Senses Northbridge Pty Ltd v Sahab Holdings Pty Ltd

The Agreement

1. The parties to the Agreement, in addition to Sahab and Senses, are Mr Michael Reid, as guarantor of the obligations of Senses under the proposed lease, and Messrs Allen Linz and Alex Collins, as guarantors of the obligations of Senses under the Agreement. The Agreement recites that Sahab is the registered proprietor of the four freehold parcels that comprise the Premises. Sahab owns different parcels in different capacities as trustee of trusts. The details of those different capacities are not presently relevant.
2. The critical operative provision of the Agreement is cl 2.1, which relevantly provides that Sahab agrees to grant, and Senses agrees to accept the grant of, a lease of the Premises in the form which is annexed to the Agreement (the Lease). Clause 2.1(b) relevantly provides that the Lease "is to vest" on the first to occur of:

• the issue by the Council to Senses of a certificate under s 109C(1)(c) of the Environmental Planning and Assessment Act 1979 (NSW) (the Planning Act) permitting and authorising the Premises to be used for the purposes of a long day childcare centre catering for up to 124 children and ancillary offices (the Specified Purposes); and
• fifteen months after the issue by the Council or the Land and Environment Court or other appeal authority of development consent under the Planning Act authorising and permitting Senses to upgrade and to construct improvements on and to use the Premises for the Specified Purposes.

1. Clauses 3.1 to 3.14 inclusive of the Agreement, which appear under the heading "DEVELOPMENT APPLICATION", deal with the proposed development application. Clauses 3.1, 3.2 and 3.4 of the Agreement are the critical provisions giving rise to the present dispute. The precise terms of those clauses are set out in Appendix 1 to these reasons.
2. Under cl 3.1, Senses is required, as soon as practicable after the commencement of the Agreement, to prepare or cause to be prepared "the development application", at its cost and expense. Clause 3.2 provides that "the development application" must be based on the Jago Concept Plans and must include all information and documents that the Council reasonably requires to enable the application to be assessed. By cl 3.4, Senses must provide to Sahab copies of "the proposed development application and its supporting drawings, schedules, reports and the like". Sahab must consent to "the development application" and must sign all documents reasonably required by Senses to enable "the development application" to be lodged with the Council.
3. Clause 3.5 obliges Senses to keep Sahab fully informed of material correspondence and communications passing between Senses and Senses' agents, on the one hand, and the Council, on the other, regarding "the development application". That obligation includes providing Sahab with copies of relevant correspondence or summaries of relevant communications, so that Sahab is kept up to date with progress made by the Council, or other authorities, in their assessment of "the development application". Under cl 3.6, Senses must prosecute "the development application" expeditiously and with all due care, skill and diligence and must comply with all reasonable requirements of the Council, or other authorities, for further information and documents in relation to "the development application".
4. The term development application is defined in cl 1.1 as "the application made by [Senses] to the Council for the development consent". The term development consent is defined in cl 1.1 as "the consent issued … authorising and permitting [Senses] to upgrade and to construct improvements on and to use the [Premises] for the [Specified Purposes]". I have emphasised the use of the definite article in those provisions above and in Appendix 1. That may have some bearing on the ultimate question of construction and effect of the Agreement.
5. Thus, at the time of the Agreement, there was nothing that satisfied the description "the development application". Rather, the development application was something that was to be brought into existence in accordance with the provisions of the Agreement.
6. By cl 3.3, Senses and Messrs Reid, Linz and Collins represented to Sahab that they estimate, on reasonable grounds, that the cost of the lessee's works will not be less than $5,500,000, including GST. Under cl 1.1, the term lessee's works is defined as all works required or intended to be carried out by or on behalf of Senses in, on or about, the Premises pursuant to or in compliance with the proposed development consent and construction certificate under s 109C(1)(b) of the Planning Act and all works otherwise required to fit out and make the Premises ready for the Specified Purposes. It is significant that cl 3.3 indicates a minimum cost of the lessee's works, rather than specifying any particular characteristics that the lessee's works were required to exhibit.
7. Clauses 3.7 to 3.14 deal with the steps to be taken by the parties if the Council declines to grant development consent or grants development consent on terms or subject to conditions that Senses or Sahab consider, on sustainable objective grounds, to be unreasonable. The steps involve obtaining legal advice as to whether there are credible grounds available for Senses to appeal to the Land and Environment Court from the decision of the Council. Provision is made for rescission of the Agreement if any such appeal is unsuccessful. Senses is required to indemnify Sahab from and against all costs, expenses and liabilities arising out of or resulting from or connected with the obligations of, and steps required to be taken pursuant to or under, clauses 3.1 and following.
8. Clauses 4.1 to 4.8 of the Agreement deal with possession and risk. Under cl 4.1, once Senses secures development consent, it must give Sahab reasonable notice of the date sought by Senses to be "the possession date". Under cl 1.1, possession date is the date on which Sahab gives to Senses exclusive possession of the Premises for the purpose of carrying out the lessee's works. Under cl 4.2, Sahab have must give notice to Senses of the possession date as soon as Sahab secures vacant possession of the Premises. In that regard, Senses acknowledges that certain tenants of Sahab have fixed term leases that can only be terminated by giving six months' notice under s 35 of the Retail Leases Act 1994 (NSW). Under cl 4.2, on and from the possession date, Senses is required to assume exclusive possession of the Premises, together with all risks associated with that possession. Clause 4.3 requires Senses to take out and maintain certain policies of insurance prior to the possession date. Clauses 4.4 and 4.5 specify particulars in respect of the policies of insurance, the details of which are not presently relevant.
