost of the project is $70m and the Phase 1 component is $8.75m. AMW propose a fee of $200,000 including GST to undertake the scope and phases of work described above in accordance with the attached programme. The Phase 1, 2 and 3 fee and invoicing strategy is set out below. As negotiated, we require 60% of each invoice paid, in accordance with our terms of payment, with the balance of the fees deferred as set out below. Phase 1

Fee for Phase 1 is $40,000 inclusive of GST.
Invoiced fortnightly with 60% payable within 14 days.
Balance of 40% payable within 8 weeks of EA approval.
Interest of 2% above RBA rate will accrue on the 40%
balance until payment.
Once Phase 1 has been completed, we will be able to determine the final scope of Phases 2 & 3 including the number of units achievable.
Phases 2 & 3
Fee for Phases 2 & 3 is $160,000 inclusive of GST.
We reserve the right to negotiate an adjustment to the Phases 2 and 3 fee and services, depending on the outcome of the Council/DOP requirements and the apartment number yield.
Invoicing for Phases 2 & 3 will be submitted monthly, with 60% payable within 14 days.
Balance of 40% payable and subject to the same conditions as Phase 1." 10Later in the document, the following appeared: "Our fee is based on the time and resources necessary to realistically achieve the required level of design resolution and documentation quality necessary to complete the EA submissions and to manage the consultant teams' input with the overall process." 11And later: "Seven days prior to the submission of the EA, we will submit our final invoice for payment, due on the day and [sic] prior to the lodgment." 12It is also relevant to set out two provisions appearing in the first of the three linked documents: "F2 Either party may terminate the agreement by giving the other party not less than 10 working days notice in writing. F3 Within 10 working days of the date of the notice of termination the client must pay the architect all accrued fees (including all costs and disbursements) in full provided that the termination is not on the grounds of architect's incapacity or failure to perform. Failure to pay the fees in full by the above due date will entitle the architect to charge interest at the rate set out in Item 6 of Schedule 6 without prejudice to any other rights and remedies available to the architect." 13It was (and is) common ground that the contract was terminated pursuant to clause F2. Each party maintains that he or it validly terminated under that clause. It is unnecessary to decide which party is correct. The important point is that termination occurred in March or April 2011.

The respondent's claims in the District Court 14In its amended statement of claim, the respondent pleaded the contract and an entitlement to be paid "within eight (8) weeks after the New South Wales Department of Planning approved the Environmental Assessment ('EA') or upon termination of the Agreement in accordance with clause F2 . . ." The pleading continued, in paragraph 2: "The EA was approved by the Department of Planning ('DOP') for advertising on or about 1 December 2010." 15In his amended defence, the appellant pleaded a contract in terms apparently indistinguishable from those pleaded by the respondent or, at all events, obviously referring to the three linked documents. He relied on the contract as pleaded by him. He denied paragraph 2 of the amended statement of claim. 16In his cross-claim, the appellant alleged breach of a term of the contract requiring the respondent to exercise care and skill of a reasonably competent registered architect and a corresponding duty of care in negligence. He also alleged breach of each duty and, in so doing referred to three applications which he said had been made by the respondent "to the New South Wales Department of Planning ('DOP') for Environmental Approval in relation to the Property". Specific failures to discharge the pleaded duties were alleged in relation to each of those applications.

The statutory context 17The contract documents do not contain any definition of "EA" or "EA approval". However, the context in which the terms were used is delineated, in part, by the scope of the services (as set out at [6] and [7] above) and the opening words of the second of the documents that made up the contract: "Thank you for the opportunity to provide a fee and service proposal to prepare a Part 3A detailed concept plan (masterplan) application/EA accompanied by a full project application/EA for Stage 1, for your property at Pymble." 18Given the context, the reference to "Part 3A" may be accepted as a reference to Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) as in force when the parties made their bargain in 2009. The parties accept that this is so. 19Part 3A, as then in force (and repealed in 2011), prohibited the carrying out of any development projects within particular categories unless the Minister had approved a particular project under that Part. Provision was made for a "proponent" to "apply for the approval of the Minister under this Part to carry out a project". Requirements as to the content of an application for approval to carry out a project were imposed by the Act. After lodgment of the application, certain steps were to be taken, including: (a)preparation by the Director-General of "environmental assessment requirements" in relation to the application; (b)notification of those requirements to the "proponent", that is, the person proposing to carry out the development comprising all or any part of the project; (c)submission by the proponent of the environmental assessment called for by the Director-General's requirements; (d)consideration by the Department whether the submitted environmental assessment met the Director-General's "environmental assessment requirements" and was suitable to be placed on public exhibition; (e)if the Director-General so required, submission of a revised environmental assessment by the proponent; (f)once the environmental assessment was accepted by the Director-General, public exhibition of it of it so that any person might make a submission about the matter; (g)if any such submissions were received, provision of copies to the proponent and others; (h)the giving of a report by the Director-General to the Minister for the purposes of the Minister's consideration of the application for approval to carry out the project. 20Only upon the completion of that process was it open to the Minister to "approve or disapprove the carrying out of the project".

