(2002) 11 BPR 20,241
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Source
Original judgment source is linked above.
Catchwords
[2017] HCA 12
Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640[2014] HCA 7
McMillan v Dunoon [2005] VSC 440
Mills v Ruthol Pty Ltd [2002] NSWSC 294(2002) 10 BPR 19,381
Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212(2002) 11 BPR 20,241
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104[2015] HCA 37
Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1
Re BarrettEx parte Young v NM Superannuation Pty Ltd (1992) 34 FCR 508(1992) 106 ALR 549
Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514[2019] HCA 13
Roberts v Investwell Pty Ltd (in liq) [2012] NSWCA 134(2012) 88 ACSR 689
Ruthol Pty Ltd v Mills [2003] NSWCA 56
Judgment (16 paragraphs)
[1]
Unit Trust (First Defendant)
Amal Security Services Pty Ltd (Fifth Defendant)
Representation: Counsel:
MW Young SC and JP Nathan (Plaintiff)
DR Stack (First Defendant)
[2]
Solicitors:
SK Law (Plaintiff)
ERA Legal (First Defendant)
File Number(s): 2019/390140
Publication restriction: Nil
[3]
JUDGMENT
The plaintiff in these proceedings is Property Holdings Group Pty Ltd (PHG).
The first and only active defendant is Rosehill Panorama Pty Ltd (Administrators Appointed) (Panorama).
There have been, at different times, four other defendants. The Court was informed at the hearing that PHG's claim against the second and third defendants had been discontinued because those defendants had acknowledged that the charge claimed by PHG over properties owned by Panorama had priority over the claims of those defendants and executed a priority deed with PHG that had that effect. The second further amended statement of claim removed as a party the fourth defendant, which had a mortgage over the properties of Panorama that PHG claimed were subject to its charge. The Court was informed that the fourth defendant's mortgage had been discharged, with the effect that it was open to PHG to establish that it was entitled to a charge over the relevant properties of Panorama in a way that was free of that mortgage. The Court was informed that the fifth defendant had been joined because it had lodged a caveat against the titles to properties that were subject to the charge claimed by PHG. The fifth defendant has not filed an appearance or appeared to defend the claim made against it. It has not been necessary for the Court to address the claim that has been made against the fifth defendant.
[4]
Consequences of appointment of administrators to Panorama
On 14 July 2023, Suelen McCallum and Antony Resnick were appointed as the joint and several administrators of Panorama under Pt 5.3A of the Corporations Act 2001 (Cth). Ms McCallum did the Court the courtesy of explaining the administrators' position concerning the defence of PHG's claim against Panorama by affidavit affirmed by her on 19 October 2023. Briefly, Panorama is a member of a group of 76 companies known as the Toplace Group. Ms McCallum and Mr Resnick have been appointed as joint and several administrators of 57 of those companies. Ms McCallum explained the financial circumstances of the companies of which she and Mr Resnick are administrators in some detail. It is not necessary to record that detail, as it is not relevant to the manner in which the Court is required to determine PHG's claim against Panorama. Relevantly, Ms McCallum explained why the administrators had decided that the circumstances of Panorama were such, when considered in the context of the circumstances of all of the other companies for which Ms McCallum and Mr Resnick have been appointed as administrators, that Panorama would only conduct the defence of PHG's claim in the limited manner that I will now explain.
Prior to the appointment of the administrators, the directors of Panorama had caused the company's legal representatives to prepare and serve evidence that provided a comprehensive defence to PHG's claim in accordance with the defence filed in response to PHG's second further amended statement of claim. That included the service of reports of expert witnesses in response to the reports of expert witnesses served by PHG. The expert witnesses had engaged in conclaves, and joint reports had been prepared. The administrators have elected to cause Panorama not to tender any of the expert evidence that had been prepared in its defence. Consequently, following the tender by PHG of its own expert evidence, in the absence of any expert evidence in response, the joint reports would become superfluous and would not be tendered.
At the hearing, counsel appeared for Panorama. He explained that, subject to one exception that I will explain below, his instructions were not to contest PHG's claim that Panorama was liable to it, or to contest the amount of the liability, if proved. Panorama's position was that PHG should be required to satisfy the Court on the evidence tendered by it that Panorama was liable to PHG for a particular amount. In that respect, the Court would be required to respond to PHG's claim that Panorama was liable to it for a particular amount as if PHG's claim was an undefended claim for an unliquidated sum. Counsel informed the Court that his primary instructions were to appear to ensure that PHG's claim that it was entitled to a charge over specified properties owned by Panorama to secure the amount of the debt that it claimed that it was owed by Panorama was properly contested. The essence of Panorama's response, among other submissions, was that the conditions upon which Panorama could have become indebted to PHG had not been satisfied, so that even if PHG was entitled to a charge over Panorama's properties, as claimed, any liability that PHG could establish was a liability to pay damages, which was not secured by the charge, and was not the debt claimed by PHG, being the alleged obligation to pay the Development Fee, the meaning of which is explained below.
[5]
Prayers for relief
It will be convenient now to set out the prayers for relief in PHG's second further amended statement of claim, insofar as orders are sought against Panorama. They are:
Judicial sale
1. A declaration that the Plaintiff has an equitable charge over the following properties:
[The street addresses and title details of 11 properties at Rosehill are then set out]
("the Land") which secures an amount of money equal to the Development Fee payable to the Plaintiff by the First Defendant pursuant to the Deed of Assignment dated 22 December 2014.
2. An order for judicial sale of the Land, with the Plaintiff appointed to effect a sale of the Land.
3. By way of facilitation of order 2, an order that the First Defendant deliver to the Plaintiff vacant possession of the Land within 14 days of the making of this order.
4. By way of enforcement of Order 3, [judgment] to the Plaintiff as against the First Defendant for possession of the Land, and leave to issue forthwith a Writ of Possession, but with that Writ to lie in the Registry for a period of 14 days from the making of this order.
5. An order that the Land be sold by the Plaintiff in such manner and on such terms as the Court may in these orders and from time to time direct, but except to the extent of such direction, as the Plaintiff sees fit.
6. An order that the Plaintiff is to act at all times in relation to the selling of the Land in accordance with the duties owed by a mortgagee in exercising a mortgagee's power of sale
7. The Plaintiff may sell the different parts [sic] Land together or separately or in whatever combination the Plaintiff reasonably considers is both appropriate and will fulfil the Plaintiff's duties in selling the Land.
…
11. An order that the sale proceeds of each part of the Land be applied as follows:
(a) first, in payment of any reasonable costs and expenses incurred by the Plaintiff in the sale of the Land;
(b) [deleted]
(c) second, in payment of any monies owing to the Plaintiff secured by the Plaintiff's charge over that part of the Land; and
(d) third, in payment of any monies owing to the Second, Third and Fifth Defendants secured over that part of the Land in order of relative priority between those Defendants; and
(e) any surplus funds to be paid to the First Defendant.
12. An order that the Plaintiff is hereby appointed to transfer the Land (and any part of it) to the purchaser or purchasers thereof upon any sale of the same.
13. Such further or other order as is required in relation to the judicial sale of the Land.
14. Liberty to the parties, and to any other person claiming an interest in any part of the Land, to apply in relation to any matter concerning the sale of any part of the Land and/or distribution of the sale proceeds of any part of the Land.
…
Charge for Development Fee
16. A declaration that the Development Fee secured by the plaintiff's charge over the Land is in the sum of $7,195,000.00.
16A. In the alternative, a declaration that the Development Fee secured by the plaintiff's charge over the Land is in the sum of $3,475,000.
Damages
17. Damages as against the first defendant for breach of contract.
Other Relief
18. Costs.
19. Interest pursuant to s. 100 of the Civil Procedure Act 2005 (NSW).
20. Such further or other order as the Court sees fit.
[6]
Summary of the basis of PHG's claim
In summary, the primary claim made by PHG is for a declaration that it is entitled to an equitable charge over specified properties that "secures an amount equal to the Development Fee payable by Panorama pursuant to the Deed of Assignment dated 22 December 2014", a declaration as to the amount of the Development Fee, and orders for the judicial sale of the properties for the purpose of PHG recovering the Development Fee.
The alternative claim for damages in prayer 17 is made on the basis that the conditions set out in the Deed of Assignment for the obligation upon Panorama to pay the Development Fee have not been satisfied because of conduct by Panorama in breach of the Deed of Assignment. The utility of this alternative remedy to PHG is questionable, because Panorama may be insolvent and PHG accepts that the term of the Deed of Assignment that creates the charge in favour of PHG would secure Panorama's obligation to pay the Development Fee, but not any obligation to satisfy an award of damages for breach of the Deed of Assignment.
In the manner that I will explain below, PHG claims that it is entitled to the benefit of the charge to recover the Development Fee, even though the conditions for that obligation to arise have not been satisfied, because the failure of the conditions were caused by the breach by Panorama of its obligations under the Deed of Assignment. PHG claims that it is entitled to relief on the basis that the Development Fee is payable by the combined operation of the principles that equity regards as done that which ought to be done, and that a party is not entitled to take advantage of its own wrong. Thus, PHG submits that it is entitled to relief as if the conditions for the obligation to pay the Development Fee had been satisfied, contrary to fact.
[7]
Relevance of the pleadings to the cases as presented
At the hearing, PHG presented its case on the basis of the opening written submissions provided by its counsel to the Court. Those submissions omitted reference to certain allegations that were made in the second further amended statement of claim. PHG accepted that the Court should determine its claim as contained in the written submissions. Accordingly, it will not be necessary for the Court to consider in detail the allegations of fact in the second further amended statement of claim.
As a result of the election by the administrators of Panorama not to tender the evidence that had been served that was material to the merits of PHG's claim, other than in respect of what may conveniently be called the security issues, it will also not be necessary for the Court to examine in detail the allegations made in the defence filed by Panorama. Panorama's defence is as set out in written submissions provided by counsel for Panorama, as refined orally during the course of the hearing.
[8]
Background summary
I will start by setting out a summary of the events that form the background to this dispute, which will assist an understanding of the operation of the Deed of Assignment, to which I will then direct my attention. The discussion of the terms of the Deed of Assignment will lead to an explanation of the legal issues that must be determined by these reasons. It will then be necessary to consider the evidence led by PHG for the purpose of making the findings of fact that are necessary for the determination of PHG's claim. Finally, I will set out my conclusions and explain the issues that must be addressed in order to bring these proceedings to a conclusion.
The dispute arises out of a proposal initiated by PHG to acquire adjoining properties in Rosehill for the purpose of their aggregation into a significant development site that would support the construction of a substantial number of residential and commercial units following the issue of development approval by the Parramatta City Council (the Council). In the period up to the 22 December 2014 date of the Deed of Assignment, PHG had negotiated and entered into purchase options with the owners of eight properties, and was in the process of negotiating a contract to purchase an additional property. There were other adjoining properties that were suitable for inclusion in the proposed development. It is not necessary to identify separately the properties that were already the subject of purchase options. I will call them the "existing option properties". The property that was the subject of the negotiation for the exchange of a contract for sale must be treated differently, and is called 41 Oak Street. The two adjoining properties that might have been included in the development are called 15 and 17 Hope Street. These three properties are the subject of separate issues that I will explain below.
By 22 December 2014, PHG had obtained a residential development scheme prepared by Architecture Design Studios Pty Ltd dated 20 October 2014. The parties called this scheme the "ADS Scheme".
The essence of the agreement between PHG and Panorama embodied in the Deed of Assignment was that PHG would assign the options for the purchase of the existing option properties to Panorama and arrange for Panorama to purchase 41 Oak Street instead of PHG. Panorama would then lodge a development application with the Council generally in accordance with the ADS Scheme, and pursue that application to its resolution by the Council. The structure of the development scheme was fluid in that it could respond to the requirements of the Council, while being generally in accordance with the ADS Scheme. Panorama was given a discretion as to its acceptance of any conditions to the grant of development consent imposed by the Council. Following the contemplated issue of the development consent, Panorama was required to pay PHG a Development Fee, as calculated in accordance with the formula in the Deed of Assignment. While the development scheme the subject of the development application was required to comprise not less than 250 units, the Deed of Assignment, as ultimately varied, made the calculation of the Development Fee dependent on the number of units for which development consent was given up to a maximum of 275.
[9]
Analysis of the Deed of Assignment
I will now address the relevant terms of the Deed of Assignment. As stated, that deed was made on 22 December 2014. It was varied by four subsequent Deeds of Variation. The only relevant variations were made by the Second to Fourth Deeds of Variation that were dated respectively 25 February 2015, 11 March 2015 and 16 March 2015.
