Oliver & Ors v Lakeside Property Pty Ltd & Ors

Court of Appeal (NSW)|2006-08-30|Before: Handley JA, Giles JA, Bryson JA, Barrett J

CITATION: Oliver & Ors v Lakeside Property Pty Ltd & Ors [2006] NSWCA 285 This decision has been amended. Please see the end of the judgment for a list of the amendments.

JUDGMENT OF: Handley JA at 1; Giles JA at 2; Bryson JA at 46

CATCHWORDS: Contract - agreement to provide town planning services for a development project - incomplete agreement on remuneration - later agreement on provision of a parcel of land in the project with a house, or money in lieu - but subject to providing town planning services until the end of the project, which did not occur - whether the later agreement was in substitution for any entitlement to reasonable remuneration - on facts, it was - no recovery on a quantum meruit.

Christopher John Oliver - First Appellant Janet Patterson - Second Appellant PARTIES: Optima Developments Pty Ltd - Third Appellant Lakeside Property Pty Ltd (as trustee for the Lakeside Property Trust) - First Respondent Lakeside Golf Club Ltd - Second Respondent Hun Sunwoo - Third Respondent

COUNSEL: I G Harrison SC & J F Merkel - Appellants K Newton - Respondents

SOLICITORS: Mallesons Stephen Jaques - Appellants Knowles Lawyers Pty Ltd - Respondents

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT DATE OF DECISION: 18 October 2005

LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 1040

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40880/05 ED 3260/01

HANDLEY JA GILES JA BRYSON JA

Monday 30 October 2006 OLIVER & ORS v LAKESIDE PROPERTY PTY LTD & ORS Judgment 1 HANDLEY JA: I agree with Giles JA. 2 GILES JA: The plaintiffs were Mr Christopher Oliver, Ms Janet Patterson and Optima Developments Pty Ltd. In July 1991 Ms Patterson established a town planning consultancy under the business name Optima Planning and Development Consultants, which Mr Oliver conducted following his resignation in November 1991 from the position of a senior town planner with Wyong Shire Council. In July 1995 the consultancy was incorporated as Optima Developments Pty Ltd, with Mr Oliver and Ms Patterson as its directors and shareholders. 3 The defendants were Lakeside Property Pty Ltd, Lakeside Golf Pty Ltd and Mr Hun (Henry) Sunwoo. From 1989 Mr Sunwoo was engaged, in part through Lakeside Golf Pty Ltd of which he was a director and secretary, in the acquisition of properties for and the development of a golf course, with tourist accommodation and ancillary facilities, on a site within the Shire of Wyong ("the project"). Lakeside Property Pty Ltd was incorporated in March 1993 and became the trustee of the Lakeside Property Trust, of which Lakeside Golf Pty Ltd was beneficiary. Lakeside Property Pty Ltd was under the effective control of Mr Sunwoo, and was intended to be a vehicle for raising money for the project; however, that did not come to pass. 4 Speaking in terms of the natural persons involved, from September 1991 until late 1995 Mr Oliver and Ms Patterson provided town planning services to Mr Sunwoo in connection with the project. The arrangements for their remuneration were loose, and were against the background of Mr Sunwoo's chronic shortage of funds. Commencing in early 1993, the parties discussed the transfer to Mr Oliver and Ms Patterson of a lot in a residential subdivision which was part of the project. Later they discussed the transfer to them of a lot or an equivalent alternative lot with a constructed residence, or the monetary equivalent. 5 In proceedings in the Equity Division the plaintiffs claimed from the defendants - "(a) An order that [the Defendants] pay to the Plaintiffs a fair and reasonable sum of money in quantum meruit for the work done and services performed for which the Defendants have accepted the benefit.