The decision of the District Court 21The primary judge found that the respondent "performed the services and drew all necessary plans for submission of the EA to the Department" and that the appellant duly paid $120,000, being 60% of the Phase 1 sum of $40,000 ($24,000) and 60% of the Phases 2 and 3 sum of $160,000 ($96,000). The judge further found that "the plans went on public exhibition" on 15 December 2010 but "no approval has been forthcoming, and the development is in limbo". His Honour continued (at [4]-[5]: "On 17 March 2011 the architects terminated the agreement and demanded that Mr Neale pay the balance of $80,000 plus interest. Mr Neale refused to pay the claim asserting that this money was a success fee, and the contract only required that he pay the fee in the event that the development was approved." 22After referring to the scope of work and the fee provisions in the contract, the judge turned his attention to the termination provisions: 23His Honour's conclusions as to the construction of the contract were as follows (at [13]-[15]: "In my opinion, the terms of this contract are clear. The parties agreed that the fee payable for the architects' services was $200,000, for a continuous stream of work over the programmed period. The entitlement of the architect to receive this money accrued in stages, as the work was done. While the contract remained on foot Mr Neale was only obliged to pay 60% of the accrued entitlement with the balance deferred until eight weeks after the Planning Approval. The parties also agreed that in the event of termination of the contract by either of them the client was to pay all accrued fees in full. The operative word governing the entitlement to receive the full fee is deferred. The entitlement is not expressed to be contingent or conditional upon. The written terms of the contract contain no word or phrase compatible with Mr Neale's submission that the deferred fee bore the character of a success fee." 24It is fair to say that the judge did not focus in any explicit way on the precise meaning of the words "within 8 weeks of EA approval" appearing in the third dot point of the fee provisions concerning Phase 1 which were also imported, by reference, into the last dot point of the fee provisions for Phases 2 and 3. His Honour therefore did not canvass possible meanings of "EA approval" or the nature of the events the happening of which would constitute "EA approval". This is because the judge decided the matter by reference to entitlements flowing from the termination of the contract. His Honour gave attention to the question whether the respondent's entitlement to fees survived the termination of the contract. He decided that it did and that there was an accrued entitlement to the remaining 40% of both fee amounts. 25In relation to the cross-claim, the judge reviewed the evidence concerning the progress of the submission to the Department and, having done so, stated his conclusion that the appellant had not shown that the respondent "failed to act prudently and professionally". 26His Honour therefore gave judgment for the respondent, as plaintiff, on its claim and dismissed the cross-claim.

The evidence 27In approaching the issues raised on appeal, it is necessary to go into some detail about the facts. 28By letter dated 11 February 2009, the Department of Planning notified direct to the appellant the "Director-General's environmental assessment requirements (DGRs)" for the proposed construction. The appellant had been advised by another firm of architects during the process that culminated in the issue of the 11 February 2009 letter. 29As well as notifying the Director-General's environmental assessment requirements (which were set out in an attachment of five pages), the letter of 11 February 2009 outlined the procedure under which the appellant might lodge an "environmental assessment" (with a view to compliance with or satisfaction of the Director-General's requirements) and the Director-General, in turn, might raise issues for attention and require revision before making the environmental assessment publicly available. 30It was the receipt of the Director-General's requirements (or DGRs) and a desire to obtain the assistance of a larger architectural practice that prompted the appellant to contact the respondent in June 2009. 31The appellant dealt with Mr Swan, a director of the respondent. On 30 June 2009, he emailed to Mr Swan "the basis on which I would like you to invest in the project". Attached to the email was a document headed "Deferred Fee Investment" which set out bases on which "any investor, including consultants who defer their fees" could invest $150,000 in one or each of several units to be built and expect projected returns from that investment. 32A period of discussion and correspondence followed. There was discussion at an early stage about the need to assemble a suitable "team" of consultants. Mr Swan referred in a letter of 6 July 2009 to "the consultant team necessary to produce the EA documents and to work collaboratively with them to design the project and prepare the EA submission". Eleven different disciplines were identified as relevant or potentially relevant. 33In the same letter of 6 July 2009, Mr Swan proposed a fee of $175,000 and referred to instalments by which $125,000 of it would be payable; also: "Upon EA approval a further immediate deferred payment of $50,000 - 10% GST. This represents AMW's financial investment in the project and incentive to achieve development approval." 34In a letter of 8 July 2009, Mr Swan emphasised that "[g]etting the EA approval is not automatic" and involved much more than "ticking the boxes set out in the DGRs". 