Recital A to the Deed of Assignment stated:
A. PHG has entered into options to purchase the properties set out in Annexure "A" on certain terms.
Annexure A listed the street addresses and details of the option agreements for the existing option properties. It also listed 41 Oak Street. Notwithstanding what was said in Recital A, PHG did not have an option to purchase 41 Oak Street. In that respect, Recital A was wrong. Annexure A stated in respect of 41 Oak Street that a contract had been issued and was awaiting exchange. The total of the option fees that were listed in Annexure A in respect of the existing option properties was $278,000, which I infer had been paid by PHG. Annexure A also listed option extension fees for those properties to a total of $121,500. It is not clear whether PHG had been required to pay any extension fees, or whether such fees might become payable in the future. The stated option fee for 41 Oak Street was $200,000, but it appears that the amount was the deposit that would be required to be paid when contracts for sale were exchanged. The total purchase price for the existing properties and 41 Oak Street was stated to be $15,975,000.
Recital B then stated that PHG had "agreed to assign all of its interest in the Options for an assignment fee calculated and payable as set out herein".
"Options" was defined in clause 1(h) as meaning "the options referred to in Annexure "A" attached". That wording gives rise to potential confusion. It might mean only the options for the purchase of the existing option properties. But, as 41 Oak Street was treated as if an option had been acquired for its purchase, and an option fee was stated, it might mean that 41 Oak Street was intended to be treated as if it was also the subject of an Option.
Whereas Recital B had stated that PHG was to receive "an assignment fee calculated and payable as set out herein" there is also some scope for confusion. Clause 1(c) contained a definition of Assignment Fee as meaning "$1,000,000.00". Clause 3 provided:
3. Panorama must pay the Assignment Fee to PHG as follows:
(a) $205,000 on the date hereof to be drawn in favour of the vendor of the 41 Oak Contract; and
(b) $795,000 on or before 16th January 2016 and payable to S K Law Trust Account - to be held in trust on the terms as set out in Clause 6.
[10]
Further issues arising out of the terms of the Deed of Assignment
There is an issue between the parties as to what is meant by "purchased properties" in clause 13(a) and by "the properties which have been purchased" in clause 13(b), in relation to how the provision applies to 41 Oak Street. The position initially stated by Panorama, in pars 38 to 40 of its written submissions, was that 41 Oak Street was not one of the "purchased properties", because the reference in clause 13(a) to there being a charge upon "the Options" should be carried into the reference in the same provision to "purchased properties", and the definition of "Options" in clause 1(h) as meaning "the options referred to In Annexure "A" attached", had the combined effect of excluding 41 Oak Street from the properties the subject of the charge. That is because, as explained above, although 41 Oak Street is listed in Annexure A, there was no option agreement, and what was described as the option fee was really the deposit to be paid under contracts of sale to be exchanged. In its submissions in reply, PHG responded to this submission, at pars 35 and 36, by accepting Panorama's argument, but on the assumption that its effect was that, as 41 Oak Street was to be excluded from the meaning of "purchased properties", it would not be the subject of the charge, but also that the purchase price of that property would not be treated as part of the Purchase Price in the formula for the calculation of the Development Fee. As the purchase price for 41 Oak Street was $2,025,000, that amount would not be a deduction in the calculation. Consequently, the amount of the Development Fee would be increased from $6,195,000 to $8,220,000. That advantage to PHG, which it was happy to accept, would be balanced against the omission of 41 Oak Street as a property the subject of the charge.
In his oral submissions, counsel for Panorama explained that its position was that, although 41 Oak Street was not within the meaning of the "purchased properties", its price was still part of the Purchase Price required to be deducted in the process of calculating the Development Fee. That was because the definition of Purchase Price in clause 1(i) included the price of "the properties referred to in Annexure "A"", without reference to whether there was an option to purchase those properties. Thus, according to Panorama, the price for the purchase of 41 Oak Street was part of the Purchase Price and was required to be deducted, but the property was not the subject of the charge.
[11]
Findings based on the expert evidence
I will now determine the findings that need to be made on the basis of the expert evidence that is before the Court.
As explained above, the only expert evidence is the evidence in chief of PHG's expert witnesses. Panorama did not tender the reports in chief of its expert witnesses. Consequently, no joint reports of the expert witnesses were tendered.
Not only did Panorama not tender any expert evidence, it did not make any significant submissions concerning the effect of the expert evidence that was tendered by PHG. Consequently, PHG's submissions focused on the summary of their opinions provided by its expert witnesses in their reports.
The primary questions addressed by PHG's expert witnesses were: first, the nature of the development scheme actually pursued by Panorama, the history of that scheme through the planning process, and the likelihood of that scheme receiving development approval; secondly, the nature and likelihood of approval of the ADS Scheme, had it been pursued by Panorama; thirdly, the nature and likelihood of approval of the AE Scheme, had it been pursued by Panorama; fourthly, the likelihood of whether, if Panorama had pursued the ADS Scheme, the effect of the interplay between the Council's officers and Panorama would have been the ultimate submission of a development scheme substantially the same as the AE Scheme; fifthly, whether any development scheme was likely to be approved; and sixthly, whether the AE Scheme or any varied scheme following the submission of the ADS Scheme that received planning approval would have been generally in accordance with the ADS Scheme.
These issues ultimately raised questions of town planning law and practice. Consequently, the primary expert witness in PHG's case was Giovanni Cirillo, a town planning expert. PHG also tendered evidence from other witnesses whose expertise concerned essential but subsidiary issues relevant to the town planning process.
PHG's expert evidence was based upon a report dated 22 December 2021 prepared by Rohan Dickson of AE Design Partnership Pty Ltd, who is an urban designer, architect and landscape architect. Mr Dickson's report developed what he described as viable development schemes for the properties listed in prayer 1 of the second further amended statement of claim. Those properties included the existing properties, 15 and 17 Hope Street and 43 Oak Street. That was apparently done on the basis that, even though PHG was only able to assign options over the existing option properties to Panorama, it was able to cause Panorama to become the purchaser of 43 Oak Street, and, at the time of the Deed of Assignment, it was contemplated in fact by the parties that Panorama would be able to add 15 and 17 Hope Street to the development site.
[12]
Legal principles governing the construction of contracts
The principles that govern the construction of contracts are well-established. Panorama propounded the following principles, which were specifically adopted by PHG. I am content to accept the principles agreed between the parties, which I will now set out, as extracted from Panorama's Outline of Submissions dated 24 October 2023:
9. First, the terms of the contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties: see Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16].
10. Second, the contract should be construed by reference to the language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract: see Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR [514]; [2019] HCA 13 at [44].
11. Third, the starting point in construction is the language of the contract. If an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning: see Mount Bruce Mining [Pty Ltd] v Wright Prospecting [Pty Ltd] (2015) 256 CLR 104; [2015] HCA 37 at [48].
12. Fourth, the whole of the contract has to be considered in order to construe any part of it and the construction of each clause must be, as best it can, harmonious with the whole of the contract: see Australian Broadcasting Commission v Australasian Performing Right Association [Ltd] (1973) 129 CLR 99 at 109.
13. Fifth, where the words used in the contract are unambiguous, then the Court will give effect to them even though that may appear unreasonable. The Court has no power to amend contracts in order to avoid inconvenient or unjust conclusions: see Australian Broadcasting Commission v Australasian Performing Right Association [Ltd] (1973) 129 CLR 99 at 109.
14. Sixth, where the words used are capable of two constructions, the Court will prefer the construction which avoids an inconvenient or unjust conclusion. The Court will adopt this approach even if that construction is not the most obvious or is grammatically incorrect: see Australian Broadcasting Commission v Australasian Performing Right Association [Ltd] (1973) 129 CLR 99 at 109.
15. Seventh, in some cases, it may be necessary to have recourse to events, circumstances and things external to the contract in order to identify the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating": see Mount Bruce Mining [Pty Ltd] v Wright Prospecting [Pty Ltd] (2015) 256 CLR 104; [2015] HCA 37 at [49].
16. Eighth, a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience: see Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35].
17. Ninth, generally, but not invariably, the words of a contract should be interpreted in a way which gives them an effect rather than a way which makes them redundant: see XL Insurance Co SE v BNY Trust Company of Australia [Ltd] [2019] NSWCA 215; (2019) 20 ANZ Insurance Cases 62-211 at [72].
[13]
Did the Deed of Assignment create a valid charge?
PHG's argument that clause 13(a) created a valid charge over the relevant property was based upon the straightforward wording of the provision, that purports to have that effect.
Panorama responded to PHG's claim by making submissions concerning what it described as five difficulties that it submitted stood in the way of PHG's success.
The first difficulty concerned the claim for a declaration in prayers 1(d) and (e) of the second further amended statement of claim, that PHG has an equitable charge over 15 and 17 Hope Street. As I have already explained above, PHG has accepted that 15 and 17 Hope Street should be excluded as subjects of the charge that it claims, because clause 14 of the Deed of Assignment was ultimately deleted by one of the Deeds of Variation.
The second difficulty raised by Panorama concerned the status of 41 Oak Street. The position ultimately adopted by Panorama was that 41 Oak Street was a property whose Purchase Price was required to be subtracted in the application of the formula for calculating the Development Fee in clause 1(d) of the Deed of Assignment, but that 41 Oak Street was not a purchased property that could be the subject of a charge, if a charge was created by clause 13(a) of the Deed of Assignment. As stated above, Panorama based the first of these propositions on the fact that the definition of Purchase Price in clause 1(i) included the price of "the properties referred to in Annexure "A"", without reference to whether there was an option to purchase those properties. The meaning of the definition of "Purchase Price" is plain, and PHG accepted that the purchase price of 41 Oak Street was required to be deducted in the process of calculating the Development Fee. The issue between the parties was whether, that being so, 41 Oak Street would be the subject of any charge created by clause 13(a) on the basis that it was a purchased property.
The question therefore is whether Panorama's submission is correct that 41 Oak Street was not intended to be purchased property for the purposes of clause 13(a), because it was not the subject of one of the Options charged by that provision, and there was no option for the purchase of 41 Oak Street that was assigned to Panorama under the Deed of Assignment, notwithstanding that the property was listed in Annexure A.
[14]
Is a Development Fee currently secured by the charge?
The position that has been reached is that the Court has found that Panorama has breached clause 8 of the Deed of Assignment, because it failed to lodge and pursue the Development Application, as defined, as soon as reasonably practicable after the date of the Deed. The development scheme that was the subject of the application that it made and pursued did not satisfy the definition, and Panorama's response to the events that happened in the approval process did not have the effect of varying the development scheme so that it accorded with the ADS Scheme. It is clear from the circumstances in which the administrators have been appointed for Panorama and the other companies in the Toplace Group that Panorama is no longer able to attempt to perform its obligations under the Deed of Assignment, albeit late. No suggestion was made on behalf of Panorama that there was any real possibility that it remained able to perform its obligations.
Consequently, PHG will be entitled to an award of damages to compensate it for the loss of the opportunity to be paid the Development Fee by reason of Panorama's breach of contract. The quantification of those damages is a subject that will be addressed below.
The conditions precedent to Panorama becoming obliged at law to pay the Development Fee to PHG have not been satisfied, and no longer can be satisfied. On the evidence, the Council will not approve what has been called the Alternate Proposal, and in the absence of the lodgement and pursuit of a development application satisfactory to the Council, a Development Consent in accordance with the Deed of Assignment has not been issued, and will not be issued. Consequently, the Development Fee cannot be calculated, because an essential integer of the formula is the number of Units, and that is the number of dwellings approved pursuant to the Development Consent. In the absence of the issue of the Development Consent, the 60 day period for the payment of the Development Fee has not commenced.
The Court has found that clause 13(a) of the Deed of Assignment created a valid equitable charge over the existing option properties and 41 Oak Street. The Court has accepted PHG's submission that the only obligation secured by the charge is the obligation imposed upon Panorama to pay the Development Fee to PHG.
[15]
Conclusion
The result is that the Court has found that PHG has a valid equitable charge over the existing option properties and 41 Oak Street. Panorama did not suggest that an equitable charge could not validly be created to secure a future debt that was contingent upon the chargor performing a contractual obligation to take steps to achieve the satisfaction of the contingency upon which the future existence of the debt depended.
If that is true, it would follow that PHG is in principle entitled to the declaration sought in prayer 1 of its second further amended statement of claim, limited to the properties over which the charge has been found to exist.
PHG has not established a present entitlement to the orders sought in prayers 2 to 14 inclusive and 16 and 16A of its second further amended statement of claim. That is because a consequence of Panorama's breach of the Deed of Assignment is that the contingency for the existence of the debt secured by the charge has not been satisfied.
Given Panorama's present financial circumstances and the appointment of the administrators, it may be that the contingency will now never be satisfied, although the outcome is uncertain as it is not now known what the result of the administration of Panorama will be.
The charge created by the Deed of Assignment is protected by a caveat. The subsistence of that caveat will affect the course of the administration of Panorama, and what the administrators are able to do with the properties that are the subject of the charge. PHG's charge over the properties may have a value, even if presently an indefinite one, assuming the administrators will look to selling the properties the subject of the charge.
The parties did not address these issues in their submissions.
PHG is entitled to an award of damages against Panorama as sought in prayer 17 of the second further amended statement of claim.