9. Under clause 4.6 of the Agreement, Senses and its agents must use and occupy the Premises at their sole and exclusive risk on and from the possession date up to and including the date on which the Lease vests. They must also indemnify and keep indemnified Sahab and its agents from and against liabilities arising out of, resulting from or connected with the Premises or their use and occupation on and from the possession date to and including the date on which the Lease vests.
10. Clauses 5.1 to 5.4 deal with the lessee's works. Under cl 5.1, as soon as practicable after the construction certificate issues and the possession date occurs, Senses must carry out or cause to be carried out the lessee's works at its cost and expense and in a proper and workmanlike manner. Once the lessee's works are practically completed, Senses must, at its cost and expense, apply to Council for an occupation certificate as referred to in s 109C(1)(c) of the Planning Act.
11. Clauses 6.1 to 6.6 of the Agreement deal with outgoings. Those provisions draw a distinction between phase 1, being the period on and from the date of the Agreement up to and including the possession date, and phase 2, being the period from the possession date to the date on which the Lease vests. During phase 1, Sahab is entitled to all rental income from the Premises and must pay or bear all outgoings and Senses must pay to Sahab a sum of $4,200 per month, monthly in advance. During phase 2, the monthly instalment payable by Senses to Sahab is to increase to $12,500, payable monthly in advance.
12. Clauses 11.1 to 11.7 of the Agreement deal with dispute resolution and provide for the determination of certain disputes in accordance with the procedure set out in those provisions. It has not been suggested by either party that these proceedings are precluded by those provisions.
13. Clauses 16.1 to 16.11, under the heading "general", contain provisions described as "boilerplate". Some of those provisions may have a bearing on the questions raised in the proceedings.
14. Thus, cl 16.2 provides that the Agreement contains: "… all agreements, understandings, promises and undertakings of, by and between the parties concerning its subject matter." Clause 16.4 relatively provides that the Agreement: "… cannot be altered, modified or amended except by written agreement between the parties and a purported alteration, modification or amendment in breach of this clause is void and to no effect." Clause 16.5 relevantly provides as follows: "Delay or failure by a party to enforce a right, require strict compliance with an obligation, make an election or exercise a discretion cannot subsequently preclude the party from enforcing the right, requiring strict compliance with the obligation, making the election or exercising the discretion."
15. Finally, it is desirable to mention briefly the provisions of the Lease. The initial term is for 20 years with an option to renew for a further term of 15 years and a further option for an additional term of 10 years. Thus, there is a potential for the tenancy to run for a period of up to 45 years.
16. The initial rent under the Lease is $500,000 per annum, net of GST. The rent is to be increased on the first anniversary of the vesting date (the Commencing Date) to $550,000 per annum, on the second anniversary of the Commencing Date to $605,000 per annum and on the third anniversary of the Commencing Date to $665,500 per annum. Thereafter, on specified anniversaries of the Commencing Date, rent is to be increased by 3% subject to a requirement that the rent be increased in accordance with increases in the Consumer Price Index if increases in that index are greater than 3%.

Facts giving rise to the Alleged Waiver and Estoppel

1. Sahab is controlled by members of the Kanjian family. At material times, the directors of Sahab were Mr Kenneth Kanjian, a solicitor, and Mrs Sonia Kanjian, Kenneth Kanjian's mother. Kenneth Kanjian was also the secretary. Both Kenneth Kanjian and Sonia Kanjian held A class shares in the capital of Sahab. Kenneth Kanjian, Victor Kanjian, Phillip Kanjian and Marianne Kanjian also held B class shares in the capital of Sahab. Disputes within the Kanjian family have resulted in litigation, the details of which are not presently before me. However, in connection with that litigation, receivers have been appointed to Sahab and the conduct of the defence of these proceedings has been in the hands of the receivers. Until the appointment of the receivers, the management of the business of Sahab was, pursuant to cl 95 of its articles of association, vested in its directors, who were authorised to exercise all such powers and do all such acts and things as may be exercised or done by Sahab and are not directed or required to be exercised or done by Sahab in general meeting. The relevance of those matters will become apparent in due course.
2. The Agreement was executed on behalf of Sahab by Sonia Kanjian and Kenneth Kanjian in their capacity as directors without using a common seal of Sahab. While there was at one stage a question as to whether the Agreement was binding on Sahab, it is now common ground that the Agreement was duly executed on behalf of Sahab and is binding upon Sahab according to its terms. The question is whether the terms of the Agreement are affected by a waiver or estoppel. As will become apparent, that question turns on the effect of certain conduct on the part of Kenneth Kanjian.
3. At relevant times, each of Messrs Reid, Linz and Collins was a director of Senses. Mr Reid has been a developer of childcare centres for over 15 years and, during that time, he has developed about 10 such centres in the lower North Shore of Sydney, including the Senses Early Learning Child Care Centre in Alfred Street, Milsons Point (the Milsons Point Centre). The Milsons Point Centre is operated by Senses Milsons Point Pty Ltd, the directors of which are also Messrs Reid, Linz and Collins. The Milsons Point Centre is conducted at premises owned by Juketop Pty Ltd (Juketop). Kenneth Kanjian acted as solicitor for Juketop in the negotiation of the lease of those premises. In the course of those negotiations, Mr Reid met Kenneth Kanjian.