(b) In the alternative damages, in contract or in equity, equivalent to the value of title to Lot 7 (or equivalent alternative Lot) on the island within the resort and finished construction of a residence consistent with those planned for the estate." 6 Barrett J held that the parties to the agreement for provision of town planning services as it existed from time to time were Ms Patterson of the one part and Lakeside Golf Pty Ltd and Mr Sunwoo of the other part. There was no appeal against his decision in that respect. It is convenient, unless it be necessary to do otherwise, to refer in what follows simply to the plaintiffs and the defendants. 7 His Honour held that the quantum meruit claim and the damages claim both failed, and dismissed the proceedings with costs. The plaintiffs appealed against his Honour's decision, but at the hearing of the appeal did not maintain the damages claim. They accepted that, as held by the trial judge, their entitlement to Lot 7 or an equivalent alternative lot with a constructed residence was conditional upon their continuing to provide town planning services until completion of the project, and that they had not done so. The appeal was concerned with their entitlement to payment of a reasonable sum for the provision of town planning services.

The trial judge's decision 8 The trial judge said that Mr Sunwoo asserted that, at a meeting with Mr Oliver and possibly Ms Patterson in late August 1991, there was express agreement for engagement "on a monthly fee of $1,000 and to work as required by the project". He was not satisfied that the terms of remuneration were finalised at the meeting, but said that - " … express agreement about remuneration was reached by subsequent words and conduct of the parties. Specifically, [Mr Oliver and Ms Patterson] accepted the cheque payment of $1,000.00 from [Mr Sunwoo] following the meeting and continued to accept such payments as satisfactory remuneration for their work on the project until May 1993." 9 At the hearing of the appeal this was taken to be a finding of agreement for payment of $1,000 per month. The plaintiffs contended, however, that the $1,000 per month was not a fixed rate of remuneration unless and until otherwise agreed, but rather that it was agreed as a reasonable rate of remuneration for the level of town planning services initially provided but subject to increase when the level of services increased. They accepted in the appeal that $1,000 per month was a reasonable rate of remuneration until mid-1994, rather than May 1993, because it had been put on their behalf in cross-examination of Mr Sunwoo (and he had agreed) that until then $1,000 per month "was probably close to a fair value for the work that was being provided to you from Mr Oliver and Ms Patterson". 10 It was common ground that the plaintiffs provided the town planning services for reward, but the trial judge did not clearly find whether the reward was $1,000 per month as a fixed rate of remuneration, or reasonable remuneration which was for the time being met by the $1,000 per month. In fact there were not consistent or regular payments of $1,000 per month. There were monthly payments of $1,000 until February 1992, then three monthly payments of $1,000 spread over the rest of 1992, then mostly monthly payments of $1,000 during 1993 but with one short payment made up with two later payments, then six monthly payments spread over 1994 in varied amounts greater than $1,000. As at the end of 1994 the arrears were $9,960. $10,000 was paid in March 1995, then payments totalling $7,000 until July 1995 so that the payments were more or less up to date. The payments in the rest of 1995 were: 9 August 1995 $1,000.00 9 August 1995 $300.00 13 September 1995 $500.00 13 September 1995 $75.00 14 November 1995 $500.00

11 A total of $49,583 was paid. At the end of October 1995, shortly before the parting of the ways, the arrears were about $500. 12 The trial judge found that, in communications in late 1993 and early 1994, it was agreed that the defendants would transfer to the plaintiffs a lot in the residential development part of the project provided that there was profitable completion of the project and, importantly, the plaintiffs continued to provide town planning services until its completion. In October 1995 Mr Oliver and Mr Sunwoo had a discussion which led to a letter dated 30 October 1995 prepared by Mr Oliver and signed by Mr Sunwoo. I set the letter out later in these reasons; it recorded agreement on remuneration for past services by way of transfer of the lot or an equivalent lot with a constructed residence, or the monetary equivalent. The trial judge said that in October 1995 the parties' agreement was varied only to the extent that Mr Sunwoo would provide an equivalent monetary sum, and that - " … by 31 October 1995 the agreement therefore entailed a promise by [Mr Sunwoo] to either, transfer the house and land to the plaintiffs upon the profitable completion of the project, or pay them the monetary equivalent, in return for the provision of services by the plaintiffs until the project was completed." 13 This was the foundation for his Honour's decision adverse to the plaintiffs. The plaintiffs ceased to provide town planning services in November 1995. The trial judge held that the provision of town planning services by the plaintiffs until completion of the project was a condition of their agreement, and that when they failed to do so the defendants were entitled to and did terminate the agreement; that the plaintiffs' obligation to provide town planning services until the completion of the project was an entire obligation, so that their failure to complete left them unable to call for transfer of the house and land or payment of the monetary equivalent; and that the plaintiffs were not entitled to reasonable remuneration on principles of unjust enrichment, because the failure meant that the defendants had not had the opportunity to reject partial performance of the entire obligation. 14 Implicit in the trial judge's decision was that the agreement as it matured in October 1995, relevantly conditional upon the plaintiffs continuing to provide town planning services until completion of the project, was the full measure of the plaintiff's entitlement to remuneration, and in substitution for any entitlement to be paid a reasonable sum. The trial judge said - "Although [Mr Oliver and Ms Patterson] insisted under cross-examination that they were entitled to fees in addition to the promised house and land or the monetary equivalent, they do not mention fees owing to them in the letter of 30 October 1995 by which they attempted to formalise their entitlements. I therefore find that the plaintiffs were content to be paid fees intermittently or otherwise at the discretion of [Lakeside Golf Pty Ltd and Mr Sunwoo],, and had looked to the promised house and land or the monetary equivalent as remuneration."