In the events that have happened, PHG has quantified the damages that it claims as $6,195,000, on the basis that, if Panorama had performed its obligations under clauses 8 and 18 of the Deed of Assignment, the evidence establishes on the balance of probabilities that, even though in principle the consequence of Panorama's breach was that PHG lost the opportunity that the Council would have issued a Development Consent that would have approved the number of Units that would have entitled PHG to be paid by Panorama the maximum amount of the Development Fee that could be payable under the Deed of Assignment, the Council would in fact have issued a Development Consent on that basis.
[16]
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: 07 December 2023
Arrangements were then made for counsel for Panorama to retire in order to enable counsel for PHG to present its case to establish that Panorama was indebted to PHG for a particular sum. A date during the time fixed for the hearing was agreed for counsel for Panorama to return to participate in the submissions on the issues concerning the existence and the effect of the charge claimed by PHG. That was an issue that was able to be determined upon the basis of the transaction documents that it was necessary for PHG to tender in order to establish that Panorama was indebted to it for a particular sum, together with Panorama's own counterparts of those documents.
During the hearing, PHG revised the claims in prayers 16 and 16A to $6,195,000 and $2,695,000 respectively. During the course of the hearing, the parties reached an agreement that, as between the two approaches to calculating the Development Fee, the approach in prayer 16 was in principle the correct one. However, during the hearing, a new issue was raised by Panorama that, if correct, would reduce the Development Fee below $6,195,000. It will be convenient to explain that issue after the relevant terms of the Deed of Assignment have been examined.
The Court was informed by counsel for PHG that, if PHG establishes that an order generally in the form of that sought in prayer 11 should be made, the formulation of the order should accommodate the fact that it has been learnt by PHG that the Chief Commissioner for State Revenue has a priority charge over the properties the subject of the charge claimed by PHG, and also that another claimant to an interest in the properties must be accommodated.
I have omitted prayer 15 above, as it sought a declaration as to the rights of PHG as against the second, third and fifth defendants. PHG's need for the declaration has been superseded for the reasons given above.
In fact, Panorama submitted to the Council a development application that varied significantly from the ADS Scheme, and in particular, sought consent for the construction of 700 units in a number of buildings that were significantly higher than what was contemplated by the ADS Scheme. The Council declined to consent to the development application that was submitted to it. Consequently, the condition stipulated in the Deed of Assignment for the Development Fee to become payable to PHG was not satisfied, but that was because Panorama did not lodge the development application contemplated by the Deed of Assignment.
The evidence has established that the Council would also not have given its consent to the ADS Scheme, if the development application had conformed precisely with that scheme. PHG's case was that the Deed of Assignment did not mandate that the development application be precisely in accordance with the ADS Scheme, but only that it be "generally in accordance" with that scheme. The evidence submitted by PHG propounded an alternative scheme prepared by a firm called AE Concept Design Pty Ltd that it called the "AE Scheme". PHG's case was that its expert evidence established that more probably than not, if a development application had been lodged by Panorama in the terms of the AE Scheme, it would have received the consent of the Council. PHG claimed that the AE Scheme satisfied the criterion that it was generally in accordance with the ADS Scheme. PHG submitted that the Deed of Assignment obliged Panorama to lodge a development application to the Council that accorded with the AE Scheme. Alternatively, PHG submitted that, even if the Deed of Assignment only required Panorama to lodge a development application for the ADS Scheme, a combination of the obligations in the Deed of Assignment that Panorama pursue the development application and that it must take all steps reasonably required to give effect to the transaction contemplated by the Deed of Assignment, in conjunction with the ordinary practices of the Council and applicants for development consent whereby adjustments would be made to development schemes where necessary to obtain the Council's approval, adjustments would have been made to the ADS Scheme in the ordinary course of the approval process that would have led to the result that the Council would have given its consent to a development scheme substantially the same as the AE Scheme.
In its defence, Panorama had pleaded a number of substantive responses to the case made by PHG. First, Panorama contended that the Deed of Assignment was frustrated by the refusal of the Council to give its consent to the development application lodged by Panorama. Secondly, Panorama claimed that the AE Scheme did not satisfy the criterion that it was generally in accordance with the ADS Scheme. Thirdly, Panorama submitted that the Development Fee had not become payable to PHG as the condition precedent to the liability arising, being the issue of the Development Consent by the Council had not been satisfied, and, moreover, Panorama was given by the Deed of Assignment an absolute discretion that would have entitled it to decline to accept any conditions imposed by the Council upon development approval. Finally, Panorama claimed that the AE Scheme was not in any event economically viable, so the Deed of Assignment did not oblige Panorama to lodge a development application with the Council that accorded with the AE Scheme.
The consequence of the administrators having elected not to cause Panorama to tender the expert evidence that it had served in response to PHG's evidence is that Panorama did not have an evidentiary basis to pursue the first and the final responses that have been set out above. Counsel for Panorama explained at the hearing that Panorama maintained the second response, but only on the basis of a submission that the Court should not be satisfied, having regard to the expert evidence tendered by PHG, that the AE Scheme was generally in accordance with the ADS Scheme, as was required by the Deed of Assignment. This was the exception referred to above to the administrators' decision not to cause Panorama to contest the issues of liability and quantum. Panorama also pursued the third response, but that was because it depended upon the legal effect of the Deed of Assignment, which was an aspect of the case that Panorama did propound at the hearing that whatever relief PHG was entitled to as against Panorama, that relief was not a right that on the proper construction of the Deed of Assignment was secured by any charge that PHG may succeed in persuading the Court was created in its favour.
The Deed of Assignment therefore required Panorama to pay part of the $1,000,000 to the vendor of 41 Oak Street, which was apparently the deposit under the contract for sale. (The difference between the $205,000 and the $200,000 referred to in Annexure A is not explained).
The Assignment Fee to be actually paid to PHG, subject to the satisfaction of the requirements in clause 6, was therefore only $795,000. It is not entirely clear whether the reference in Recital B to "an assignment fee calculated and payable as set out herein" was intended to refer only to the Assignment Fee, or whether in addition it was intended to encompass PHG's entitlement to the Development Fee, and also an additional reward in the form of the transfer of a commercial or retail lot following the completion of the development, as was required by clause 11. I interpolate that PHG has not made a claim in these proceedings based upon the fact that Panorama has not complied with clause 11.
It is relevant to note that an effect of clause 1(e) of the Second Deed of Variation was to delete clause 3(b). The reason for that variation is not established. Clause 1(a) of the Second Deed of Variation amended the definition of Assignment Fee to read "$205,000.00 (of which receipt is acknowledged)". The "receipt" acknowledged was the receipt of the vendor of 41 Oak Street per clause 3(a). These amendments had the effect that no part of the Assignment Fee as originally defined was to be payable to PHG. So, while at the time of the Deed of Assignment it may have been intended that PHG was to be paid $795,000 in return for the assignment of the Options, with the potential entitlement to receive the Development Fee and the transfer of the unit as being additional consideration, the effect of the Second Deed of Variation was that the only recompense that PHG could receive for its exertions in obtaining the Options and the ADS Scheme was the receipt of the Development Fee and the transfer of the unit.
Clause 8 of the Deed of Assignment provided:
8. Panorama must, as soon as reasonably practicable, and at its cost, lodge and pursue the Development Application and diligently pursue any rights of appeal if Development Consent is not granted.
In association with this clause, clause 18 provided:
18. Each party must take all steps, execute all documents and do everything reasonably required by the other party to give effect to the transactions contemplated by this Deed.
"Development Application" was defined in clause 1(e) in the following terms:
(e) Development Application means the development application to be lodged by Panorama for a substantial residential flat building comprising not less than 250 units and otherwise generally in accordance with [the ADS Scheme].
"Development Consent" was defined in clause 1(f) as follows:
(f) Development Consent means the consent to the Development Application on terms and conditions acceptable to Panorama in its absolute discretion.
Thus, even though the combined effect of clauses 8 and 18 and the definition of Development Application was that Panorama was obliged to lodge and pursue a development application in the terms required by the Deed of Assignment, if the Council issued its consent subject to conditions, Panorama had an absolute discretion not to accept the conditions, in which event even though in fact a development consent had been issued, that event would not satisfy any requirement that depended upon the issue of the Development Consent, as defined.
Clause 10 is one of the primary provisions upon which PHG's claim is based. It provided:
10. Panorama must pay the Development Fee on or before the later of 60 days after receipt by Panorama of the written Development Consent and any time limit for lodging an appeal has expired.
If a Development Consent had been issued by the Council, that event would have triggered the obligation of Panorama to pay PHG the Development Fee. That event has not happened in the events that have occurred.
"Development Fee" was originally defined in clause 1(d) of the Deed of Assignment. That provision was varied by the Third and Fourth Deeds of Variation, and in its final form provided:
(d) Development Fee means $85,000 × Units (to a maximum of 275) LESS the Purchase Price LESS the Assignment Fee LESS $1,000,000.
"Units" remained as defined in clause 1(j) as follows:
(j) Units means the number of dwellings approved by Parramatta City Council or The Land & Environment Court pursuant to the Development Consent.
Consequently, the potential amount of the Development Fee was not known at the date of the Deed of Assignment. Its amount would depend upon the number of Units permitted by the Development Consent, and might be varied during the approval process in response to the requirements of the Council. The actual number of Units cannot be known given the absence of a Development Consent.
"Purchase Price" was defined in clause 1(i) in the following terms:
(i) Purchase Price means the aggregate price paid by PHG and/or Panorama for the purchase of the properties referred to in Annexure "A" and Clause 12 if applicable.
The reference in this provision to clause 12 is a plain error, as clause 12 is a provision that would require Panorama to appoint a selling agent associated with PHG to sell the completed Units, if the development scheme was executed. It is evident that the correct reference was to clause 14, which provided:
14. The parties agree to negotiate the inclusion of 15 and 17 Hope Street in the proposed development. If 15 and 17 Hope are included then the provisions of this agreement will apply as if 15 and 17 Hope were included at the date hereof.
It may be that the intent of this provision was that, if Panorama was successful in acquiring 15 and 17 Hope Street, those properties would be treated in the same way as the properties listed in Annexure A, or at least the existing option properties that were so listed. In that case, the application of the formula for the calculation of the Development Fee would be affected. It is not necessary to pursue this issue, because, although clause 1(b) of the Second Deed of Variation corrected the error by varying the reference in clause 1(i) of the Deed of Assignment from clause 12 to clause 14, a manuscript addition of clause 1(j) to the Second Deed of Variation provided: "14 clause 14 is deleted". Consequently, as was agreed by the parties in their submissions, the effect of the deletion of clause 14 is that, for whatever purpose the amount of the Development Fee might be calculated, it is immaterial whether or not 15 and 17 Hope Street were acquired and were included in the development scheme lodged with the Council.
There remains an issue as to how 14 Oak Street should be treated for the purpose of the calculation of the Development Fee. Is the price paid by Panorama for 14 Oak Street to be treated as part of the Purchase Price? As noted, 14 Oak Street is referred to in Annexure A, even though PHG had not acquired an option to purchase it.
The second primary provisions of the Deed of Assignment relied upon by PHG is clause 13, which provided:
13(a) Pending payment of the Development Fee, PHG shall be entitled to a charge upon the Options, contracts to purchase properties and purchased properties
(b) Panorama shall not transfer, assign, charge or mortgage the options, any contracts to purchase the properties or any of the properties which have been purchased, prior to the release of the funds referred to in clause 6 to the unrestricted control of PHG and payment of [sic] PHG of the Development Fee.
This is the provision of the Deed of Assignment that PHG claims has created the charge that PHG seeks to enforce in these proceedings.
The literal effect of clause 13, if it is otherwise effective to create a charge, is that the charge will subsist indefinitely, and will only be discharged by Panorama successfully obtaining a Development Consent and paying the Development Fee to PHG. Until that event, Panorama would permanently be prohibited from, so far as is presently relevant, transferring or securing the properties.
So the strictly literal position in the present case is that, on the wording of the Deed of Assignment, the condition for the Development Fee being able to be calculated and Panorama becoming liable to pay it to PHG has not occurred, but into the indefinite future, until it has occurred, the properties will be charged in favour of PHG, and Panorama will be prohibited from transferring or securing the properties.
There was evidence that PHG has lodged a caveat against the title to the properties to protect the charge. That caveat would, if the charge is found to be valid, have the effect of indefinitely preventing Panorama from transferring or securing any of the properties.
This revelation led to the response on the part of PHG that it reverted to its position that it accepted that the price of purchasing 41 Oak Street was required to be deducted, but consequently and consistently, 41 Oak Street was subject to the charge.
I will return to a consideration of this issue when I come to the resolution of the issues that require to be determined.
The most significant feature of clause 13 of the Deed of Assignment is that, so far as is now relevant, the only obligation that is the subject of the charge that PHG claims was created is the obligation to pay the Development Fee, assuming that the clause does create a charge. It does not in terms create a charge over the purchased properties to secure payment of any damages ordered by the Court to be paid by Panorama to PHG for breach of the Deed of Assignment, by failing to comply with the obligations in it to try to obtain the Development Consent, the obtaining of which is a precondition to the creation of the liability to pay the Development Fee.