4. On 8 July 2017, Messrs Reid and Collins met with Kenneth Kanjian at the Premises, which are presently used for mixed-use retail and commercial purposes. Following a tour of the Premises, Messrs Reid, Collins and Kenneth Kanjian discussed options for the Premises. Kenneth Kanjian said that the Premises were held through Sahab, which he described as a "family company". He said that significant land tax was payable in respect of the Premises but that, if a childcare centre were to operate from the Premises, land tax would not be payable. He also said that he liked what had been done with the Milsons Point Centre and said that he would like Mr Reid and Mr Collins to explore whether the Premises might be a suitable site for a Senses early learning centre.
5. Following that meeting, Messrs Reid, Linz and Collins came to the view that the Premises might be suitable for a childcare centre. They arranged for a surveyor to undertake a contour survey in order to prepare a rough site plan. Mr Reid was of the view that a commercially successful childcare centre would need to have capacity to hold over 100 children. He and Messrs Linz and Collins considered either using the existing structures of the Premises or demolishing those structures and replacing them with a completely new development.
6. In June 2017, Mr Reid engaged Nordon Jago Architects (Nordon Jago) to prepare a schematic drawing for the site, to assess whether a childcare centre capable of holding more than 100 children could be constructed on the Premises. Nordon Jago emailed a concept sketch to Mr Reid on 29 June 2017. On 4 September 2017, Nordon Jago emailed to Mr Reid draft plans for 79-place childcare centre. Mr Reid was not happy with the number of places and the concept sketch was refined and expanded to accommodate 124 places.
7. During the course of Mr Reid's dealings with Nordon Jago, Mr Reid had a verbal exchange with Mr Kenneth Kanjian to the following effect: "Reid: Nordon Jago are working on some high level schematic concept plans to show you the sort of thing we could do with the site based on the existing improvements. Kanjian: When they are ready, I want to present them to my family."
8. On 5 October 2017, Nordon Jago emailed to Mr Reid a set of plans, being the Jago Concept Plans. Mr Reid had a copy of the Jago Concept Plans mounted on A1 boards and delivered them to Kenneth Kanjian's office on 9 October 2017.
9. Mr Reid described the Jago Concept Plans as schematic concept plans, designed to convey the capabilities of the Premises, utilising the existing improvements rather than contemplating the demolition of those improvements and the construction of a purpose-built structure. He said that they were not fully realised plans for a childcare centre, which would normally require numerous revisions and would need to be developed with the assistance of town planners, traffic control consultants, fire safety consultants and other consultants, and with response from the authority for the area in which the Premises are located, namely, the Council.
10. The Jago Concept Plans were not drawn to scale because Mr Reid had not arranged for a surveyor to enter the Premises. At the meeting on 8 July 2017, Kenneth Kanjian had said that he did not want the tenants of the Premises to know that Sahab was considering a redevelopment. As a consequence, in preparing the Jago Concept Plans, neither Nordon Jago nor Mr Reid knew the internal dimensions of the improvements on the Premises or where the internal structural supports were located. Nevertheless, by reason of the Jago Concept Plans, Mr Reid concluded that the Premises might be capable of accommodating an adequately sized childcare centre. He and Messrs Linz and Collins therefore arranged for the incorporation of Senses on 19 December 2017.
11. In about February 2018, Mr Reid spoke to Kristina Mitkovski, an architect at Two Form Architecture and Interior Design (Two Form), who designed the structure for the Milsons Point Centre. Mr Collins and Mr Reid decided to engage Two Form for the project at the Premises because Two Form were familiar with the requirements for childcare centres generally and, specifically, a centre that functionally and aesthetically corresponded with "the Senses brand". For that reason, Nordon Jago was replaced with Two Form on all architectural work undertaken for the Senses group. In May and June 2018, Two Form sent fee proposals to Senses in respect of the pre-design, concept design and schematic design work undertaken from their engagement until 7 June 2018 and proposed further design development and documentation to be undertaken up to and including the date of lodgement of a development application.
12. After considering the site of the Premises in some detail, Mr Reid concluded that it would be more economical and functional if the existing structures were to be demolished and a purpose-built childcare centre developed in order to avoid, amongst other things, the costs of retro-fitting the existing buildings, to ensure compliance with all applicable building standards and requirements of the Council. He also considered that a bigger centre should be developed on the site of the Premises.
13. In about February 2018, Mr Reid said to Kenneth Kanjian words to the following effect: "We are getting Two Form, the architect who worked on the Milsons Point [Centre], to work up detailed plans instead of Nordon Jago. We are going to opt for the demolition of the existing building. I've spoken to the traffic consultant we use and they are concerned about the existing driveway entrances and exits on Strathallen Avenue and safety owing to the location of the bus stop and the crossing and the lines of sight for the kids."
14. Between the time of the initial meeting involving Messrs Reid and Collins and Kenneth Kanjian on 8 July 2017 and the signing of the Agreement, the terms of the proposed agreement were negotiated, including the insertion of a demolition clause in the Lease.
15. Thus, cl 60 of Part 2 of Schedule A to the Agreement provides that the first new lease is to be identical with the initial lease, except that it must contain a clause dealing with demolition, providing that, if Sahab wishes to demolish the building on the Premises for the purpose of redevelopment, Sahab can terminate the Lease with 12 months' notice but only if Sahab can establish that the proposal is genuine and can be carried out within a reasonable period after the lease is terminated and the Premises are vacated. Mr Reid understood that that clause was included at the request of Kenneth Kanjian's siblings.
16. Mr Reid said that, on various occasions, Kenneth Kanjian informed him that he needed to discuss the proposal for the development of the Premises with his family and told Mr Reid on various occasions that he had done so. Mr Reid did not have any direct dealings with any of Kenneth Kanjian's family during the negotiation of the Agreement, its execution or the preparation of the proposed development application.