The issue in the appeal 15 As I have indicated, the plaintiffs accepted at the hearing of the appeal that their entitlement to the lot or an equivalent lot with a constructed residence was conditional upon their continuing to provide town planning services until completion of the project, and that they had not done so. They submitted that the letter of 30 October 1995 did not record an agreement on remuneration in substitution for any other entitlement to remuneration, and that their entitlement to reasonable remuneration for the provision of the town planning services remained and was not conditional upon provision of town planning services until completion of the project. Having accepted that a reasonable rate of remuneration from September 1991 to mid-1994 was $1,000 per month, they sought referral to an Associate Justice for an inquiry into reasonable remuneration from mid-1994 onwards. They accepted that the $49,583 should be credited against their overall entitlement.

The agreement in October 1995 16 The initial agreement involving payment of $1,000 per month was from an early time supplemented by discussion of additional reward, in kind if not in money. The agreement left unspecified, even on the plaintiffs' case, the basis on which the plaintiffs would be remunerated beyond the monthly payments and, with continued looseness, the discussions were on that subject. 17 The defendants were short of money, and the trial judge found that Mr Oliver "would have been informed about the financial difficulties of the project and [Mr Sunwoo] through his close working relationship with [Lakeside Golf Pty Ltd and Mr Sunwoo] and his extensive involvement in the project". His Honour found - "Perhaps motivated by their understanding of the financial difficulties of [Mr Sunwoo] and the project, [Mr Oliver and Ms Patterson] readily accepted other forms of remuneration from [Mr Sunwoo]. These included, on the plaintiffs' evidence, an allocation of units in Lakeside Property Trust, promise of a house and land of the project or the monetary equivalent, and use of the office premises of [Lakeside Golf Pty Ltd]." 18 The offer of units in the Lakeside Property Trust was the subject of only limited evidence, and the trial judge said that he accepted Mr Oliver's account "only to the extent that allocation of units was allegedly proffered by [Mr Sunwoo]". In 1995 the plaintiffs relocated their consultancy from Cairns to the premises of Lakeside Golf Pty Ltd in Sydney. The trial judge noted Mr Oliver's agreement that they did so in their own interests, in his Honour's view meaning to "facilitate their involvement in the project, and thereby secure the realisation of the promised house and land".. 19 The genesis of the agreement in October 1995 lay in events in 1993. According to Mr Sunwoo, in the latter part of that year there was a conversation between him and Mr Oliver - "Sunwoo: 'I think this project will yield a large profit, once we start selling properties. You know I can't pay you more than $1,000 per month for your services, but if you stay on with me to the end and the project makes a profit, I will transfer to you a piece of land, if I can. It would be kind of like a bonus. Meanwhile, I'll keep paying the $1,000.00 per month.'