PHG explicitly accepted that, on the proper construction of clause 13, any charge created by it does not secure the payment to PHG of any damages that are ordered by the Court to be paid by Panorama to PHG.
In these circumstances, PHG's primary claim was that it was entitled to a declaration that the Development Fee was payable to it, notwithstanding that the making of that declaration would be contrary to the true facts. PHG claimed that it was entitled to such a declaration for two alternative, or perhaps complementary, reasons. The first was that the terms of the Deed of Assignment obliged Panorama to take the steps that were necessary to obtain a Development Consent that conformed to the requirements of the Deed of Assignment, and equity regards as done that which ought to be done. Secondly, the common law and equity both apply a principle that a party is not entitled to take advantage of its own wrong, and, in this case, that meant that Panorama would not be heard to say that the precondition to its liability to pay the Development Fee to PHG had not been satisfied, because it was Panorama's own wrongdoing in its breach of the terms of the Deed of Assignment that was the cause of the failure of the condition.
PHG's claim that Panorama had breached its obligations under the Deed of Assignment was not limited to a claim that Panorama had attempted to comply with its obligations under the Deed of Assignment by lodging and pursuing the development application that was required, but that by minor breaches it had failed to obtain the Development Consent. PHG's claim was that, as a matter of fact, Panorama had in substance ignored its obligations under the Deed of Assignment, and had only sought development consent for a development scheme that bore no real relationship to the development scheme contemplated by the Deed of Assignment, insofar as its scale was magnified out of all proportion to what was contemplated - measured by 700 units compared with the minimum of 250 required by the definition of Development Application, and in comparison to the 299 units contemplated by the ADS Scheme - such that Panorama made no real attempt at all to comply with its contractual obligations, and that the development application that it in fact made was always doomed to fail.
Mr Dickson's report explained alternative development schemes called respectively a Base Case Scenario for the site, achieving a floor space ratio (FSR) of 2.5:1, and then an Optimum Yield Case Scenario for the site, achieving an FSR of 3:1, which Mr Dickson said: "would have had a high likelihood of having been approved as a planning proposal and subsequent development application had it been lodged in 2015 to 2017." For the present, it is only necessary to note that Mr Dickson concluded that, on the Base Case Scenario, a total of 251 dwellings could be achieved with an FSR of 2.5:1, and the Optimum Case Scenario would achieve 294 dwellings with an FSR of 2.79:1. (The difference in FSR between 3:1 and 2.79:1 is not explained).
PHG tendered a comprehensive report dated 9 February 2022 of a highly experienced water engineer, Dr Brett C Phillips, on the flooding risks and flood management issues relevant to the various forms of the development scheme, given the proximity of the development site to the Parramatta River. PHG also tendered a comprehensive report dated 1 March 2022 by Tom Steal, a senior traffic engineer, which dealt with the traffic issues associated with the various development schemes. It is not necessary to consider the reports of Dr Phillips and Mr Steal in any detail. I accept their expertise and the logic of the conclusions reached in their reports. The reports formed a basis for the expert opinions expressed by Mr Cirillo in his town planning expert evidence, and I accept that Mr Cirillo's reliance on the conclusions expressed by the flooding and transport expert witnesses was justified.
Mr Cirillo's primary report was his Town Planning Report issued on 11 February 2022. Mr Cirillo issued a supplementary report on 25 February 2022.
Although no challenge was made to the adequacy of Mr Cirillo's expertise, it is appropriate that I observe that Mr Cirillo's curriculum vitae establishes that he is a very highly qualified and experienced town planner. He built up his experience in a wide range of positions commencing in 1991, occupying various town planning positions with Gosford City Council, South Sydney City Council and Sydney City Council, and the position of Director of City Planning and Regulatory Services for the City of Sydney in the period of 2006 to 2008. He was the Executive Director of Urban Renewal and Major Sites at the NSW Department of Planning from 2009 to 2013, after which he has worked in private practice from 2013 as principal planner at Planning Lab. Mr Cirillo was made Adjunct Associate Professor at the University of Sydney in the Faculty of Architecture, Design and Planning in 2015, having been an Adjunct Senior Lecturer from 2013.
In his Town Planning Report, Mr Cirillo stated the questions that he was asked to address in par 6 in the following terms:
6. … I have been instructed… as an expert in town planning to provide a report answering the following questions:
a. If [Panorama] submitted a planning proposal and relevant application for development approval in accordance with the ADS Scheme, how likely is it that [Panorama] would have obtained the development approval for the Development, whether in accordance with the ADS Scheme or in some modified form?
b. If in the scenario above, the approval would likely have been in a modified form, in what form would those modifications likely have been?
c. Please describe the differences between the development contemplated in the ADS Scheme and the development contemplated in the Alternate Proposal, together with their materiality, if any, to the likelihood of approval.
d. How likely is it that [Panorama] will obtain a development approval given the submitted Alternate Proposal?
The development scheme described as the "Alternate Proposal" in these questions is the development scheme actually submitted to the Council in October 2015 by Panorama and modified on a number of occasions up to August 2018.
Mr Cirillo summarised his answers to these questions in his Town Planning Report in the following terms:
7. Based on the analysis outlined in this Report, I believe that the ADS Scheme containing 327 apartments would be unlikely to have been approved and would have required revision (Attachment 3). There were four key issues with the design that would have inhibited ADS Scheme:
a) The proposed side setbacks were non-compliant with Objective 3F of the ADG.
b) Flooding issues arose due to insufficient setbacks to street and insufficient provision of deep soil.
c) The proposed floor space (FSR) was significantly greater than that of any surrounding development.
d) The ADS Scheme did not meet Council's urban design vision for the area presenting tooth and gap style buildings and not locating the tallest building elements along James Ruse Drive.
8. The Alternate Proposal that was lodged as a Planning Proposal in October 2015, and most recently modified in August 2018 (Attachment 4), was substantially larger in both height and FSR than the ADS Scheme. It also proposed an additional hotel use on the site. The Alternate Proposal was an overdevelopment of the site having an excessive height in the neighbourhood context and a poorly resolved response to the site's significant flood affectation and traffic constraints. The Alternate Proposal had very little chance of approval due to these issues and was ultimately never approved.
9. The Alternate Proposal was considered by the Parramatta Local Planning Panel (LPP) as item 5.4 in their meeting 28 November 2018 (Attachment 5). A Council Officer's report accompanied item 5.4, which did not support the Alternate Proposal's proposed height, density or massing (Attachment 6). That report did, however, suggest that the site be rezoned to permit heights of part 26m and part 65m (8 and 20 storeys) and the floor space ratio (FSR) of 2.5:1. The LPP endorsed Council's findings and recommended that further issues be resolved relating to urban design; flooding; traffic and heritage view corridors.
10. At the City of Parramatta's Ordinary Council meeting on 17 December 2018, Council deferred consideration of the proposal until those issues identified by the LPP were resolved (Attachment 7). This course of events demonstrates that the City of Parramatta was not averse to supporting a reasonable proposition for increased density on the site, subject to an appropriate design being advanced.
11. While the Alternate Proposal represented a significant overdevelopment of the site, the issues presented by the ADS Scheme were not as substantial or unresolvable. Subject to design refinement, a scheme of similar size would very likely have sufficient merit to warrant the granting of development consent.
12. AE Design has produced concept designs ('AE Design Scheme') for the site, which demonstrate that these issues, while significant, could have been resolved through design refinement. AE Design has produced a preferred Base Scheme ('Base Scheme'), which achieves an FSR of 2.35:1, 0.15:1 less than that recommended by Council Officers in November 2018. They have also produced a preferred Optimum Yield Scheme ('Optimum Yield Scheme'), which achieves an FSR of 2.94:1 taking into consideration the yield reasonably available on the site had the ADS Scheme undergone further design development. This Optimum Yield Scheme results in a density across the properties identified in the Alternate Scheme that is consistent with the 2.5:1 FSR envisioned by Council's modelling.
13. Neither the ADS Scheme nor the Alternate Proposal was likely to receive Council's support as a planning proposal. Had the ADS Scheme been modified as shown by the AE Design Base Scheme, the support of Council for a planning proposal and subsequent development application would have been highly likely. The larger Optimum Yield Scheme would have been more likely than not to have been supported.
Thus, Mr Cirillo concluded that neither the ADS Scheme nor the Alternate Scheme would have received planning approval. He concluded, however, that the ADS Scheme's planning deficiencies were not so serious that the scheme could not be amended to receive Council approval. Significantly, Mr Cirillo concluded that, if the ADS Scheme had been amended to equate to the AE Design Base Scheme, it would have been highly likely to have been supported by the Council. The larger Optimum Yield Scheme would more likely than not have been supported by the Council.
In Part 5 of his Town Planning Report, Mr Cirillo considered the history of the development schemes for the site. He started by noting that the ADS Scheme was created by plans dated 20 October 2014, that were lodged with the Council for "a Pre-DA review in late 2014". The Council provided feedback on 13 January 2015, by advising that the Pre-DA scheme could not be lodged as a development application, due to the proposed building heights significantly exceeding the existing height limits, so that a planning proposal would be required to amend the height limits under the Parramatta Local Environmental Plan 2011, before the proposal could be considered as a development application. That led to ADS, after the 22 December 2014 date of the Deed of Assignment, redesigning the scheme in early January 2015 to include 15 and 17 Hope Street. This varied scheme containing 327 units is the one referred to as the "ADS Scheme". Panorama lodged the Alternate Proposal with the Council in October 2015. The Alternate Proposal had three iterations, on 7 October 2015, 26 June 2016 and in August 2018. Each proposal required the rezoning of the site. The initial proposed FSR was 7:1, and that of August 2018 was part 3.5:1 and part 4.5:1. Mr Cirillo treated the August 2018 iteration as the Alternate Proposal. It was that proposal that led to the actions of the Local Planning Panel and the Council set out in pars 8 to 10 of Mr Cirillo's report that have been extracted above.
In his Supplementary Town Planning Report, Mr Cirillo revisited the questions that were set out in par 6 of his Town Planning Report and provided more extensive responses. Mr Cirillo also dealt with the question raised by the definition of "Development Application" in clause 1(e) of the Deed of Assignment, concerning whether either version of the AE Scheme was generally in accordance with the ADS Scheme.
Mr Cirillo said:
17. In my opinion, [Panorama] could have obtained an approval for a residential development containing 250 or more apartments had the ADS Scheme been pursued and modified through continued discussion with the Parramatta City Council. In my experience, design refinement undertaken in dialogue with Parramatta City Council would have likely produced a design similar to the Optimum Yield Scheme prepared by AE Design which is generally in accordance with the ADS Scheme. The prospects of the modified approval have been considered in paragraphs 70-96 of the Town Planning Report.
18. In the event that the heights and FSR of the Optimum Yield Scheme were not supported by Council, the design could have been reduced in scale to produce a design similar to Base Yield Option prepared by AE Design. The Base Yield Option, though smaller in regard to height, GFA and the apartment yield, is generally in accordance with the ADS Scheme.
In relation to the relationship between the ADS Scheme and the schemes designed by AE Design, MR Cirillo expressed the following opinions:
31. The AE Design Scheme Optimum Yield Scheme is generally in accordance with the ADS Scheme insofar as it comprises a complex of interconnected mid-rise to high-rise residential flat building(s) on the same site with the yield of approximately 300 apartments.
…
39. The AE Design Base Yield Scheme is generally in accordance with the ADS Scheme but with a lower height, FSR and apartment yield.
The issue of whether the AE schemes were generally in accordance with the ADS Scheme is the one question dependent upon a consideration of the expert evidence that Panorama specifically left open and required the Court to decide on the basis of the expert evidence. No submissions were made by the parties concerning the meaning of the expression "otherwise generally in accordance with [the ADS Scheme]" as used in clause 1(e) of the Deed of Assignment. Mr Cirillo did not address the meaning of the term in any detail in his reports. However, it is obvious from the terms of his reports that he acted upon a conception of what constituted a general accordance between different development schemes in the context of town planning practice. Mr Cirillo was evidently satisfied that the necessary accordance could be established on the basis of a broad comparison of the proposed structures comprising the development schemes, and their relationship, as well as the yield measured in the number of proposed units.
Mr Cirillo explained why he had concluded that the AE Design Optimum Yield Scheme would more likely than not have been a successful planning proposal and gained subsequent development approval, when compared to the Alternate Proposal, in par 33, where he said:
33. The AE Design Optimum Yield Scheme resolves the town planning issues identified in paragraph 25 of this evidence, and generally satisfies the relevant planning controls (considered in detail in Appendix B of the Town Planning Report). It also achieves building heights and density similar to that recommended by Council in response to the Alternate Proposal is considered in paragraphs 70-96 of the Town Planning Report. Accordingly, the modified ADS Scheme, in a form similar to the AE Design Optimum Yield Scheme, would have been more likely than not to have been successful as a planning proposal and subsequent DA.