17. On 16 May 2018, Kenneth Kanjian and Mr Reid embarked on a tour of the Milsons Point Centre. During the tour, Kenneth Kanjian and Mr Reid had a conversation to the following effect: "Reid: We are proposing to start swimming lessons here by using the facilities at North Sydney pool. That way the kids learn to swim and it's not another thing parents need to worry about teaching their kids on the weekend. Kanjian: That's a great idea. I can only swim with a snorkel and I can't turn my head. Reid: The swim school is a real point of difference for Senses. Other child care centres don't offer swimming lessons. Given the size of the Northbridge site, I am sure you could fit a swimming pool in there. We would have to excavate down for the car park in any event so there would be room. Kanjian: Yes I'm very happy that you're excavating the car park and I love the swim school idea. Please see if it can be done."
18. On 17 May 2018, Kenneth Kanjian sent an email to Messrs Linz and Reid relevantly saying as follows: "It was a great catching up with you last Wednesday to be given a personal inspection of the terrific fit out you have undertaken at Milsons Point. Essentially, you have turned what was a dead no man's land into very attractive and productive space. In terms of the Northbridge property, I am very much in your hands as to how you want me to deal with the various tenancies we have. I will now be able to tell them that we are exploring other options and that for the time being no long-term leases can be offered. However, as you formulate your ideas for the development application, what I propose to do just before the application is lodged is to convene a meeting with the tenants and to advise them of the application so that they hear it from me and not by way of notification from the Council. I would appreciate it if, as and when you can, you give an indication of the timetable to which you are working in terms of preparation of schematic drawings for the development application and lodgement of the application itself. I acknowledge Michael's advice that it may well be in your interests not to upgrade or renovate current improvements but to start from scratch - I will leave that to you. The one final point I wished to draw to your attention is in relation to payment of monthly rent during phase 1 of the Agreement for lease. …"
19. On 31 May 2018, Senses made its first payment of rent to Sahab pursuant to the terms of the Agreement. An exchange of emails on 31 May 2018 confirmed the remittance of the first payment.
20. On 15 June 2018, Mr Reid sent an email to Kenneth Kanjian saying Senses had "a cast of thousand working on Northbridge behind the scenes". Mr Reid said: "Will have plans for your perusal by end of next weekish all going smoothly, with a pre DA likely mid July. Post pre DA think it would be prudent to introduce ourselves to the local precinct committee and do a presentation with your blessing?" Kenneth Kanjian responded later in the day saying, relevantly, as follows: "I very much look forward to receiving an update report from you and, when available, revised plans. I agree that post pre-DA, there should be an introduction to the Northbridge Progress Association. If you wish, I can introduce you to the President with whom I am reasonably well acquainted and perhaps you may wish to make a presentation to a meeting to get members of the Association on side …" The emails also dealt with the question of access for a surveyor.
21. On 10 July 2018, Messrs Reid and Linz met Kenneth Kanjian at a coffee shop in the city. During that meeting, they discussed a forthcoming meeting with officers of the Council, at which Senses hoped to obtain feedback on the proposed plans for the site of the Premises. During the meeting, Messrs Reid and Linz gave Kenneth Kanjian two A3 bound colour copies of what was described as "the pre-DA plans". During the meeting, a conversation took place to the following effect: "Reid: Ken, here are the plans that we intend to show the Council. As you can see they've been revised since May and now they have got the swimming pool we have been discussing. Kanjian: I love the pool and I hope the Council responds positively. I think the façade needs work though. Reid: We have designed the building from the inside out. I think you're right: the façade is so so. Don't worry about that. We can work on it."
22. The copies of "the pre-DA plans" provided to Kenneth Kanjian clearly show a proposal that is quite different in concept and detail from that shown in the Jago Concept Plans, as provided to Kenneth Kanjian on 9 October 2017. In the afternoon of 10 July 2018, Kenneth Kanjian sent an email to Messrs Reid and Linz saying: "Thanks for the coffee this morning. It was good to catch up. I look forward to hearing from you once you have had your pre-DA meeting with the Willoughby Council."
23. On 16 July 2018, Kenneth Kanjian sent another email to Messrs Reid and Linz saying: "I note that you are scheduled to meet with [the Council] today for a pre-DA meeting. Please let me know how it turns out." Kenneth Kanjian also referred to requirements for a bank guarantee and for the payment of a tax invoice. Mr Linz responded to the email later in the day, saying that they would call him on the following day.
24. On 17 July 2018, Kenneth Kanjian and Mr Reid had a verbal exchange to the following effect: "Kanjian: Like I've said, I don't really like the façade in the proposed plans. Please can you change it. Reid: Yes, we can definitely look at that for you."
25. During July and August 2018, Kenneth Kanjian and Mr Reid exchanged correspondence about the air conditioning in the Premises and other matters concerning the proposed development, including the need to take acoustic measurements. In the emails, Kenneth Kanjian also inquired about progress in updating the façade. For example, on 15 August 2018, Mr Reid sent an email to Kenneth Kanjian saying: "The[re] is no doubt the external plant was in a terrible state and not being maintained, which I understand is the Lessee responsibility. Let me know entity you wish tax invoice to be reissued. Almost there on the façade." Kenneth Kanjian responded later on the same day saying: "Thank you for helping out with this. I will attend to the payment of the tax invoice promptly … I look forward to catching up with you and Allen [Linz] when your plans on the façade and generally are advanced. I am yet to make disclosure to tenants although I suspect that the rumour mill is alive and well." Mr Reid responded later on the same day: "Thanks Ken. Will be in touch asap re facade plans."