Oliver: 'Okay, that'll be great. I'm happy to go ahead.'" 20 Thereafter Mr Sunwoo sent to Ms Patterson, by a letter dated 21 October 1993, a copy of the site plan for the residential development. Two of the lots were coloured pink, and Mr Sunwoo wrote on the plan - "Dear Jan,

This is Henry's promise! ONE OF THE TWO LOTS MARKED PINK is yours. Tell me which one your prefer. It will not be on sale! If we make really too much money, I MAY even build it for you. Let me know what you think of the design!

Henry 21/10/93" 21 According to Mr Sunwoo, he spoke to Ms Patterson -

Sunwoo: 'If Oliver is prepared to stick it out with me and the project is profitable, I'll transfer to him one of the blocks.'

Patterson: 'I'll make him work really hard, and make you money so we get a block.'" 22 Mr Oliver said that he had a conversation with Mr Sunwoo which included- "Oliver: 'We've got your plan and I understand you have spoken to Jan. The block on the northern side of the island looks great.'

Sunwoo: 'No worries. I'll put the sold sign on the plan. You've earned it. …'" 23 Ms Patterson replied to Mr Sunwoo on 28 October 1993 - "Dear Henry,

RE: HENRY'S PROMISE It all seems like a fairy tale. The northern lot appears to have the best appeal and is preferred out of the two lots identified. I guess I will have to make sure that Chris makes you lots of money. The floor plan looks great. Kind regards,

JAN" 24 On 4 January 1994 Mr Oliver received a facsimile of the site plan from Mr Sunwoo on which the selected lot, lot 7, had been marked "Sold". 25 The trial judge said, apparently accepting the evidence of Mr Sunwoo - "41 [Mr Sunwoo] says that he informed [Mr Oliver] on "a number of occasions" that he could only afford to pay [Mr Oliver and Ms Patterson] "$1,000 here or there" and would give [Mr Oliver and Ms Patterson] a block of land upon profitable completion of the project provided that [Mr Oliver] continued to service the project until it was complete. I quote from the 2004 affidavit of [Mr Sunwoo]:

'Sunwoo: "If the plans go ahead, there will be a lot of work involved for me. I will also need town planning help. I think that developing the project could be very successful. If the project goes ahead, I would be prepared to give you a piece of land at the end of the day, of course you'll have to stay with me until the end, and you would have to be loyal to the project."

Oliver: "I'm sure you'd make a profit. That would be excellent."

Sunwoo: "Chris, if you stay with me to the end and we get this development done, as a bonus you can have a block of land."

Oliver: "Oh yeah, I understand. That would be good. Thank you."

Sunwoo: "You know I am very happy about this project. I can see good things for it. At the end of it all I will give you a parcel of land as a bonus."