By way of elaboration, Mr Cirillo said in par 46:
46. In my opinion, there are three significant differences between the Alternate Proposal and the ADS Scheme which made the Alternate Proposal substantially less likely to be approved than a modified ADS Scheme as described in response to question 2. These are:
a) The Alternate Proposal included a hotel use on the corner of James Ruse Drive and Oak Street which created additional parking access and traffic concerns. The AE Design Scheme, which replicates a modified ADS Scheme, was not subject to these traffic issues. This is considered in paragraphs 47-48 of this Statement of Evidence.
b) The Alternate Proposal located a hotel building on the corner of James Ruse Drive and Oak Street with minimal setbacks in a location where it was subject to significant flood risks. The AE Design Scheme, which replicates a modified ADS Scheme, has provided alternative building footprints and has resolved the potential flooding issues. This is considered in paragraphs 49-52 of this Statement of Evidence.
c) A substantially greater height and FSR was requested at all stages of the amended Alternate Proposal than was by the ADS Scheme. This is considered in paragraphs 53-55 of this Statement of Evidence.
In relation to the fate of the Alternate Proposal, Mr Cirillo stated:
59. The City of Parramatta, having provided their own recommendation for the future zoning of the site, have conclusively demonstrated that they do not support the heights, or density being proposed by the Alternate Proposal.
60. The LPP had also recommended that further work be undertaken in relation to the intended rezoning of the site regarding detailed urban design, investigation, traffic impacts, flood management and management of heritage view corridors. These recommendations demonstrate that the Alternate Proposal had not satisfied the LPP in relation to these matters.
61. [Panorama] is extremely unlikely to obtain a rezoning of the land in accordance with the Alternate Proposal as:
the LPP accepted Council's position that the Alternate Proposal sought building heights and FSR limits that were excessive; and
the LPP was not satisfied that issues relating to urban design, traffic impacts, flood management and heritage view corridors were adequately resolved.
62. That the proposal has not progressed since December 2018 demonstrates that there is no forward momentum behind the Alternate Proposal.
63. For these reasons, [Panorama] is extremely unlikely to obtain a rezoning of the land in accordance with the Alternate Proposal.
The unanswered expert evidence satisfies me that I should make the following relevant findings:
1. The Alternate Scheme pursued by Panorama was not generally in accordance with the ADS Scheme, as required by clause 1(e) and clauses 8 and 18 of the Deed of Assignment. That was, in summary, because its bulk, density (in FSR), building height, setbacks and traffic and flood mitigation arrangements (including in respect of the inclusion of a proposed hotel) were so much at variance with the ADS Scheme that there was no reasonable probability that the Alternate Scheme would receive Development Consent within the meaning of clause 1(f).
2. All three iterations of the Alternate Scheme were not in accordance with the ADS Scheme.
3. Since December 2018, Panorama has failed to prosecute any development scheme with the Council, and in breach of clause 8 and clause 18 of the Deed of Assignment, Panorama has not pursued any development scheme, or adjusted the Alternate Scheme, so that it accorded generally with the ADS Scheme.
4. Panorama would have complied with clause 1(e) and clauses 8 and 18 of the Deed of Assignment if it had lodged and pursued in accordance with the Council's practice the ADS Scheme, and responded to the Council's requirements (generally as indicated by the Council's responses to the Alternate Scheme) by adjusting the ADS Scheme to either of the versions of the AE Scheme, with the consequence that Panorama would have pursued a development scheme generally in accordance with the ADS Scheme.
5. Alternatively, Panorama could have achieved the same result by lodging either of the versions of the AE Scheme initially.
6. Panorama would more likely than not have received a Development Consent that accorded with clause 1(f) of the Deed of Assignment, if it had performed its obligations in a way that proposed the AE Design Optimum Yield Scheme, in which case it would have received development consent for a scheme containing 327 units. (Note that Mr Cirillo stated this number of units in par 42 of his Supplementary Report, but gave the figure of approximately 300 apartments in par 38, and in par 17 said "250 or more apartments").
7. Panorama would have been highly likely to succeed in receiving a Development Consent that accorded with clause 1(f) of the Deed of Assignment, if it had adopted the AE Design Base Case Scenario, which would have involved the approval of 243 units.
As a result of Panorama's breach of the Deed of Assignment, PHG lost the opportunity that it would have become entitled to be paid the Development Fee pursuant to clause 10 following the issue by the Council of a Development Consent, had Panorama lodged and properly pursued the Development Application, as required by clause 8. There was discussion in submissions as to whether PHG's loss should be considered to be a loss of a chance, but that is perhaps an inappropriate concept, as the prospect that the Council would issue a Development Consent was not strictly a matter of chance. Although the legal principles and town planning practices that are applied by the Council, and other relevant planning authorities, are complex and to some extent discretionary, it would not be correct to equate the process with one whose outcome is essentially unpredictable. As the expert evidence in this case has demonstrated, for a particular development site, there should be a range of development schemes that can be predicted to have positive prospects of success, provided that the structure of the scheme accords with criteria that are reasonably susceptible of discovery and compliance, and provided that the proponent of the scheme engages constructively with the planning authorities. But the evidence also demonstrates that, until a particular development scheme receives the necessary consent, the proponent only has an opportunity to gain that consent, and the subject of any consent that is given will fall within a range of possible outcomes that is not precisely predictable.
In the present case, the evidence establishes that, by one process or another, Panorama had a more likely than not chance, if it had complied with the requirements of the Deed of Assignment, of gaining a Development Consent that would have authorised the construction of the development with a number of units in the range of 300 to 327. It was highly likely that Panorama could have achieved a Development Consent that permitted the construction of 243 units.
As I understand the evidence given by Mr Cirillo, he did not have an objective basis for predicting which outcome the Council would have permitted, in the sense that he seemed to accept that the outcome would probably depend upon the response of officers of the Council to development applications generally in accordance with the two schemes proposed by AE Design.
The significance of this uncertainty must be considered in the light of the fact that the definition of Development Fee in clause 1(d) of the Deed of Assignment made the amount payable proportional to the number of units up to a maximum of 275. The effect of the evidence is that it is highly likely that the Council would have approved 243 units, and more likely than not that the Council would have approved 300 to 327 units. The evidence therefore is that, on the balance of probabilities, the Council would have issued a Development Consent, if Panorama had performed its obligations under the Deed of Assignment, and that upon the same standard of proof the number of units approved would have exceeded 275.
I do not accept Panorama's submission, as I am satisfied that, on the proper construction of the Deed of Assignment as a whole, 41 Oak Street was intended both to be a property whose purchase price was to be deducted in the process of calculating the Development Fee and was also to be the subject of any charge created by clause 13(a).
As it is only the latter proposition that is in contest, I start by noting that clause 13(a) refers simply to the "purchased properties". That term is not specifically defined in the Deed of Assignment. However, it is implied in the definition of "Purchase Price" in clause 1(i) as being the aggregate price for the purchase of the properties referred to in Annexure A, and as 41 Oak Street is referred to in that annexure, that the property was intended to be included in the purchased properties.
There is at least an element of ambiguity created by the definition of "Options", as meaning the options referred to in Annexure A, when 41 Oak Street is listed in Annexure A, but no option to purchase it existed or was assigned to Panorama under the Deed of Assignment. Further, a figure is stated in the column for "option fee", which is evidently the deposit under the proposed purchase contract, rather than an option fee per se.
In the light of this ambiguity, it is legitimate to have regard to the context in which the terms of the Deed of Assignment were agreed, which includes the unchallenged evidence in the affidavit of PHG's Rayed Skaf, sworn on 22 May 2020, in which he explained at par 23 that, as at 22 December 2014, PHG had agreed on terms to buy 41 Oak Street, but did not complete this purchase because the representative of Panorama who was negotiating with him said: "Don't worry about getting an option over 41 Oak Street, [Panorama] will buy it directly by contract after we assign the options."
The effect of this evidence is supported by clause 4 of the Deed of Assignment, which provided:
4. The parties will do all things necessary as soon as possible for Panorama or its nominee to exchange the 41 Oak Contract.
"41 Oak Contract" was defined in clause 1(b) as meaning: "the contract for the purchase of 41 Oak Street, Rosehill."
These provisions support the conclusion that it was the intention of the parties to the Deed of Assignment to treat 41 Oak Street as an integral part of the site that was to be the subject of the Development Application, whether Panorama acquired the existing option properties by exercising the assigned options, or whether, in the case of 41 Oak Street, by directly purchasing that property from its then owner, by reason of being substituted for PHG as the purchaser under the then negotiated purchase contract.
The general intent of the parties to the Deed of Assignment is also demonstrated by the terms of clause 14, as included at the date the Deed was executed, notwithstanding that that clause was subsequently deleted. The agreement contained in clause 14 that the parties would negotiate the inclusion of 15 and 17 Hope Street in the proposed development, and if so, then the provisions of the Deed of Agreement would apply as if 15 and 17 Hope Street were included at the date of the Deed, tends to demonstrate that the position was fluid as to the addition of further properties to the development site, but that the parties intended that, if further properties were added, they would be treated in the same way as the existing option properties, both in the calculation of the Development Fee and as subject to the charge created by the Deed of Assignment.
The third difficulty propounded by Panorama was that the effect of the words "shall be entitled to a charge" in clause 13(a) of the Deed of Assignment meant that the provision was no more than an agreement to create a charge, and no charge had subsequently been granted by Panorama to PHG over any property falling within the description in clause 13(a).
This supposed difficulty was based upon the proposition that the word "shall" expresses the "future tense", which Panorama submitted suggested that the parties did not intend that Panorama would grant an immediate charge, but that it merely agreed to grant a charge at some time in the future. Panorama submitted that, if that proposition was correct, then as was noted in the judgment of Bathurst CJ in Roberts v Investwell Pty Ltd (in liq) [2012] NSWCA 134; (2012) 88 ACSR 689 at [30], the terms of clause 13(a) would not constitute an immediate charge.
Panorama proffered four submissions in support of this suggested construction of clause 13(a). It submitted, first, the negative pledge provided for in clause 13(b) was included to prevent any other security interest being granted before the future charge provided for in clause 13(a) could be created. Secondly, clauses 6, 7, 13(b) and 16 of the Deed of Assignment involved the use of the word "shall" in the future tense. Panorama submitted that, if clause 13(a) was intended to grant an immediate charge, the parties would have used wording like "PHG is hereby entitled to a charge". Thirdly, Panorama submitted that clause 13(a) does not identify any debt as being secured by the charge, and suggested that that was because the charge was to be created at a later time, in a separate and more detailed document. Fourthly, Panorama submitted that there was no certainty that the Development Fee would ever be payable. As, in principle, the preconditions to the Development Fee becoming payable may never have been satisfied, and, as the expert evidence establishes that development consent would not have been given for the ADS Scheme, Panorama submitted that clause 13(a) would be unworkable, if intended to create an immediate charge, because the charge would last indefinitely to secure an obligation that may never arise.
I reject Panorama's submission that clause 13(a) of the Deed of Assignment was not intended to create an immediate charge of its own force. I consider that, in the context of the wording of the Deed of Assignment as a whole, the words "shall be entitled to a charge" were intended to mean that the entitlement was to arise upon the execution of the Deed of Assignment and was to persist for the period stated in the provision. It is an aspect of the ordinary meaning of "shall be", when used in conjunction with the word "entitled", that the entitlement exists immediately, and insofar as the word "shall" is used, that relates to the future continuation of the entitlement, not its creation in the future.
That construction of clause 13(a) is consistent with the inclusion of the opening words: "Pending payment of the Development Fee". The obligation upon Panorama to take the steps that could lead to the Development Fee becoming payable to PHG was created by clause 8 immediately upon the execution of the Deed of Assignment, and that obligation would remain pending until payment of the Development Fee. Clause 13(a) was clearly intended to create the situation that the entitlement to the charge would subsist during the whole of the period when payment of the Development Fee was pending.
Furthermore, the charge was stated to apply to the Options, contracts to purchase properties and purchased properties. If Panorama complied with its obligation under clause 8, the Options that existed at the date of the Deed of Assignment would in due course be exercised, and they would be replaced by contracts to purchase, which in due course would be replaced by Panorama's ownership of the properties. That is a continuum in time commencing at the date of the Deed of Assignment and ending at the date of payment of the Development Fee. The provision would be meaningless if it were possible that the parties only would agree to the terms of a subsequent charge to be granted by Panorama at a time after the Options had been exercised and the contracts to purchase completed.
In any event, if clause 13(a) is to be given a sensible commercial effect, it must be construed as being intended to create the charge over the whole of the period from the execution of the Deed of Assignment to the payment of the Development Fee.