26. On 20 August 2018, Mr Reid sent an email to Kenneth Kanjian enclosing a copy of an email that he had received from Mr Collins concerned acoustic readings, seeking permission to proceed. Kenneth Kanjian responded on the same day saying, relevantly: "…Please go ahead with the acoustic logger. … Please let me know whether you are making progress with the elevation drawings relating to the façade of the proposed development." Mr Reid replied: "Thanks. I think will have something for your perusal on the elevations this week."
27. On 11 September 2018, Messrs Collins and Reid met Kenneth Kanjian at a coffee shop in the city. Mr Reid gave Kenneth Kanjian a copy of plans for the Premises featuring a façade modified in accordance with Kenneth Kanjian's request. Mr Kanjian said that he was "happy with that". The plans are quite clearly different in concept and detail from the Jago Concept Plans.
28. On 11 September 2018, Kenneth Kanjian wrote to the president of the Northbridge Progress Association to arrange a meeting with Mr Reid. He told the president that he had reached agreement with a party which proposes "an impressive and socially beneficial use of the [Premises] in light of the demographics of Northbridge". He said that one of the principals wished to introduce the president to the concept that he and his colleagues had in mind. On 8 October, Mr Reid subsequently met the president of the Northbridge Progress Association.
29. On 5 October 2018, Kenneth Kanjian asked Mr Reid by email whether he and Mr Linz could meet "for a catch up". After several exchanges, Kenneth Kanjian sent an email to Messrs Reid and Linz relevantly saying as follows: "I am looking forward to the meeting with you and Allen on Friday morning. My siblings and parents have asked me for an update report and I was concerned about the delay in lodging the development application. I explained to them that it is a complicated process - front end loaded but that good progress is being made. To keep everyone onside, would it be possible for you to send me in electronic format copies of proposed plans. On Friday perhaps we can discuss timing issues and other matters because my parents and siblings have asked me to provide them with a written report. Parts of the centre are falling into disrepair and we are holding back on carrying out repairs so we would like to have an idea of timing on your side as well. Also, depending on what you tell me on Friday, I feel that the time is approaching for me to convene a meeting with the tenants and make disclosure. However I do not wish to approach anyone until we have a talk."
30. On 12 October 2018, Messrs Reid, Linz and Collins met Kenneth Kanjian in the city and a verbal exchange to the following effect took place: "Kanjian: I'm having some difficulty with my family. I think you should try to get the DA lodged as soon as possible. Reid: Ken, we will do our best and the intent is to lodge early December.
31. On 17 October 2018, Mr Collins sent to Kenneth Kanjian a detailed progress report, saying, relevantly, as follows: "As discussed during our … meeting last Friday, 12 Oct 2018 …, we think it best to articulate the work that has been undertaken to date in preparing the development application (DA) submission since the agreement for lease was executed 10 May 2018. It is important to highlight that in developing the documentation (from schematic concept to the level of detail required for DA submission), Senses has engaged with various stakeholders …. To date, Senses has only received positive and constructive feedback to its proposed mixed use scheme. Senses decided to engage a new architect based upon the successful delivery of its Milsons Point long day/childcare centre. The architect and interior designer for Milsons Point was Two Form Architecture and Interior Design. Two Form was formally engaged by Senses on 12 June 2018 as the lead architect for the Northbridge project. A pre-DA meeting was held at Willoughby Council on 16 July 2018 at which time the proposed mixed long day/childcare centre and swim school scheme was presented to Council staff. …. The matters raised related to traffic and parking, landscaping, waste, evacuation procedures, contamination, operational management plans, acoustics, access and architecture (including the need to activate part of the ground level facing Strathallen Ave). Post the pre-DA meeting, the consultant team had to decipher and consider the relevant matters …. Specifically and in response to your concern, the façade treatment had to be redesigned. Various internal reiterations of the drawings were produced and considered before all consultant disciplines could be provided with a revised draft set of drawings. Quotations were received from a number of firms within each consultant discipline … and selected consultants engaged. This process commenced in the middle of August 2018. …" [The email then set out the various external consultant disciplines required to lodge the DA] Further, a briefing was held on 8 October 2018 … with the Northbridge Progress Association. … Michael presented the mixed retail, long day/childcare centre and swim school scheme and the feedback was very encouraging. We appreciate your continued positive feedback and encouraging comments with respect to the plans and current scheme. …" The "latest concept plans… prepared by Two Form Architecture and Interior Design" were attached to the email.
32. On 18 October 2018, Kenneth Kanjian responded to that email with a further email relevantly in the following terms: "Alex Thank you for your detailed and well considered report providing me with an update of all the work that has been done in relation to the project since the agreement for lease was exchanged earlier in May this year. I appreciate that significant work has been undertaken to bring the project to this point and I am encouraged that you are not too far away from being in a position to lodge the formal development application with the Willoughby City Council. The plans have evolved somewhat since our initial discussions and that is perfectly understandable. A project of this complexity by its nature entails evolution, development and of course, refinement. I look forward to receiving further update reports from you as the matter progresses. There are two matters which I should raise at this juncture. First, the addition of the swim school and retail outlet on the ground floor will probably mean that the land tax exemption that we had initially contemplated will be lost. As I understand it, under the current law, the land tax exemption only applies if the entire property is used solely for childcare purposes. Second, I was a little concerned to read that Ampol had owned the site from 1954 into the 1970s. Petrol companies did not do a great job remediating station sites at those times and so I do not know what will be the outcome of environmental enquiries presently being undertaken. Please keep me abreast of developments on this front as well although I understand that you Allen and Michael have considerable experience in dealing with sites that may not have been remediated effectively. That said, we have owned the site and its current structure since the early 1980s and I guess that development consent for the redevelopment of the site which took place then would not have been given if the Council had not been satisfied that remediation had been carried out to a satisfactory degree. Anyway, this is a matter which can be considered more carefully when the facts become known. I look forward to hearing further from you as the DA lodgement date approaches."