35In a long email of 12 July 2009 to Mr Swan, the appellant said: "From our last discussion I concluded that your quotation will get me a DA approval for the whole site and with the way prepared to move to CC, especially on Stage 1 at a further cost. You will defer 40% of your fees as quoted until 8 weeks after DA is approved." 36The email contained other references to a "DA". 37The appellant held discussions during July 2009 with Ms Lynne Sheridan, an urban planning consultant, and ultimately retained her. In a letter of 27 July 2009 to the appellant, Ms Sheridan said: "As the town planning consultants for the project, Sheridan Planning's role will be to provide town planning advice to the architect for the project, meet with and discuss the preliminary plans with DOP officers and prepare an Environmental Assessment (EA) report for submission to the Department of Planning that addresses the DGR's for both the Concept plan and for Stage 1 of the development. We note that following our discussions, we would not be involved in briefing of the sub-consultants (as this has been undertaken by you) or any public consultation (as there has been sufficient public consultation previously." 38The contract between the appellant and the respondent was entered into on or about 31 July 2009. 39Work progressed thereafter, but not without disharmony. In an email of 22 October 2009, to the appellant, Mr Swan said: "All this argument has distracted Lynn and I from the important task of finalising the plans and EA. The late engagement of the sub-consultants has, as previously advised, also impacted on the time line e.g. the landscape architect has still not provided us with a scheme. We require signoff of the scheme by Close of Business tomorrow or it will delay the EA final lodgement date and incur prolongation costs." 40Ms Sheridan eventually lodged an environmental assessment with the Department of Planning in December 2009. It was a very substantial document. It was submitted by Ms Sheridan's firm on the appellant's behalf. 41The Department responded by letter dated 23 March 2010 which said, in part: "The Department has reviewed the EA for the project and is not satisfied that it adequately addresses the Director-General's Environmental Assessment Requirements (DGRs) issued on 11 February 2009. I understand that Departmental Officers have had numerous discussions with yourself and your planning consultants, highlighting issues that require to be addressed prior to any public exhibition. It is therefore requested that your EA be amended and revised (as detailed in Attachments 1 & 2) and a copy be re-submitted to the Department for review of adequacy." 42Attachments 1 and 2 dealt with numerous matters, including the need for detailed landscape plans, an Aboriginal archaeology assessment, a quantity surveyor's certificate, an updated contamination report, an access report, a plan concerning the rail corridor and a community consultation strategy. 43On 24 March 2010, Ms Sheridan sent the appellant a short email about co-ordination of "the various tasks" emerging from the Department's letter. She said that she had discussed this with Mr Swan. On 31 March 2010, Ms Sheridan asked the appellant by email whether he was "ok with the tasks I've assigned to you" and sought "the timeframe to complete these tasks when you have spoken to the relevant consultants". 44On 1 April 2010, the respondent (through Mr Redman) emailed Ms Sheridan (with a copy to the appellant) to outline the inputs of the respondent foreseen as necessary to provide the "additional information" required by the Department. A meeting with Department officers was suggested to clarify "the full scope of this information". On 9 April 2010, Ms Sheridan, Mr Swan and Mr Cox (also of the respondent) met with a departmental officer, Mr Smith. Minutes of the meeting identify fourteen matters requiring attention in the preparation of an "amended submission". A copy of the minutes was sent to the appellant by Mr Swan under cover of a letter dated 14 April 2010 which outlined additional work to be done by the respondent. 45A meeting with the Director-General of the Department (Mr Haddad) took place on 23 April 2010. Present were Mr Wilson of the Department, the appellant and his then solicitor (Mr Whitfield). Neither Ms Sheridan nor any representative of the respondent was present. The meeting was arranged by the appellant. Notes taken by the appellant recorded, among other things, that: (i)Mr Wilson said it was a 'merit based' assessment and that is why they wanted stronger argument; and (ii) Mr Wilson "was scathing about the quality of the presentation and described the planner's assembly of the information as 'lazy'". 46On 29 April 2010, the appellant emailed Ms Sheridan (with a copy to Mr Swan) complaining that she had not been able to give him "a tip-off in January as to what extra work might be required instead of waiting until the end of March", noting that he had "relied on your [ie, Ms Sheridan's] assurances that you had prior experience with Part 3a and Andrew Smith"; also that "75% of TOA submissions are successful according to the DOP published information". 47On 5 May 2010, Mr Swan wrote to the appellant referring to the attachments to the letter of 23 March 2010 (which he described as "the Test of Adequacy response") and asking that the appellant "as a matter of urgency" finalise "the engagement of all the necessary consultants" some of which were then mentioned. The letter continued: "Lynne has advised that she cannot complete the EA report until all this information is at hand. As it stands, the project is being unnecessarily delayed because the required information is not available." 