I accept the submission made by PHG that the observation of Bathurst CJ referred to above is to be distinguished, because the contractual provision that required construction in that case included the words: "The parties agree that if requested by Roberts at any time Investwell must at its own expense immediately grant to Roberts a mortgage over the Land, an equitable mortgage or charge over Investwell's assets and undertakings, and/or such other security as Roberts may consider necessary…" [emphasis added]. The point is that, in express terms in that case, the security was to be granted following a request by Roberts. The nature of any request that might be made was not known at the date of the agreement. Consequently, the property that might be made the subject of any security that was required to be granted was not known at that time. In the case of clause 13(a), the existence of the charge was not made subject to a request by PHG for its creation. If the charge was not intended to be created at the time of the Deed of Assignment, no time was specified for its creation. Furthermore, the properties intended to be subject to the charge were specified.
I consider that the negative pledge created by clause 13(b) was simply agreed in aid of the charge created by clause 13(a), and there is no indication in the wording that the purpose of the negative pledge was to preserve the position pending the later grant of a charge by Panorama.
The fact that the word "shall" is used in other places in the Deed of Assignment to signify obligations to be performed in the future does not require a construction of clause 13(a) that has the effect that the charge was intended to be created in the future. The meaning to be assigned to the word "shall" depends upon the specific context, as "shall" is commonly used in conjunction with other words that signify the time of occurrence of the matter the subject of the expression. "Shall" is used in the context "shall be entitled" in clause 13(a) and the entitlement may exist from the time of the creation of the right. In contrast, clause 6 uses the expression "shall be repaid" and clause 7 includes "shall pay". The obligation to pay will naturally arise in the future upon the occurrence of the stipulated event. On the other hand, clause 13(b) uses the expression: "Panorama shall not transfer, et cetera" and clause 16 includes: "shall not disclose or authorise the disclosure". In these latter two cases, I conclude that the word "shall", in context, was, much the same as in clause 13(a), intended to create an obligation having effect immediately upon the execution of the Deed of Assignment.
It is true that, as a matter of its strict wording, clause 13(a) does not specifically identify the obligation that was intended to be secured by the charge. It is also true that it was PHG's clear position that, to give the provision commercial effect, it must have been intended to secure payment of the Development Fee, and not any other potential obligation of Panorama to PHG, such as the obligation to satisfy an award of damages for breach of the Deed of Assignment. PHG's submission was that the only sensible construction of a term that created a charge pending a particular payment being made is that the charge was intended to secure that payment being made. It does not follow from the absence of an explicit statement of the obligation intended to be secured that the parties intended that the charge was to be created at a later time. A term that had the effect contended for by Panorama would be of no commercial benefit to PHG, because it could not compel the creation of any charge in its favour in the absence of an agreement between the parties concerning the obligation to be secured by the charge.
It is also true that there was no certainty that the Development Fee would ever be payable. Panorama did not submit that, as a matter of legal principle, property cannot be charged to secure the performance of a contingent obligation that may never become absolute, because the satisfaction of the contingencies does not occur. If the Court accepts that the intention of clause 13(a) was to secure the payment to PHG of the Development Fee, if it should become payable, the fact that it might not become payable is not a reason to conclude that clause 13(a) was intended to require the parties to agree to the creation of a charge in the future.
The fourth difficulty propounded by Panorama relies upon the proposition, already considered, that clause 13(a) does not identify the obligation which the charge was intended to secure. The validity of this submission depends upon the construction that the Court gives to the provision, and is not persuasive, given that the ordinary meaning of the wording of clause 13 (a) is that it creates a charge, and that the implied obligation that is secured is the payment to PHG of the Development Fee.
The fifth difficulty suggested by Panorama is that clause 13(a), even if it does create a charge over the properties described in the provision, does not secure performance by Panorama of its obligation in clause 8 of the Deed of Assignment to lodge and pursue the Development Application. The submission was that, even if the charge secures the payment of the Development Fee, no Development Fee has become payable, because the required Development Consent has not been issued by the Council. A charge that secures the payment of a contingent debt that has not become payable, but does not secure performance of a contractual obligation to satisfy the contingencies that would make the obligation to pay the debt absolute, is not a security that is able to be enforced by the Court.
That submission is correct, so far as it goes, but I do not accept that clause 13(a) does not create a valid charge because the obligation that it secures is a contingent one that may never become absolute.
Panorama put a further argument as to why clause 13(a) does not create a valid charge that was a component of a number of submissions that it made. That was that the part of the definition of "Development Consent" in clause 1(f) of the Deed of Assignment that the Development Consent had to be "on terms and conditions acceptable to Panorama in its absolute discretion" meant that Panorama was free to reject any Development Consent that the Council was prepared to issue, and that in reality PHG had no definite entitlement to receive any Development Fee.
While in appropriate circumstances the part of the definition of "Development Consent" relied upon by Panorama would take effect in accordance with its terms, I consider it to be irrelevant to the determination of the present dispute. Panorama did not lodge and pursue a Development Application that complied with the Deed of Assignment. The point was not reached where the Council had indicated that it would issue a Development Consent on particular conditions, that Panorama may have been entitled to reject. The fact that, at the end of the process, Panorama had a right to reject conditions that the Council wished to impose did not derogate from Panorama's obligation to comply with clause 8 and clause 18 of the Deed of Assignment.
Furthermore, Panorama did not lead any evidence to establish any likelihood that, if it had complied with its obligations to lodge and pursue the Development Application, the Council would have sought to impose conditions that Panorama would in fact have rejected. The validity of Panorama's argument must be judged in the context that it would have expended considerable capital in lodging and pursuing the Development Application, which it would have wasted if it had rejected any conditions imposed by the Council, and in any event, Panorama was in the business of constructing residential developments, so that the profit motive would have affected its response to conditions proposed by the Council.
Finally, the evidence led by Panorama does not establish that in fact it would have exercised its discretion to reject conditions proposed by the Council just to avoid the obligation to pay the Development Fee to PHG, and, notwithstanding the stated "absolute" nature of the discretion, I do not accept on the proper construction of the Deed of Assignment that Panorama was entitled to reject a Development Consent, if the true reason was to avoid the obligation to pay the Development Fee.
Consequently, the position at law is that PHG is entitled to a charge over the relevant properties, but the charge does not secure the payment of any debt that is now payable to PHG.
As explained above, PHG seeks to cure this deficiency in the enforceability of its charge by relying upon the equitable maxim that equity regards as done that which ought to be done, as well as the common law principle, that is followed by equity, that a party to a contract will not be permitted to take advantage of its own wrong. I will consider the application of these two principles in turn.
I preface my consideration of the application of the two maxims with the acknowledgement that it is inherently difficult to discern how these simply and generally expressed maxims actually operate at law and in equity. They do not operate as generally as the simplicity of their expression would suggest. They inform the operation of accepted principles that they underpin, but it can be challenging to try to formulate clearly and exhaustively when they apply. Indeed, the very exercise of attempting to formulate clear descriptions of their ambit of the operation is elusive, and may well be unattainable (see Corin v Patton (1990) 169 CLR 540 at 557 per Mason CJ and McHugh J).
As to the first principle, PHG's case is no less than that, if Panorama had performed its obligations under the Deed of Assignment, then the Council would have issued a Development Consent, so that the obligation upon Panorama to pay the Development Fee to PHG would have arisen. PHG resolves the difficulty in quantifying the Development Fee by submitting that the evidence establishes that, even though the number of Units cannot be known, if Panorama had performed its obligations under the Deed of Assignment, on the balance of probabilities, the unknown number of Units would have been more than the maximum number of 275, as determined by the variation effected to clause 1(d) by the Fourth Deed of Variation. In these circumstances, PHG submits, equity regards as done that which ought to have been done. Panorama ought to have achieved a Development Consent for at least 275 Units, so that the application of clause 13(b) will be made by equity as if that result had occurred, so that PHG is entitled to a charge over the relevant properties to secure payment to it of a Development Fee calculated on the basis of the issue of a Development Consent for at least 275 Units.
The cardinal question is whether this suggested application of the maxim that equity regards as done that which ought to be done accords with the true meaning of the maxim.
The submission, if valid, would have far-reaching consequences, because it would mean that wherever equity would give relief conditional upon a state of affairs that could only be achieved by one party performing its obligations under a contract - no matter the nature of the obligations or the complexity of the performance or the uncertainty of the outcome - equity would grant the relief upon proof that the condition was not satisfied because of the other party's breach of the contract, and upon proof on the balance of probabilities that the condition would have been satisfied if the contract had been performed. The maxim would operate to entitle the first party to equitable relief on the artificial assumption that the other party had performed its contractual obligations. That would be so irrespective of the availability of a remedy at law for the breach of contract.
The operation of the maxim in this context was explained by Dixon J in Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 at 26-27 in the following terms, noting that his Honour's references to assignments of future property could apply equally to the creation of charges (footnotes omitted):
An assignment of future debts obtains its efficacy from the doctrines of equity. In Tailby v. Official Receiver Lord Macnaghten stated the principles, which he described as well known. "It has long been settled," he said, "that future property, possibilities and expectancies are assignable in equity for value. The mode or form of assignment is absolutely immaterial provided the intention of the parties is clear. To effectuate the intention an assignment for value, in terms present and immediate, has always been regarded in equity as a contract binding on the conscience of the assignor and so binding on the subject matter of the contract when it comes into existence, if it is of such a nature and so described as to be capable of being ascertained and identified." He expounds, explains and exemplifies this statement in a way that has made his speech the chief source of guidance upon the subject. In a later passage he says: "Long before Holroyd v. Marshall was determined it was well settled that an assignment of future property for value operates in equity by way of agreement, binding the conscience of the assignor, and so binding the property from the moment when the contract becomes capable of being performed, on the principle that equity considers as done that which ought to be done, and in accordance with the maxim which Lord Thurlow said he took to be universal, 'that whenever persons agree concerning any particular subject, that, in a court of equity, as against the party himself, and any claiming under him, voluntary or with notice, raises a trust': Legard v. Hodges". Again: - "The truth is that cases of equitable assignment or specific lien, where the consideration has passed, depend on the real meaning of the agreement between the parties. The difficulty, generally speaking, is to ascertain the true scope and effect of the agreement. When that is ascertained you have only to apply the principle that equity considers that done which ought to be done if that principle is applicable under the circumstances of the case".
For the purpose of deciding in the present case whether the respondents' title to the book debts depends upon what amounts to an assignment, it is important to notice the essential elements upon which Lord Macnaghten dwells. As the subject to be made over does not exist, the matter primarily rests in contract. Because value has been given on the one side, the conscience of the other party is bound when the subject comes into existence, that is, when, as is generally the case, the legal property vests in him. Because his conscience is bound in respect of a subject of property, equity fastens upon the property itself and makes him a trustee of the legal rights or ownership for the assignee. But, although the matter rests primarily in contract, the prospective right in property which the assignee obtains "is a higher right than the right to have specific performance of a contract," and it may survive the assignor's bankruptcy because it attaches without more eo instanti when the property arises and gives the assignee an equitable interest therein (In re Lind; Industrials Finance Syndicate Ltd. v. Lind). In that case Swinfen Eady L.J. describes the effect of the decisions thus: - "It is clear from these authorities that an assignment for value of future property actually binds the property itself directly it is acquired - automatically on the happening of the event, and without any further act on the part of the assignor - and does not merely rest in, and amount to, a right in contract, giving rise to an action. The assignor, having received the consideration, becomes in equity, on the happening of the event, trustee for the assignee of the property devolving upon or acquired by him, and which he had previously sold and been paid for".
This is the principle that underpins the validity in equity of the charge created by clause 13(a) of the Deed of Assignment, given that the contract to purchase 41 Oak Street and the contracts to purchase the existing properties were not in existence at the date of the Deed, and title to all of the properties involved after-acquired property.
The principle stated by Dixon J would, in the circumstances of this case, support the validity of the charge, but PHG's submissions call upon it to do the further work of creating a fiction, contrary to fact, that Panorama should be treated as if it had performed its contractual obligation to cause the debt secured by the charge to be created. The equitable maxim is pressed into service to create both the charge and the debt.
In this respect, it is to be noted that the learned editors of Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) (Meagher, Gummow & Lehane), at [3-215], in their consideration of the application of the maxim in the context of contracts said: "… Similarly, a contract to assign future choses in action is often treated as automatically vesting in the intended assignee the beneficial interest in the relevant choses in action once they come into existence and vest in the intended assignor - assuming there is no further condition to be performed…" It is the qualification contained in the assumption that is pertinent. Equity assumes that the assignment has been made or the charge created when the property vests in the assignor or chargor where the contract to assign or charge is supported by consideration, where the only thing left to be done is the formal assignment or creation of the charge, and the performance of that obligation is not conditional on events that have not occurred.