33. Kenneth Kanjian sent an email to Mr Collins with a copy to Messrs Linz and Reid on 18 October 2018 in response to the email from Mr Collins of 17 October 2018. The email said relevantly: "Thank you for your detailed and well considered report providing me with an update of all the work that has been done in relation to the project since the agreement for lease was exchanged earlier in May this year. I appreciate that significant work has been undertaken to bring the project to this point and I am encouraged that you are not too far away from being in a position to lodge the formal developed application with the Willoughby City Council. The plans have evolved somewhat since our initial discussions and that is perfectly understandable. A project of this complexity by its nature entails evolution, development and of course, refinement. I look forward to receiving further update reports from you as the matter progresses." Mr Kanjian's email then referred to two other matters. The first was the expected land tax exemption that may be lost because of the addition of the swim school and retail outlet on the ground floor. The second matter concerned the fact that the site had been used by a petrol company from 1954 into the 1970s. Mr Kanjian expressed concern as to whether proper remediation of the site of the Premises had been carried out. He said that that was a matter that could be considered more carefully when the facts became known. The email ended by saying: "I look forward to hearing further from you as the DA lodgement date approaches."
34. On 29 November 2018, Mr Collins sent an email to Mr Reid saying that, in relation to the proposed development application documentation, a USB was waiting for Mr Reid's collection for drop off to Kenneth Kanjian. He said that the USB contained the DA forms, a statement of environmental effects, a Two Form architectural drawing package and all supporting consultants' reports and drawings, all of which were attached to the email. Mr Collins said that, in order to lodge the development application, Sahab's consent was required as owner and that a letter on company letterhead would be required. Mr Collins said that the letter should clearly grant Senses' consent to lodge the application with the Council and that Sahab authorised officers of the Council to enter the Premises to carry out inspections relating to the application. The email said that Senses was ready to lodge the development application as soon as the consent letter from Sahab was provided. Senses attaches some significance to the fact that the development application form estimates the proposed cost of the development of $9,075,000, a sum significantly greater than that originally proposed.
35. On the same day, Mr Reid forwarded a copy of the email of 29 November 2018 to Kenneth Kanjian. All of the attachments were also forwarded to Kenneth Kanjian. It is quite clear, and it is common ground, that the proposals outlined in the material so forwarded to Kenneth Kanjian were not based on the Jago Concept Plans.
36. On 29 November 2018, Mr Reid collected the USB to which Mr Collins had referred and delivered it to Kenneth Kanjian at his office at about 3.30pm. At that time, a verbal exchange occurred to the following effect: "Kanjian: My family have commenced legal proceedings against me and I expect that they'll seek an injunction to prevent me from signing the DA and its being lodged. Reid: OK, I'll contact Gil Baron."
37. Mr Baron, of Baron + Associates, Solicitors, was acting for Senses. Thereafter, Baron + Associates exchanged correspondence with Messrs Uther Webster & Evans, the solicitors acting for Kenneth Kanjian's siblings, and Keypoint Law Pty Ltd, the solicitors acting for Kenneth Kanjian's parents, in proceedings commenced in the Protective List of the Supreme Court.
38. Thus, on 7 December 2018, Baron + Associates wrote to Kenneth Kanjian, saying that, on 29 November 2018, copies of the development application and supporting documentation had been provided to him to obtain the signed consent of Sahab and that Senses had not received the signed consent. Kenneth Kanjian responded saying that, in the proceedings in the Protective List on 6 December 2018, he had been required to give an undertaking to the Court not to give the consent of Sahab to the development application. He said that he was not presently at liberty to sign the consent on behalf of Sahab.
39. Mr Kanjian also said that both his parents and his siblings opposed the development application and the Agreement, pointing principally to the difference between the proposal as encapsulated in the development application and the proposal as contemplated at the time when the Agreement was entered into. Baron + Associates responded by saying that, if the required written consent was not forthcoming from Sahab by 18 December 2018, an application would be made by Senses seeking an urgent order directing that Sahab provide the necessary documentation for the development application.