48The appellant emailed Mr Cox of the respondent (with copies to Ms Sheridan, Mr Swan and Mr Whitfield)) complaining that none of "Dale, Stephen, Lynn, Chris and Andrew" had any intention of "considering the legal rights and obligations involved". He also complained of delay and said: "The delay is due to the failure of my consultants who have been engaged at a cost of $440,000 to pass a TOA. DOP publishes the fact that 75% of TOAs are passed. My written and verbal instructions have been largely ignored." 49On 6 May 2010, Mr Swan wrote to the appellant in response to the email of complaint from the appellant. The letter tendered advice of various kinds on the best way forward as Mr Swan saw it. He confirmed that the respondent's role was to "assist you in the preparation of documents for an Environmental Assessment submission to the Department of Planninjg (DOP)"; and "Our aim remains to present a scheme to the DOP that is able to be approved." 50After denying an allegation by the appellant that the respondent had caused delay, Mr Swan said: "It is not a matter of passing or failing the Test of Adequacy. The TOA is for the Department to review the documents and request more clarification/information if required before advertising. That is exactly what they have done." 51Mr Whitfield, the appellant's solicitor, wrote to Mr Wilson of the Department on 12 May 2010. He thanked Mr Wilson for "viewing the presentation by Ancher Mortlock about density and height which addresses the principal issue raised in Attachment 1". Mr Whitfield asked that Mr Wilson "give consideration as to how the following exemptions from Attachment 2 can be dealt with as soon as practicable to enable us to finalise our answers". Five particular items were then mentioned. The references to "Attachment 1" and "Attachment 2" are clearly references to the two attachments to the Department's 23 March 2010 letter. 52On 27 May 2010, Mr Swan wrote to the appellant expressing concern about continuing delay "in submitting the Environmental Assessment document to the Department of Planning (DoP)". He said: "The submission could have been made over a month ago if the matter in the Test of Adequacy [ToA] had been addressed and the necessary consultants engaged promptly." 53The appellant made a strong complaint by email of 27 May 2010 to Mr Cox: "I entered into $440,000 worth of contracts to pass a TOA. The DOP took months longer to assess it and neither they nor my consultants tipped me off about the forthcoming result. Now everyone wants extra fees because they collectively stuffed up." 54Mr Swan replied on 28 May 2010: "Your comment regarding the consultants not 'tipping you off' is totally inaccurate and misleading. The consultants did not 'stuff up' as you say. On the contrary, you did by not engaging all the necessary and appropriate consultants in a timely manner to carry out the required scope of work. We have, from the inception of the project, continually written to you about this very problem. You chose to go against the advice of the architect/planner and not provide contamination, aboriginal/archaeology, and other items specifically required by the DGR's." 55Further documents were in due course submitted to the Department and, on 25 October 2010, the respondent reported to the appellant by letter that the Department had "now confirmed the adequacy of the Environmental Assessment (EA) submission to be placed on public exhibition" but that "further minor additional information" had been requested. 56This was confirmed by a letter dated 10 November 2010 from the Department addressed to the appellant which began: "The Department has reviewed the revised Environmental Assessment (EA) for the above project and considers it to be adequate for public exhibition provided that the additional information as highlighted in Attachment 1 is submitted prior to the EA being placed on public exhibition." 57On the same day, Ms Sheridan emailed to the appellant and others "signed TOA letter from the Department, stating we are ok for public exhibition". 58On 11 November 2010, Mr Swan emailed the appellant saying that "the signed Test of Adequacy" had been received. This may be accepted as a reference to the Department's letter of 10 November 2010. 59A dispute about the respondent's fees and contractual obligations with respect to the "next phase of work" then ensued. In a letter dated 17 March 2011, the respondent stated that it had performed the work it was contracted to do; was not contractually obliged to work on the next phase of project; and gave notice of termination of the contract in accordance with clause F2. 60The appellant wrote to the respondent on 5 April 2011. He purported to give notice of termination of the contract "on the grounds of AMW's incapacity and failure to perform as partly set out in the Director-General's letter to me of which AMW has a copy". The respondent's solicitors wrote to the appellant on 8 April 2011 disputing the effectiveness of the appellant's purported termination "as the Contract had already been effectively terminated by notice from our client dated 17 March last." 61On 19 April 2011, Mr Wilson of the Department wrote to the appellant referring to the fact that the application had been placed on public exhibition. Mr Wilson noted that "a copy of all submissions received have been forwarded for consideration". Mr Wilson said that the Department had identified a number of issues relating to "height and building layout, environmental constraints, residential amenity, traffic generation and carparking". These were listed in Schedule 1 of two pages headed "Key issues". Mr Wilson also drew attention to "additional information" required, as set out in Schedule 2 of about a page and a half.