PHG supported its submission by reliance on an extract from the judgment of von Doussa J in Re Barrett; Ex parte Young v NM Superannuation Pty Ltd (1992) 106 ALR 549 at 568. (von Doussa J's decision was overturned on appeal, the appeal not being relevant to the extracts below). I will give the same extract from Re Barrett; Ex parte Young v NM Superannuation Pty Ltd (1992) 34 FCR 508 at 527-528:
The respondent and the bankrupt seek to avoid this difficulty by calling in aid the equitable maxim that equity looks on that as done which ought to be done. This maxim has application in the case of contracts. Equity treats a contract to do a thing as if the thing were already done, though only in favour of the person entitled to enforce the contract specifically and not in favour of volunteers. In Halsbury's Laws of England (4th ed, reissue), Vol 16, par 752 it is said:
"Thus, where the obligation arises from contract, that which ought to be done is treated as done only in favour of some person entitled to enforce the contract as against the person liable to perform it. The true meaning of the maxim is that equity will treat the subject matter, as to collateral consequences and incidents, in the same manner as if the final acts contemplated by the parties had been done exactly as they ought to have been, but the contract itself is not varied. The doctrine does not make for the parties contracts different from those they have made for themselves."
The last sentence of this passage summarises the statement of principle made by Lord Atkinson in De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 at 65-66:
"That doctrine cannot, in its application to contracts, however, be permitted to turn the conditional into the absolute, the optional into the obligatory, or to make for the parties contracts different from those they have made for themselves. What a party to a contract ought to do, within the true meaning of this doctrine, is what he has contracted to do, and nothing more and nothing less is to be taken, in equity, to be done."
[emphasis added].
It should be noted that the reference in the extract from Halsbury's Laws of England given by his Honour to equity treating "the final acts contemplated by the parties" as if they had been done, is to the same effect as the qualification given in Meagher, Gummow & Lehane at [3-215] concerning the assumption that "there is no further condition to be performed".
PHG also relied upon the judgment of Gillard J in McMillan v Dunoon [2005] VSC 440, where his Honour said (footnotes omitted):
[31] Mr Nettlefold referred to the second edition of Equity Doctrines and Remedies by Meagher, Gummow and Lehane at paras 339-40.
[32] The learned authors were dealing with the maxim that, "Equity looks on that as done which ought to be done", and Mr Nettlefold relied upon the fifth instance stated by the learned authors. In that paragraph they set out a number of examples of when the maxim has been applied. With respect to the fifth instance they said:
The fifth instance is equity's attitude to contracts where the maxim means that often equity treats a contract to do a thing as if the thing were already done. Thus often equity will treat a person who for valuable consideration has agreed to take a lease as if he were a lessee: this is the doctrine of Walsh v Lonsdale [1882] 21 Ch D9 discussed in the previous chapter. Thus also is the doctrine of an equitable mortgage explicable. Any contract to give a mortgage creates not a hyperfication but an equitable mortgage conferring a right to foreclose.
[33] The learned authors then went on to observe, the following:
It is noted that the applicability of the maxim is limited to circumstances where that which ought to be done can be done; the maxim does not require one to believe that equity will regard as done that which no court of law or equity would ever order to be done. Therefore it can be availed of not by everybody but only by those who would have the right to seek in equity the enforcement of the contract. This is often expressed by saying with approximate accuracy that in cases of contract the maxim depends on a specific enforceability of the contract.
[34] Applying that statement to the present case I have little doubt that it would have been open to Mr Dunoon, if he so thought fit, to seek specific performance of the obligation requiring the execution of a deed.
[Emphasis added].
As I understand PHG's argument, it sought to draw upon the emphasised parts of the extracts from these two judgments to support a submission that what underlays equity's readiness to apply the maxim is that the remedy of specific performance would be available to the party asserting its application to achieve the result that the application of the maxim would establish.
In the extract from Palette Shoes Pty Ltd v Krohn that is set out above at [131], Dixon J drew upon the speech of Lord Macnaghten in Tailby v Official Receiver (1888) 13 App Cas 523. In that case, his Lordship said, in relation to the relevance of the remedy of specific performance in this context, at 547-548 (footnotes omitted):
… It was to this view, I think, that Lord Westbury addressed himself; and by way of shewing how real and substantial were equitable interests springing from agreements based on valuable consideration, he referred to the doctrines of specific performance, illustrating his argument by examples… It is difficult to suppose that Lord Westbury intended to lay down as a rule to guide or perplex the Court, that considerations applicable to cases of specific performance, properly so-called, where the contract is executory, are to be applied to every case of equitable assignment dealing with future property. Lord Selborne has, I think, done good service in pointing out that confusion is sometimes caused by transferring such considerations to questions which arise as to the propriety of the Court requiring something or other to be done in specie (Wolverhampton and Walsall Railway Company v. London and North Western Railway Company). His Lordship observes that there is some fallacy and ambiguity in the way in which in cases of that kind those words "specific performance," are very frequently used. Greater confusion still, I think, would be caused by transferring considerations applicable to suits for specific performance - involving, as they do, some of the nicest distinctions and most difficult questions that come before the Court - to cases of equitable assignment or specific lien where nothing remains to be done in order to define the rights of the parties, but the Court is merely asked to protect rights completely defined as between the parties to the contract, or to give effect to such rights either by granting an injunction or by appointing a receiver, or by adjudicating on questions between rival claimants. The truth is that cases of equitable assignment or specific lien, where the consideration has passed, depend on the real meaning of the agreement between the parties. The difficulty, generally speaking, is to ascertain the true scope and effect of the agreement. When that is ascertained you have only to apply the principle that equity considers that done which ought to be done if that principle is applicable under the circumstances of the case. The doctrines relating to specific performance do not, I think, afford a test or a measure of the rights created. There are cases where the rights of the parties may be worked out by means of specific performance, though no specific lien is effected by the agreement itself. More frequently a specific lien is effected though no case of specific performance is contemplated…
[Emphasis added].
His Lordship appears to distinguish between executory contracts, where the circumstances may justify the Court making an order that one party specifically perform its contractual obligations, from the case where a party promises for valuable consideration to transfer or create an interest, such as a charge, in after-acquired property, and the contract is executed from the perspective of the party promised the interest, because the consideration has been provided. When the property is acquired, equity regards as done that which ought to be done, which means that equity treats the party entitled to the interest as having that interest, notwithstanding that the party making the promise has not taken the step of creating that interest at law. No further condition need be satisfied, and there is no need or occasion for the Court to consider whether equity would order specific performance of an obligation to create the interest at law. Equity will protect the interest by remedies available in equity.
In this light, the statement in Re Barrett; Ex parte Young v NM Superannuation Pty Ltd: "Equity treats a contract to do a thing as if the thing were already done, though only in favour of the person entitled to enforce the contract specifically and not in favour of volunteers", and in McMillan v Dunoon: "Therefore it can be availed of not by everybody but only by those who would have the right to seek in equity the enforcement of the contract", should be taken to mean that the maxim may be applied by equity in the context of the enforcement of contracts only in favour of parties who are entitled to enforce the contract because they are not volunteers. They do not mean that the application of the maxim, in the cases in which it is applied, depends upon the availability of the remedy of specific performance. They definitely do not mean that, in cases where one party has not performed its obligations under the contract, and the other party may have been entitled in the circumstances to the remedy of specific performance, equity will always treat performance as having occurred, where that performance is a condition to the availability of some other remedy that is sought by the other party.
This is but a statement of the proposition that the maxim has a limited application in equity such that equity may treat a party entitled to a right at law as if the party had that right, without it having been actually granted at law, on the basis that what ought to be done has been done. This in no way obviates the need for parties to take action to enforce their rights under executory contracts, by taking action to obtain the remedies that may be available either at law or in equity.
If the remedy of specific performance were available to PHG in this case to oblige Panorama to comply with its obligations under clause 8 of the Deed of Assignment, PHG has not sought that remedy. Accordingly, the issue of whether the Court could have made an order for specific performance is a matter for speculation, and has not been the subject of contest. All that can now be said is that it must be doubtful that, even if the Court had looked with favour on the making of an order that Panorama specifically perform its obligation to lodge and pursue a development application for a substantial residential flat building comprising not less than 250 units and otherwise generally in accordance with the ADS Scheme - given the huge range of applications that Panorama could select to satisfy that obligation - it is impossible to see how the Court could have supervised the necessary adjustments to the development application, in response to the Council's refusal to accept it that is established by the evidence - given, in particular, the ultimate entitlement of Panorama, flowing from the definition of "Development Consent", to refuse conditions imposed by the Council "in its absolute discretion".
PHG cannot sidestep the difficulties in obtaining relief to specifically enforce Panorama's obligations under the Deed of Assignment, by calling upon the maxim that equity regards as done that which ought to be done, to achieve the artificial result that orders are made that enable PHG to enforce the charge created by clause 13(a) to recover the Development Fee, when the obligation to pay that fee has not yet arisen.
I will now address the issue of whether PHG is entitled to a declaration that Panorama is indebted to it for an amount equal to the Development Fee that would have become payable under clause 10 of the Deed of Assignment, if Panorama had performed its obligation in clause 8 to lodge and pursue the Development Application, on the ground that Panorama will not be permitted to take advantage of its own wrong in failing properly to perform clause 8, by asserting that the precondition for the Development Fee becoming payable has not been satisfied.
The Court has found that Panorama failed to perform its obligations under clause 8 and, if it had done so, on the balance of probabilities, the Council would have issued a Development Consent for a development scheme of at least 275 Units.
That breach of contract will entitle PHG to an award of damages to compensate it for its lost opportunity to become entitled to payment of the Development Fee as a debt. The issue is whether, in asserting that the precondition to the Development Fee has not been satisfied, Panorama will infringe a prohibition of its taking advantage of its own wrong, so that it will be precluded from making the assertion. If so, then the Court will find that Panorama is indebted to PHG for the Development Fee, contrary to the fact that the Development Consent has not been issued, and that the Council itself has not consented to the Development Application and determined the number of Units that will be permitted.
Two factors must be noted. First, Panorama seeks to argue that in fact the Council has not issued a Development Consent. In that sense, Panorama seeks to enforce the terms of the Deed of Assignment. Under clause 10, the Development Fee must be paid a given time after receipt of the Development Consent, and that receipt has not occurred. It is true that the reason is that Panorama has breached its obligations under clause 8. However, Panorama is not seeking to apply a term of the Deed of Assignment that relieves Panorama from liability to PHG, in circumstances where the availability of the term has been brought about by Panorama's breach of contract. In this case, the liability asserted by PHG has not arisen under the contract according to its terms. This is not a case where a term of the contract can be exercised by Panorama to free itself of liability.
Secondly, it is simply a fact that the Development Consent has not been issued. The Court can find as a fact on the balance of probabilities that the Council would have issued the Development Consent, and what the probable integers of the Development Consent would have been. But that can be no more than a finding within a range, on the balance of probabilities.
The significance of these factors may be subtle, but they must be borne in mind in determining the effect and reach of the principle asserted by PHG that Panorama will not be permitted to take advantage of its own wrong. PHG is in truth asserting that, in the case of any contract where one party will become entitled to receive X if the other party performs its obligation to do Y, the failure of the other party to do Y will always entitle the first party to receive X. That will always transform the first party's right to an award of damages for failure to do Y into a right to receive X as a debt, or some other remedy, in specie.
PHG relied upon the decision of the Court of Appeal in Ruthol Pty Ltd v Mills [2003] NSWCA 56; (2003) 11 BPR 20,793. In that case, the defendant had granted an option to purchase the defendant's land to the plaintiffs. Previously, the defendant had leased the land to a tenant under a lease that gave the tenant an option to renew the lease. The option to purchase granted to the plaintiffs was subject to a condition that it could only be exercised if the tenant had not exercised its option to renew. The tenant exercised the option to renew, but not on the terms set out in the lease. The defendant misled the plaintiffs into believing that the lease had been renewed in accordance with the lease. Consequently, the plaintiffs did not exercise the option to purchase within the permitted period. When the plaintiffs learned the truth, they purported to exercise the option out of time, and sued the defendant claiming that they had an equitable interest in the land under a contract to purchase. However, in the interim, the defendant had entered into a contract for value to sell the land to a third party who had no notice of the plaintiffs' claim.
At first instance, Palmer J held that the plaintiffs were entitled to exercise the option to purchase out of time, because the defendant could not assert that the time for the exercise of the option had elapsed; because it had misled the plaintiffs into believing that the condition subsequent to the effectiveness of the option to purchase had occurred, the defendant was precluded from asserting that the option to purchase was not effective at the time of its exercise, because that would permit the defendant to take advantage of its own wrong: Mills v Ruthol Pty Ltd [2002] NSWSC 294; (2002) 10 BPR 19,381 at [110]-[116]. In the Court of Appeal, Sheller JA, with whom Meagher JA and Cripps AJA agreed, considered the reasoning of Palmer J at [88]-[89], but concluded:
[92] Tricon did not appeal from Palmer J's orders although it sought, in effect, to have some of the trial judge's orders set aside. However, the point it relied on was embraced in Ruthol's notice of appeal and the argument adopted on Ruthol's behalf. In my opinion, the argument should succeed. While, as Palmer J said, Ruthol could not rely upon its deliberate misrepresentation to Mr and Mrs Mills about whether Alphega had exercised its option to renew the lease to defeat Mr and Mrs Mills' claim to damages against it, the maxim "no man can take advantages of his own wrong" did not enable Mr and Mrs Mills to posit in reliance on that misrepresentation an equitable interest which would defeat Tricon's equitable interest in the Manly Vale property.