Oliver: "Okay."' 42 Clearly, [Mr Oliver] understood that the transfer of the land necessarily depended on further progress of project. Nevertheless, it seems that [Mr Oliver and Ms Patterson] expected to receive the transfer and did not make alternative arrangements for remuneration. 43 Based on the evidence, I am satisfied that [Mr Oliver and Ms Patterson] and [Lakeside Golf Pty Ltd and Mr Sunwoo] expressly agreed to the promised transfer of land but that this was conditional upon the profitable completion of the project and the plaintiffs continuing to work until the completion of the project. This is particularly evident from the contents of the handwritten note accompanying the floor and site plans to the second plaintiff on or about 21 October 1993, and the facsimile dated 4 January 1994." 26 In his oral evidence Mr Oliver said of the promised transfer of land - "Q. And apart from the small amount you were being paid, you were satisfied that sharing the fruits of success in the form of a block of land would be perfectly adequate for you? A. Well, as soon - I saw the offer of the block of land as probably achieving a number of roles. One, negating the need to pay for the effort that had been put in to achieve the decision that we - we had achieved in October and, you know, just to - as an incentive to keep us in there to - to realise that." 27 The position of the project and the plaintiff's involvement in it as at the end of October 1995 is of some significance. 28 From mid-1994 the level of town planning services had increased, and Mr Sunwoo agreed in his evidence that $1,000 per month was from then on no longer "a fair value". 29 The defendants' financial woes had become acute. At the end of 1994 Mr Sunwoo told Mr Oliver that he was having cash flow problems and was organising refinance, and would catch up on his fees. He caught up to some extent, paying the $10,000 in March 1995 but saying that it was "all I can afford for now"; he provided also a blank cheque, saying that he would let the plaintiffs know the amount to put in it. As can be seen from the payments earlier described, payments thereafter were irregular and there were only drip-feed payments from August 1995. The defendants' financier, ANZ, was discontented, and Mr Oliver said that he was told that Mr Sunwoo "desperately needs financial support or he might go under; the ANZ Bank are moving on him". Mr Oliver agreed in his oral evidence that by September 1995 the pressure ANZ was putting on Mr Sunwoo was "serious" and that Mr Sunwoo's position was "desperate". (In fact ANZ appointed a receiver over its security properties, and in due course exercised its power of sale.) Mr Sunwoo was trying to sell the project, but could not do so. 30 Mr Oliver said that he approached Mr Sunwoo because he was "concerned that … we were getting into a situation where we hadn't received payment for some time". According to Mr Oliver - "On 29 October 1995 I had a meeting with Mr Sunwoo during which I said words to the following effect: 'Henry, we cannot continue to work without payment, as we have now used up almost all of our own savings and are currently not receiving enough to pay our rent. You are in a desperate financial situation and despite all your promises, they may not be worth anything if you go under. We do not even have a proper written contract to confirm what you owe us, only being told to rely upon your word.' He replied using words to the following effect: 'I will always honour my word.' I then said words to the following effect: 'But surely you must realise that we are not financiers of this project.' He replied using words to the following effect: 'You know how hard I am trying to make this work. If someone offers me the right money I would sell it tomorrow.' I said words to the following effect: 'Prior to us coming to Sydney, you said a block of land on the island was ours. What else do you owe us now that we have obtained the Consent, which must surely substantially increase the value of the property and the fact that we have worked full time, sometimes seven days a week, since March and don't say to me that you are going to give me shares in any Trust.' He said words to the following effect: 'I took you off the Trust Share Registrar when I allocated the block of land to you. You have earned the house and land package and you know I need other investors to make it work, but I have to fix up ANZ first.'" 31 Mr Oliver prepared on Lakeside Golf Pty Ltd letterhead a letter "reflecting the previous day's discussions", which Ms Patterson typed. According to Ms Patterson, the letter was "looked at" by the plaintiffs' accountant "because he was a solicitor". Mr Oliver presented it to Mr Sunwoo on 30 October 1995. 32 According to Mr Oliver, when he presented the letter to Mr Sunwoo he said, "Henry, I have prepared this letter which reflects and confirms what you owe us, please read it carefully", and their conversation continued - "After reading the letter he said words to the following effect: 'I am not signing that.' I then said words to the following effect: 'Why not, it's the truth, if not tell me what is wrong and I will change it.' He then said words to the following effect: 'This means you don't trust my word.' I said words to the following effect: 'It's the only true record we have and probably won't be worth the paper its written on if you go under.' After lengthy discussions on the status of the project, latest developments on people he was trying to entice into the project and an update on the ANZ potential actions, I said words to the following effect: 'Well, are you going to sign the letter or not?"