The appeal in respect of the 40 per cent element 62The appellant's contention is that, under the contract, the respondent was not entitled to the 40 per cent element of the fee because the event described as "EA approval" had not occurred and the respondent's right to be paid what was in substance a success fee was contingent on the happening of that event. 63The first point to be made here is that the pre-contractual correspondence concerning an "investment" by the architects in the project was quite irrelevant to the construction of the contract. The judge said that there was no ambiguity in the resolution of which such correspondence might be useful. In construing a contract, the court may take into account evidence of circumstances attending formation of the contract, even in the absence of ambiguity: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [14]-[18]. But it is perfectly plain that the "investment" proposals mooted in the correspondence differed considerably from the arrangement ultimately adopted in contractual form, which arrangement speaks for itself. An understanding of the contract is in no way assisted by considering the mooted proposals. 64Let it be assumed that "EA approval" had not occurred when, in March or April 2011, the contract was terminated by notice given under clause F2. As I have said, it is not necessary to decide which of the termination notices was effective. The important point is that termination occurred under that clause by reason of the giving of one of them. 65As I have also said, the judge saw the provision making 40 per cent of the fee "payable within 8 weeks of EA approval" as dealing with the timing of payment of remuneration, as distinct from the earning of remuneration. His Honour was right to do so. The provision was concerned solely with the time at which payment was to be made, as distinct from the creation of indebtedness. The fee as a whole was for the performance of the work described. Once the work was done, the whole fee was owing, even though the 40 per cent portion was not payable until the elapse of eight weeks from EA approval. While any part of the work remained undone, the 40 per cent element was neither owing nor payable. 66At the point in March or April 2011 when the contract was terminated under clause F2, the work had been completed. The description of the work phases showed that the final elements of the "continuous stream of work" were "submission to DOP for the Test of Adequacy (TOA)" and "Issue the final submission". Those events had happened before the Department's notification by the letter of 10 November 2010. 67Had there been no termination in March/April 2011, the time for payment of the 40 per cent element then already owing would have remained eight weeks after EA approval. But termination brought clause F3 into operation. That provision made payable within ten working days after the giving of the termination notice "all accrued fees", that is, fees that had, at that point, matured into debts owing but had not been paid. 68The primary judge referred to Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd [1936] HCA 6: (1936) 54 CLR 361. Dixon and Evatt JJ there said (at 379-380): "When a contract comes to an end by reason of the occurrence of an event upon which the parties have by an express provision made it terminate, the question whether an inchoate liability arising thereunder does or does not become enforceable must in the end be governed by the intention of the parties. It is a rule of law that when a simple contract is discharged by the election of one party to treat himself as no longer bound after the other has committed a breach of the contract, rights and obligations which have already arisen from the partial execution of the contract shall remain unaffected (see McDonald v. Dennys Lascelles Ltd (1933) 48 CLR at pp 476, 477). No doubt it is open to the parties to provide in advance for such an event and by a stipulation to the contrary to produce some other effect. When the parties themselves have provided for the determination of the contract on a given contingency, the consequences flow altogether from their contractual stipulation and are governed by their intention, either actual or imputed. In the present case, however, all the agreement expressly says is that in any of the specified events it shall immediately terminate and be at an end. In applying such a compendious provision to a continuing relationship of the complicated character which the agreement establishes some guidance may be found in the nature of the agreement and of the obligations to which it gives rise. But primarily it remits the inquiry to a general consideration of what is involved in the sudden termination of an executory agreement under which liabilities are accruing from day to day. We are concerned only with a liability to pay a liquidated demand. In general the termination of an executory agreement out of the performance of which pecuniary demands may arise imports that, just as on the one side no further acts of performance can be required, so, on the other side, no liability can be brought into existence if it depends upon a further act of performance. If the title to rights consists of vestitive facts which would result from the further execution of the contract but which have not been brought about before the agreement terminates, the rights cannot arise. But if all the facts have occurred which entitle one party to such a right as a debt, a distinct chose in action which for many purposes is conceived as possessing proprietary characteristics, the fact that the right to payment is future or is contingent upon some event, not involving further performance of the contract, does not prevent it maturing into an immediately enforceable obligation." 