The Issues in the Proceedings

1. The relevant allegations made by Senses in the Statement of Claim may be restated as follows:

• Under the terms of the Agreement, Sahab had an obligation to consent to the development application prepared by Senses but that obligation was qualified by a right on the part of Sahab to refuse consent in the event the development application was not based on the Jago Concept Plans;
• By email dated 17 May 2018, Kenneth Kanjian, on behalf of Sahab, informed the directors of Senses that Sahab did not require Senses to adhere to the Jago Concept Plans for the purposes of the development application "but [could] start from scratch - I will leave that to you";
• On 10 July 2018, Kenneth Kanjian was provided with plans for the Premises prepared by Two Form, which were more detailed and differed in various respects from the Jago Concept Plans;
• In the period from 10 July 2018, Sahab raised no objection to the plans prepared by Two Form and the revisions to those plans with which Sahab was provided;
• By email dated 18 October 2018, Kenneth Kanjian, on behalf of Sahab, stated to Messrs Reid, Collins and Linz that the plans prepared by Two Form had evolved somewhat since their initial discussions, that that was perfectly understandable and that "a project of this complexity by its nature entails evolution, development and of course, refinement";
• On 29 November 2018, Senses provided to Sahab for Sahab's consent a development application that incorporated a final version of the plans prepared by Two Form;
• Sahab has failed and refused to provide the necessary consent to the development application and has given no reason for its failure to do so other than undertakings and orders given or made in the proceedings brought in the Protective List;
• As at 29 November 2018, to the extent that Sahab would have had the right described above to refuse its consent to the development application on the ground that the plans prepared by Two Form, which form part of the development application, differ from the Jago Concept Plans, Sahab, by its conduct in permitting and encouraging Senses to proceed with the preparation of the development application based on the plans prepared by Two Form, waived that right and is estopped from relying on it;
• The estoppel first arose against Sahab on 17 May 2018 and operated throughout the whole period to 29 November 2018 and derives from both: 1. the assumption on the part of Senses that Sahab did not require Senses to adhere to the Jago Concept Plans and was satisfied with the plans prepared by Two Form; and 2. Senses adopting the assumption referred to in (i) as to the terms of its legal relationship with Sahab and Sahab also having adopted that assumption.
• The assumption made by Senses was encouraged or induced by Sahab;
• Senses acted in reliance on its assumption by continuing to formulate the development application on the basis of the plans prepared by Two Form;
• Sahab knew that Senses was acting in reliance on the assumption;
• Senses suffered detriment by preparing the development application on the basis of the plans prepared by Two Form;
• Sahab failed to avoid that detriment by fulfilling the assumption made by Senses;
• Both parties conducted their relationship on the basis of the assumption referred to above;
• Each party knew or intended that the other party would act on that basis; and
• Departure by Sahab from the assumption would occasion detriment to Senses.

1. In its defence of 14 June 2019, Sahab does not dispute the communications alleged above, although it does not accept that they had the effect alleged. Sahab denies the allegation that it had an obligation to consent to the development application, qualified by a right to refuse consent. It denies that it has waived any right or is estopped from relying on such a right. In addition, Sahab asserts that, even if an estoppel had arisen, Senses has not suffered any prejudice that is not curable by damages or equitable compensation.
2. The relief claimed by Senses is in effect for specific performance of the relevant provisions of the Agreement. It also claims equitable compensation. However, it eschews any claim for damages for breach of the Agreement.
3. Sahab contends that, if an assumption was made by Kenneth Kanjian, any such assumption made by him was not the assumption pleaded by Senses. Further, it says, even if that assumption was made by Kenneth Kanjian, it was not made by Sahab because an inference should be drawn that the other director of Sahab, Sonia Kanjian, did not make any assumption.
4. Senses contends that the parties treated the words "must be based on the [Jago Concept Plans]" in cl 3 of the Agreement as being no longer relevant or as varied in some way or the operation of which has been suspended. It says that that gave rise to both a promissory estoppel and a conventional estoppel. It also asserts that the conduct of Kenneth Kanjian also constituted a waiver by Sahab, by electing not to assert its right to refuse consent, on the grounds of non-conformity with the Jago Concept Plans.
5. Sahab responds to that contention by asserting that such an estoppel is not pleaded and is not supported by any evidence. Thus, the Statement of Claim asserts an assumption on the part of Senses that Sahab did not require Senses to adhere to the Jago Concept Plans and was satisfied with the plans prepared by Two Form and that Sahab also adopted that assumption.

The Assumptions

1. Mr Reid gave unchallenged affidavit evidence that he assumed, from the statements in Kenneth Kanjian's email of 17 May 2018, that Sahab would leave it to Senses to formulate, with its architects, the architectural drawings that would be necessary for the development application and that Sahab was content for those architectural drawings to be prepared "from scratch", and would not involve the upgrade or renovation of the improvements currently erected on the site of the Premises. Mr Reid said that that assumption was also based upon the discussions that he had with Mr Kenneth Kanjian in February 2018, as referred to above.
2. Mr Reid said that, if he had been told, at any time prior to the submission of the draft development application to Kenneth Kanjian on 29 November 2018, that the assumption that he made was incorrect, and that Sahab was not content for the architectural drawings to be prepared "from scratch" and required the drawings to involve the upgrade or renovation of the current improvements, he would have insisted that Senses be granted access to conduct an audit and survey of the existing structure at the Premises. Mr Reid asserted that he was led to believe by Kenneth Kanjian that Sahab approved of a development application based on the plans prepared by Two Form.
3. In his unchallenged affidavit evidence, Mr Linz said that he assumed, from the statements contained in Kenneth Kanjian's email of 17 May 2018 that Sahab would leave it to Senses to formulate, with its architects, the architectural drawings that would be necessary for the development application and that Sahab was content for those architectural drawings to be prepared "from scratch" and, if Senses felt it to be desirable, not involving the upgrade or renovation of the current improvements on the site of the Premises. Mr Collins also gave unchallenged affidavit evidence in identical terms to that of Mr Linz.
4. Thus, the evidence of the three directors of Senses was unchallenged. Had their evidence been challenged, some question may have arisen as to its credibility in circumstances where the language of the affidavits was identical. In any event, Sahab's response is that the assumption about which the three directors of Senses gave evidence was not the assumption pleaded in the Statement of Claim. Therefore, it says, the claim by Senses cannot succeed because there is no evidence to support the assumption alleged.