In effect, the Court of Appeal referred to the reasoning of Palmer J on the application of the principle that a party is not permitted to take advantage of its own wrong with apparent approval, but allowed the appeal on the basis that the interest of the third party purchaser prevailed over the interest of the plaintiffs.
At first instance, Palmer J found that the principle applied to the case before him on the basis of the acceptance by Rath J in Bragg v Alam [1981] 1 NSWLR 668 of a principle stated by Herbert Broome in Broom's Legal Maxims (10th ed, 1939, Sweet & Maxwell) at p 191. As Palmer J stated at [112]: "His Honour relied chiefly on the principle of law, applicable equally in courts of law and in courts of equity, that no one shall be permitted to take advantage of his or her own wrongdoing".
It will be necessary to look at the extract relied upon by both Rath J and Palmer J to aid the enquiry as to what the real meaning of the maxim is. The author said, at p 192, in the context of the application of the maxim in the context of the law of contracts, against the sidenote "Construction of contracts" (footnotes omitted):
It is contrary to justice that a party should avoid his own contract by his own wrong. Accordingly, "in a long series of decisions the Courts have construed clauses of forfeiture in leases, declaring in terms, however clear and strong, that they shall be void on breach of conditions by the lessees, to mean that they shall be voidable only at the option of the lessors. The same rule of construction has been applied to other contracts, where a party bound by a condition has sought to take advantage of his own breach of it to annul the contract"; and it is applicable even where the legislature has imposed the condition, unless the scope and purpose of the enactment be so opposed to the rule that it ought not to prevail.
[Emphasis added]
In the Court of Appeal, Sheller JA, at [94], briefly reviewed the history of the application of the principle, and cited a number of cases in which it had been considered. They included the decision of the Court of Appeal in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, where Hope JA, with whom Priestley and Meagher JJA agreed, said at 147:
There is a line of authority which has established a rule of construction based upon a broad proposition which was described by Lord Diplock, in Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 at 189, as being that: "A man cannot be permitted to take advantage of his own wrong." Many authorities relating to this principle were discussed in the judgment of Lord Jauncey of Tullichettle in Alghussein Establishment v Eton College [1988] 1 WLR 587. That was a case where the College had agreed to grant the predecessors in title of the plaintiffs a lease for ninety-nine years of land in London on terms which provided that the tenant should as soon as was reasonably practicable following the obtaining of all necessary licences, permissions, consents and approvals use its best endeavours to commence and proceed diligently with a development being the construction of a block of flats. Clause 4 of the agreement provided:
"… if for any reason due to the wilful default of the tenant the development shall remain uncompleted on the 29th day of September 1983 the lease shall forthwith be granted and completed as aforesaid but without prejudice to the provisions of cl 3 hereof."
The rights under the agreement were assigned to the plaintiffs, who by their own default did not complete the development by the named date. The college purported to terminate the agreement because of the plaintiffs' repudiation and thereafter the plaintiffs commenced proceedings denying repudiation and claiming that even if they were in wilful default the college was bound to grant them a lease by reason of the terms of cl 4. The House of Lords, affirming the decisions at first instance and of the Court of Appeal, held that, applying the rule of construction to which I have referred, the only party entitled to rely upon cl 4 was the party who was not in default. It may be thought that there was an obvious omission of the word "not" from the clause but the matter was dealt with on the basis that the clause contained no such omission.
It will be seen that the case was one where the plaintiffs were seeking a benefit under the contract by reason of their own default; the college had purported to terminate the agreement but the acceptance of a repudiation, if there had been one, formed no part of the plaintiffs' case. Their case depended upon their own wilful default which resulted in the non-completion of the development by the specified time. In the decisions cited in the judgment of Lord Jauncey the principle was applied likewise in cases where the party in default was seeking to exercise a power or obtain a benefit under the contract which flowed directly from and depended upon that party's own default.
[Emphasis added].
Sheller JA also cited the judgment of Powell JA in Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212; (2002) 11 BPR 20,241, where his Honour said, with the agreement of Stein JA and Rolfe AJA:
[55] … In this regard, it is appropriate to note that both the decision of the High Court in Suttor v Gundowda Pty Ltd supra and the decision of the House of Lords in Alghussein Establishment v Eton College supra to which his Honour referred in paragraph 10 of his Judgment, involved the application, in each case, to the agreement then under consideration of what has been described as "a rule of construction" based upon a broad proposition that a party is not entitled to take advantage of his own default or wrong. In each of the cases to which his Honour referred reliance was placed upon the decision of the House of Lords in New Zealand Shipping Co Ltd v Société des Ateiliers et Chantiers de France [1919] AC 1. Thus, in the speech of Lord Jauncey of Tullichettle, with whom Lord Bridge of Harwich, Lord Elwyn-Jones, Lord Ackner and Lord Goff of Chieveley agreed, in Alghussein Establishment v Eton College supra at 592-595 the following passages may be found:
"In the New Zealand Shipping case in the Court of Appeal [1917] 2 KB 717, Viscount Reading CJ said, at pp 723-724:
'Unless the language of the contract constrains the court to hold otherwise, the law of England never permits a party to take advantage of his own fault or wrong. In Malins v Freeman (1838) 4 Bing NC 395, 399 Coltman J said: 'It is so contrary to justice that a party should avoid his own contract by his own wrong, that unless constrained, we should not adopt a construction favourable to such purpose.' That appears to me to be the true underlying principle of the cases in which the word 'void' has been construed as if it mean voidable. Unless there are clear words to the contrary, a clause making a contract void must be read subject to the condition that the party who is seeking to set up the invalidity is not himself in default.'
…
It only remains to refer to the respondent's argument that there is an absolute rule of law and morality which prevents a party taking advantage of his own wrong whatever the terms of the contract. My Lords I do not find it necessary to deal with this. For my part I have no doubt that the weight of authority favours the view that in general the principle is embodied in a rule of construction rather than in an absolute rule of law ..."
[Emphasis added].
These authorities appear to establish that the maxim upon which PHG seeks to rely does not have the effect of the general principle of law that PHG contends. In particular, they suggest that there is no substantive principle that, in all cases where the effect of a breach of contract by one party is that a state of affairs is not established that would entitle the other party to some benefit, that the other party will be entitled to that benefit because the wrong of the first party disentitles it from relying on the absence of the necessary state of affairs. The maxim underpins a rule of construction that, in the absence of wording that compels a contrary result, where a contract appears to confer on a party a benefit that will be available on the occurrence of a particular state of affairs, the contract will not be construed as making that benefit available in cases where the party apparently entitled to it has caused the state of affairs to exist by conduct that is wrongful, generally conduct that is in breach of the contract.
It must be acknowledged, however, that there is contrary authority that suggests that the maxim does have a substantive operation. In Mills v Ruthol Pty Ltd, Palmer J said:
[113] It is worthy of note that [Rath J] did not consider that the defendant's entitlement to exercise the option out of time depended upon the doctrines of tender, waiver or estoppel: at 673E-F. His Honour was content to hold that the defendant succeeded because of the substantive principle of law, applicable in every jurisdiction, which deprives a person from taking advantage of his or her own wrong. Alternatively, his Honour considered that the defendant could rely upon the principle that a grantor cannot derogate from his or her own grant: at 674B.
[114] Bragg went to the Court of Appeal, but the appeal was dismissed: (1982) NSW Conv R 55-082. Hutley JA, with whom the other members of the Court agreed, quoted with approval at 56,489 the following passage from Corbin on Contracts, 1993, West Publishing Co, sec. 767:
"One who unjustly prevents the performance or the happening of a condition of his own promissory duty thereby eliminates it as such a condition. He will not be permitted to take advantage of his own wrong, and to escape from liability for not rendering his promised performance by preventing the happening of the condition on which it was promised."
…
[115] In my opinion, the reasoning in Bragg is entirely applicable to the present case. By its misrepresentation to the Mills that Alphega had exercised its option to renew the lease and that, as a consequence, the Mills' Option was terminated, Ruthol deprived the Mills of the opportunity of exercising their option within the option period, as they would doubtless have done otherwise. I have concluded that the misrepresentation by Ruthol was deliberate so that it is clearly a wrongful act for the purpose of the substantive principle of law referred to in Broom and in Corbin, as applied by the court in Bragg.
[116] The consequence is that the law regards the wrongful conduct of Ruthol as having eliminated as a condition in the Mills' Option the requirement that the option be exercised by 30 June 1997. The Mills' Option was validly exercised on 3 March 1999, within a reasonable time after the Mills discovered with sufficient certainty the deception that had been practised upon them.
[Emphasis added].
An understanding of the significance of this decision is not assisted by the fact that Palmer J at [113] clearly excluded estoppel as the basis for his judgment, whereas on appeal Sheller JA said at [93]: "Assuming, as Palmer J does correctly, that Ruthol was estopped from denying that the Millses' option was properly exercised, what application could the maxim that no man may take advantage of his own wrong have to Tricon's priority which could be reconciled with the decision of the High Court in Latec Investments?"
The issue of whether the maxim operates only to underpin a rule of construction, or whether in addition there are circumstances in which it may have substantive effect, does not appear to be entirely settled. While there may be situations where a party is denied a benefit to which it is entitled under a contract upon the happening of an event, where that event is caused by the wrongful conduct of that party, it does not follow that, where the innocent party is entitled to a benefit that depends upon an event that the contract requires the other party to achieve, the wrongful failure of the other party to achieve the event will entitle the innocent party to the benefit in specie, as opposed to damages against the wrongful party for breach of the contract. A principle of construction whereby the wrongful party will not be entitled to a benefit under a contract when the event necessary to give rise to the entitlement to that benefit is caused by the wrong of the party claiming it, or even if there is a substantive principle to that effect, does not translate into the situation where it is the innocent party who is claiming the benefit, and that benefit has been denied because the other party's failure to cause the necessary event to happen is a breach of the contract.
In the present case, PHG was not entitled to be paid the Development Fee under the Deed of Assignment unless and until the Development Consent was issued by the Council. The Development Consent was not issued because of a breach of the Deed of Assignment by Panorama. It cannot now be known what the terms of the Development Consent would have been, if Panorama had performed its obligations under the Deed of Assignment. In the circumstances, PHG is entitled to a judgment for damages against Panorama.
As explained above, on the uncontested expert evidence led by PHG, it has established on the balance of probabilities that, if Panorama had performed its obligations under the Deed of Assignment, the Council would have issued a Development Consent that approved a development comprising of at least 275 Units.
Not only has Panorama not challenged the expert evidence led by PHG, but it has not made any submissions in opposition to PHG's submissions in support of the quantum of its loss. In particular, Panorama has not asserted by reference to the evidence that there were additional, relevant contingencies that the Court should take into account in valuing PHG's lost opportunity, that would require the Court to assess the damages on the basis that the Court should allow for the possibility that the Development Fee would have been less than that claimed by PHG, including to allow for the possibility that the Council would not have issued a Development Consent at all. In the circumstances, if the Court were to allow for additional contingencies not contended for by Panorama, that would involve the Court in engaging in speculation that is unfair to PHG.
I conclude that PHG is entitled to an award of damages against Panorama in the sum of $6,195,000.
PHG may be entitled to interest on its damages. There may be an issue as to the time from which interest should be calculated, as the parties did not address the time when the Development Fee would have become payable had Panorama performed its obligations under the Deed of Assignment. It will be necessary for PHG to provide to the Court a calculation of the interest that it claims.
It may be that, if the Court enters judgment in favour of PHG against Panorama for damages for breach of the Deed of Assignment, then PHG's right to claim the Development Fee under the Deed of Assignment will merge in the Court's judgment. If that is so, then the charge claimed by PHG and its entitlement to the declaration in prayer 1 of the second further amended statement of claim may lapse. The parties have not provided submissions on this issue, or whether any consequential orders should be made.
In principle, PHG is entitled to an order that Panorama pay its costs of the proceedings. Given the change of position by Panorama as a result of the appointment of the administrators, of which the Court was informed at the beginning of the hearing, the Court has not been required to consider a large proportion of the parties' forensic efforts in these proceedings. However, it is my understanding that Panorama challenged both PHG's claim to enforce a charge to recover the Development Fee on the basis that it should be treated as being presently payable, and also PHG's claim for an order for the payment of damages. If that is correct, then I consider that PHG has substantially succeeded on its claim against Panorama, and accordingly is entitled to an order for the payment of its costs.
It will unfortunately be necessary for the parties to provide further submissions to the Court on these outstanding issues. For reasons concerning the Court's ability to determine any outstanding issues, the Court will require the parties to deliver concise further submissions to my Associate by 11 December 2023.