69This principle produces the result that the effect of the termination, construed in the light of the mutual intention manifested in clause F2, was that the obligation to pay fees that were, at that point, already owing (because earned), including the 40 per cent element, was accelerated, in the sense that the specification as to time for payment in clause F2 superseded and replaced the specification in the provision referring to eight weeks after EA approval. 70The judge was right so to hold. 71Of course, if "EA approval" had occurred before termination of the contract in March/April 2011, the conclusion that the respondent was entitled to the 40 per cent element would have been dictated by a combination of that fact and the principle that vested contractual rights in general remain unaffected when a contract is terminated: McDonald v. Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457. 72Upon the hearing of the appeal, the Court granted leave to the respondent to file a notice of contention seeking to uphold the judge's decision on the basis that "EA approval" had occurred more than eight weeks before termination in March/April 2011 and that the payment obligation in respect of the 40 per cent element was accordingly already due for performance at the time of termination. The appellant opposed the filing of the notice of contention. The Court granted leave because it was satisfied that all material facts were available and the question was merely one of construction. 73The notice of contention raises the question of the meaning of "EA approval". The description of the statutory context at [19] above makes it clear that an "environmental assessment" is something that a "proponent" submits in response to and with a view to meeting or satisfying the Director-General's "environmental assessment requirements". Submission of an "environmental assessment" may cause the Director-General to require submission of a revised "environmental assessment" dealing with such matters as the Director-General considers require further attention by reference to the notified "environmental assessment requirements". A proponent's aim, in relation to an "environmental assessment" that the proponent submits, is to obtain acceptance of it by the Director-General as suitable to be put on public exhibition. It is that acceptance by the Director-General that signifies satisfaction of the "environmental assessment requirements" and the point at which the proposal passes from the realm of departmental examination into the arena of public scrutiny and ultimately decision by the Minister. 74In that context, "EA approval" must, as the respondent contends, represent acceptance of an applicant's "EA" (that is, environmental assessment) by the Director-General as suitable for public exhibition, as established by the fact of such public exhibition. The judge's finding that "the plans went on public exhibition" on 15 December 2010 is not challenged on appeal. The finding is consistent with the notification in the Department's letter of 10 November 2010. It must therefore be accepted that "EA approval" had been achieved by 15 December 2010. 75The respondent's right to be paid the 40 per cent element of the remuneration can thus be seen to be established on each of two alternative bases. If, contrary to what has just been said, "EA approval" had not occurred at the time the contract was terminated by notice under clause 2F in March or April 2011, the accrued right to be paid, at the specified future time, fees already earned by the provision of the contracted services was, upon that termination, accelerated by clause F3. If, on the other hand, "EA approval" was given on or before 15 December 2010, eight weeks from that event had already elapsed when the contractual right of termination was exercised in March/April 2011.

The appeal in respect of the cross-claim 76The appellant's notice of appeal put this part of his case on appeal as follows: "The Court below erred in dismissing the Appellant's Cross claim in that it failed to deal with or to properly consider the letters of the Department of Planning, which was not controverted at trial, to the effect that:- (i) the Respondent submitted Plans to the Department of Planning in December 2009; (ii) the plans in the form as submitted by the Respondent were unsuitable and inadequate for the purposes of public exhibition and EA approval; (iii) the suitability of the plans put forward by the Respondents for the purposes of the Appellant's project being properly considered for the purposes of public exhibition was not resolved by the Respondents until December 2010." 77In the course of the hearing of the appeal, the appellant identified "the letters of the Department of Planning" as: (a) the letter of 23 March 2010 from the Department of Planning to the appellant (see [41] above); (b) the letter of 10 November 2010 from the Department of Planning to the appellant (see [56] above); and (c) the letter of 19 April 2011 from the Department to the appellant (see [61] above). 78Each of these was a letter in which the Department commented on and notified questions or requisitions in relation to material submitted by the appellant for the Department's consideration. The appellant's contention seems to be, in essence, that the fact that matters were raised in response to the submission of particular material to the Department showed that the respondents had fallen short of some required standard in performing work included or reflected in the submitted material. 