33 Mr Sunwoo signed the letter. 34 The letter of 30 October 1995 was addressed to Optima Developments Pty Ltd, and read - "Dear Chris and Jan RE: CONFIRMATION OF TERMS OF ENGAGEMENT FOR SERVICES RENDERED This letter is to confirm that I, Hun Sunwoo, Director of Lakeside Golf Pty Ltd and Manager of Lakeside Property Trust acknowledge the work and successful performance of Chris Oliver and Jan Patterson in their professional role in which they performed as consultants with Optima Planning & Development Consultants and Optima Developments Pty Ltd. This engagement extends from August 1991 to present and has achieved all expectations for the Lakeside Golf Resort Developments in Wyong. In remuneration for past service, I confirm earlier undertakings to pay you by way of title to Lot 7 (or equivalent alternative number) on the Island within the resort and finished construction of a residence consistent with those planned for the estate which also includes associated taxation and stamp duty commitments. In the event of me losing control of the project, I agree to the remuneration package being converted to an equivalent $(dollar) figure. Yours faithfully, Henry Sunwoo Director" 35 Mr Sunwoo did not give evidence of the conversation on 29 October 1995. According to Mr Sunwoo, when Mr Oliver presented to him the letter of 30 October 1995 Mr Oliver said - "If you want me to continue consulting for you, you need to sign this piece of paper. This piece of paper will only be good down the track if you make a profit out of the project, like we have always intended, but I need a little bit of security at this time just so I know our agreement is formalised". 36 Mr Sunwoo said that he signed because he felt he had no choice, but did not consider that the letter was "of … significance or legal status". 37 Despite Mr Sunwoo's view of it, the letter of 30 October 1995 was plainly contractual, and it was correctly so regarded by the trial judge. Mr Oliver said in his oral evidence, consistently with the terms of the letter, that "it was a way of confirming what he promised us", and that it recorded "my understanding of contractual arrangements". 38 There was a great deal of cross-examination exploring the understandings and intentions of Mr Oliver and Mr Sunwoo, including in relation to the letter of 30 October 1995. The agreement in October 1995, however, must be found in the terms of the letter understood in the circumstances in which it came into existence. 39 The conversation on 29 October 1995 and the letter of 30 October 1995 were the culmination, under the influence of the defendants' desperate financial position and the possibility that the project would founder or be sold off, of the discussions of the basis on which the plaintiffs would be remunerated beyond the monthly payments. 40 In the conversation on 29 October 1995 Mr Oliver spoke of "a proper written contract to confirm what you owe us". What was owed was the present unpaid and the future reward for the plaintiffs' provision of town planning services. That is apparent from the circumstances in which Mr Oliver approached Mr Sunwoo, concerned about not being paid, and can be seen in his reference to what else Mr Sunwoo owed on top of saying that a block of land on the island was theirs. When he described the letter to Mr Sunwoo, Mr Oliver said that it "confirms what you owe us". 41 The letter was then quite clear in this respect. It had the heading "Confirmation of Terms of Engagement for Services Rendered". It referred to the engagement from August 1991 to the present, and described the payment by way of transfer of lot 7 or an equivalent lot with finished construction of residence as "remuneration for past service". It referred to the monetary equivalent as a conversion of "the remuneration package". 42 In my opinion, the agreement was that the plaintiffs' remuneration beyond the monthly payments would be the "remuneration package" described in the letter. There was no longer any question of reasonable remuneration; the reward was fixed. There was in the circumstances earlier noted good reason for the plaintiffs to agree upon its measure, and to have a record of their entitlement to reward for provision of town planning services, as what Mr Oliver described as "the only true record we have". 43 The trial judge found that the agreement was conditional upon provision of town planning services until completion of the project. That was not mentioned in the conversation on 29 October 1995, or stated in the letter of 30 October 2005. The trial judge regarded it as a continuation of the conditionality found in the promised transfer of land as at early 1994. The plaintiffs accepted the conditionality of their entitlement to their transfer of lot 7 or an equivalent alternative lot with a constructed residence. Since in the view I take that entitlement was in substitution for an entitlement to other remuneration beyond the $1,000 per month, the appeal fails. 44 The plaintiffs suggested that it "defies commonsense" that they would have given up an entitlement to be paid reasonable remuneration for the contingency of the house and land or money in lieu. It is not uncommon for services to be provided in return for a "success fee", with no reward if there is not success but a substantial reward if there is success. The plaintiffs also placed considerable reliance on evidence from Mr Sunwoo to the effect that he accepted that, if he could not give the plaintiffs land for the work they had done, he had to give them money. The evidence was not particularly clear, as to the time in the relationship to which the evidence related and what was meant; it was in the category of the understandings and intentions earlier mentioned. I am not persuaded by it to a contrary view.

The result 45 In my opinion, the appeal should be dismissed with costs. 46 BRYSON JA: I agree with Giles JA. **********

31/10/2006 - incorrect number - Paragraph(s) coversheet

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