79The primary judge noted that the appellant "found it difficult to articulate the particular conduct of the architects that he claims fell short of the standard required of a reasonably prudent architect". In relation to the appellant's complaint that "no reasonable architect would have failed to submit options or alternatives to the designs accompanying the first EA submission", the judge noted that no expert evidence had been called on the matter and that Mr Swan had given evidence that five or six options were prepared by the respondent and discussed with the appellant and departmental officers but that the officers had, at a meeting in which the appellant participated, indicated a preference for a submission accompanied by a single design. As to complaints that the respondent was responsible for delay between December 2009 and 23 March 2010, the judge noted Mr Swan's evidence that he had telephoned the Department on "numerous" occasions and that the appellant had not explained what more the respondent could have done. As to perceived delay between April 2010 and November 2010 and the appellant's complaint that the respondent had failed to compel the planner and other consultants to respond expeditiously, the judge pointed to provisions of the contract making "the client responsible for all secondary consultants" and to the fact that the appellant had put pressure on the planner, Ms Sheridan, to "get these people organised", referring to the other consultants. 80His Honour's conclusion on the negligence claim was: "Mr Neale has failed to persuade me that the architects failed to act prudently and professionally, or were, in any respect, in breach of duty. The cross claim must be dismissed." 81None of the three letters from the Department upon which the appellant relied in this Court (see [77] above) indicates in any way that the respondent breached any contractual duty or duty in tort owed by it to the appellant. Each letter said, in effect, that something more needed to be done or provided before the appellant's proposal could be progressed to the next stage of the bureaucratic process. Nothing in the letters warranted a finding that any of the additional matters sought was something that would have been provided by a reasonably prudent architect acting in the circumstances in which the respondent was acting, that is, as one of several consultants retained by the appellant to provide inputs to a process which involved a town planner (Ms Sheridan) submitting material calculated to produce, on the part of the Department, an outcome favourable to the cause the appellant was pursuing. The fact that an official performing an evaluative function takes the view that material submitted needs to be supplemented in some way before the necessary judgment can be made simply cannot, of itself, warrant any finding of negligence on the part of anyone involved in the preparation of the submitted material. Mr Swan of the respondent had made it perfectly clear to the appellant in the letter of 8 July 2009 that "[g]etting the EA approval is not automatic" and involved much more than "ticking the boxes set out in the DGR's". The respondent can have been under no misapprehension about the discretionary and evaluative nature of the process. 82The appellant sought to rely on statements made in letters he received from Dr Daines, a town planner whose assistance he sought through a mutual friend. But that correspondence, even if accepted as expert opinion evidence (a question that does not directly arise), does not assist the appellant's case. In fact, it undermines that case. 83Particular reference needs to be made to an email from Dr Daines to the appellant dated 22 September 2010. In accordance with a practice he explained in his evidence, the appellant interpolated comments of his own into Dr Daines' text. The email reads in part as follows (with the appellant's interpolations in bold italics): "All along over the months I have been wondering who is the 'lead consultant' that you have charged with the responsibility of drawing together all the strands and sub consultant reports of your application to ensure completeness and compliance with the DG's requirements. In practical terms it is me. In legal terms it may be Lynne Sheridan. Architects AMW have a contract worth 5 or 6 times as much and have been in very close contact with her and me however, as you say, Lynne submitted the proposal and won her contract because of her claim that she had handled Part 3a [sic] applications before. Andrew Smith (the Assessing Officer) was sceptical about this. The Chief Planner, Chris Wilson, does know her reasonably well, mainly because their kids go to the same school (or something like that). It is called 'you can run but you can't hide!'. Last night you sent me the EA prepared by Sheridan dated December 2009 which the Department's letter of 23 March 2010 clearly states her report does not satisfy the DG's requirements issued on 11 February 2009. So I feel I now know the answer and it is Sheridan. Yes Please confirm that is your view. Yes I have only read part of her report on screen but I note she has 'certified' that her report satisfies the DG's requirements and complies with the relevant section of the Act. There may be a cause for possible legal action against her there. I have won many far less probable legal actions than that. I would not be able to recover more than $50,000 (net) if I sued her whereas the best outcome for the site is probably $10m better than the worst outcome. I am legally entitled to the best outcome and now have massive evidence to support that claim. I will provide more information in answer to your earlier questions." 84It can thus be seen that Dr Daines' opinion, whatever evidentiary value it may have, simply does not bear out the case in negligence that the appellant sought to advance against the respondent. 85The judge was, in my opinion, correct when he held that the appellant had not established the allegation of professional negligence.

The costs order 86The costs order made by the judge is referred to at [1] above. That order was justified by the result of the proceedings and the appellant's non-acceptance of an offer of compromise filed on 24 September 2012. Nothing the appellant has put warrants alteration of the order.

Conclusion 87The appeal should be dismissed with costs. 88GLEESON JA: I agree with Barrett JA that the appeal should be dismissed with costs. I also agree with his Honour's reasons, but wish to add the following on the question of construction of "EA approval". 89In my view the expression "EA approval", where appearing in the provision in the contract providing for the deferred payment of part of the architect's fee: "Balance of 40% payable within 8 weeks of EA approval" (Blue 31), is ambiguous or susceptible to more than one meaning. 90Two possible meanings arise. The first, which seems to have been the meaning adopted by the primary judge at [13] of his Honour's judgment, is that it is a reference to "eight weeks after Planning Approval". This may be taken to have been a shorthand reference by the primary judge to the Minister approving the carrying out of the project under s 75J(1) of the Environmental Planning and Assessment Act 1979 (the Act), as then in force. The second, being that for which the respondent contends by its amended notice of contention, means acceptance of the environmental assessment by the Director-General under s 75H(3) of the Act. 91Authority requires that an objective approach be adopted in determining the rights and liabilities of parties to a contract. As the High Court recently reaffirmed in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35]: "The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. ... it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience." [Footnotes omitted.] 92Nonetheless, as Barrett JA explains at [63], the pre-contractual correspondence does not assist in the resolution of the ambiguity in the present case, because the "investment" proposals mooted in the correspondence differed considerably from the arrangement ultimately adopted in contractual form. Thus, for example, there was reference in the pre-contractual correspondence to deferral of payment of part of the architect's fee until eight weeks "after DA is approved" (Blue 284). The abbreviation "DA" may be taken as shorthand for "development application". This finds its closest expression in Part 3A of the Act, as an application for the approval of the Minister to carry out a project: see s 75J(1) of the Act. By contrast, acceptance by the Director-General under s 75H(3) of the Act of the environmental assessment is a step along the way to an approval by the Minister of the carrying out of the project. 93Moreover, insofar as the prior negotiations consist of statements and actions of the parties, in particular the appellant, which are reflective of their actual intentions and expectations they are not admissible on the question of construction: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (Codelfa) [1982] HCA 24; 149 CLR 337 at 352. Such statements and actions can only reveal the terms of the contract which the parties, in particular the appellant, intended or hoped to make. They are superseded by, and merged in, the contract which the parties in fact made: Codelfa at 352. 94The resolution of the ambiguity in the present case is to be found in the subject matter of the contract and the objective background facts relating to the Part 3A process which were known to both parties. The architect was engaged for a fixed fee to perform work in respect of three identified phases of the Part 3A process up to the point of preparing an EA submission in a form that was accepted by the Director-General as suitable for public exhibition. Thereafter, any further work by the architect in connection with the Part 3A process was be treated as an agreed variation to the contract, undertaken on a specified hourly rate. The nature of the possible further work by the architect beyond the third phase was identified in Section D of the contract as providing assistance in, amongst other things, the: "... negotiation of the EA through DOP's approval process, after lodgement of the EA submission, ie, to attend meetings, provide additional documentation, reports or advice ..." (Blue 33K-L). 95It is clear that the scope of works which the parties contemplated might be the subject of an agreed variation to the contract, related to the stage of the Part 3A process after the EA had been accepted by the Director-General under s 75H(3) of the Act as suitable for public exhibition. 96To suggest, as the appellant does, that a reasonable businessperson would have understood the reference to "EA approval" as referring to the Minister's approval of the carrying out of the project under s 75J of the Act, would produce a commercial result that 40% of the payment in respect of work done by the architect would not only be deferred, but also contingent upon, the outcome of an uncertain approval process over which the architect had no control. It cannot be supposed that this was how a reasonable businessperson would have understood those terms. 97For these reasons, together with the reasons given by Barrett JA at [73]-[74], with which I agree, the expression "EA approval" means acceptance of an applicant's "EA" (that is, environmental assessment) by the Director-General as suitable for public exhibition, as established by the fact of such public exhibition. 98LEEMING JA: I agree with the reasons of Barrett JA on the notice of contention and the cross-claim, which together suffice for the appeal to be dismissed. The notice of contention, whose essence is that the architect was entitled to be paid 40% of its fee only after the environmental assessment was accepted as suitable for exhibition by the Director-General, reflects the self-evident commerciality of the agreement. To my mind, it is the most natural way to resolve the dispute between the parties. 99Whilst I do not doubt the authority of the principle in Westralian Farmers relied on by the primary judge, its application is subject to the parties' (imputed) intention. That question is, on the view I take, not free from difficulty, and, since it is entirely academic, I prefer not to express a view as to its application to this contract, had the architect terminated and claimed its fee prior to the environmental assessment being accepted. 100I also agree with what Gleeson JA has said on the question of construction of "EA approval".

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 March 2014

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