5. In addition, Sahab contends, the undisputed evidence set out above does not support a finding that Kenneth Kanjian made the assumption pleaded, even if it might support a finding of some other assumption on the part of Kenneth Kanjian. Further, Sahab also contends that, whether or not the evidence supports a finding that Kenneth Kanjian made the assumption pleaded, the evidence does not support a finding that Sonia Kanjian, who was also a director of Sahab, made the assumption pleaded, or any assumption, as to the basis upon which the development application would be prepared or the material on which the development application would be based.
6. In relation to that last proposition, Sahab filed, relevantly, affidavits by Ms Sarah Saad, Ms Monica Ross-Maranik and Ms Vivian Evans. Ms Saad is a lawyer employed by the solicitors for Sahab. Ms Ross-Maranik is a solicitor who acts for Kenneth Kanjian's father. Ms Evans is a solicitor who is acting for Kenneth Kanjian's siblings, Victor Kanjian, Philip Kanjian and Marianne Yaghljian. Kanjian Holdings No. 1 Pty Ltd is the beneficial owner of one of the parcels that make up the Premises. Ms Evans acts for that company as well as for Kenneth Kanjian's siblings. Ms Evans was not aware of the Agreement until September 2018. That evidence is relied upon by Sahab to establish facts from which it says it should be concluded that Sahab, as opposed to Kenneth Kanjian, did not adopt the pleaded assumption, with the consequence that no estoppel could arise.
7. Sahab has two directors, Kenneth Kanjian and Sonia Kanjian. A subpoena was served on Kenneth Kanjian requiring production, relevantly, of all documents passing between him and his parents and siblings between 30 April 2018 and 10 December 2018 relating to the Premises. No documents were produced in answer to the subpoena and no minutes of any meetings of directors of Sahab were produced. Sahab contends that an inference should be drawn that there were no such meetings.
8. There are two shareholders of Sahab, being Sonia Kanjian and Kenneth Kanjian. Kenneth Kanjian holds his shares on trust for his father, Loris Kanjian. Sonia Kanjian and Loris Kanjian take the position that Kenneth Kanjian had no authority to agree to any variation of the Agreement and that any decision to do so required their specific approval. By no later than 23 October 2018, Loris Kanjian and Sonia Kanjian wished to investigate rescinding the Agreement. Kenneth Kanjian's siblings assert that he had no authority to act on behalf of Sahab without the approval of Sonia Kanjian. Kenneth Kanjian was not at any relevant time an attorney of Sonia Kanjian.
9. Kenneth Kanjian was asked to provide copies of the Jago Concept Plans, as referred to in the Agreement, so that Loris Kanjian and Sonia Kanjian could consider consenting to the development application. Sahab contends that, in those circumstances, an inference should be drawn that Sonia Kanjian had no knowledge of any proposed departure from the Jago Concept Plans until the first disclosure of the proposed departure on 22 November 2018.
10. On 18 October 2018, Ms Evans sought copies of the Jago Concept Plans. Sahab contends that an inference should be drawn that, in those circumstances, Ms Evans and those for whom she acted were unaware of any departure from the Jago architectural drawings.
11. Sahab contends that it is necessary for Senses to establish that a relevant assumption was made by Sonia Kanjian, as one of the two directors of Sahab, in circumstances where the articles of association vest the management of the affairs of Sahab in its directors. As I have said, the nature of the proceedings in the Protective List of the Equity Division is not in evidence. However, it appears that there are significant questions about the current mental capacity of Sonia Kanjian. I am not satisfied, in all of the circumstances described above, that it is more likely than not that Sonia Kanjian made any relevant assumption about the materials upon which any proposed development application would be based for the purposes of the Agreement. However, for the reasons set out below, that is not an end of the matter.

The Estoppel or Waiver

1. Sahab characterises the claims made on behalf of Senses as being based on two estoppels, namely, promissory estoppel and conventional estoppel. It asserts that the Statement of Claim incorrectly characterises its obligation under cl 3.2 and cl 3.4 of the Agreement as giving rise to a "right", as asserted in the Statement of Claim. Thus, the Statement of Claim alleges that, under the terms of the Agreement, the obligation of Sahab to consent to a development application was qualified "by a right … to refuse consent". The Statement of Claim subsequently asserts that "to the extent that [Sahab] would have had the right [so described], to refuse its consent to the development application … Sahab waived that right and is estopped from relying on it".
2. Clause 3.4 of the Agreement creates an obligation on the part of Sahab that Sahab "must consent" to the development application and must sign all documents reasonably required by Senses to enable the development application to be lodged with the Council. As I have said, the term "development application" is defined as the application made by Senses to the Council for the development consent. The term "development consent" is defined as the consent issued by the Council authorising and permitting Senses to upgrade, and to construct improvements on and to use, the Premises for the Specified Purposes. The critical provision that gives content to Sahab's obligation is cl 3.2, which requires that "the development application must be based on the [Jago Concept Plans]".
3. The question is whether cl 3.2 imposes an obligation on Senses with a co-relative right conferred on Sahab. While cl 3.2 uses the term "must", analysis of the provisions suggests that cl 3.2 is a qualification of the obligation clearly imposed on Sahab by cl 3.4. That is to say, cl 3.2 does not create a "right" on the part of Sahab. Rather, the effect of reading cll 3.2 and 3.4 together, together with the definitions, is that the obligation imposed upon Sahab by cl 3.4 is conditional, in the sense that it will only be required to consent to a development application that is based on the Jago Concept Plans. There is no obligation under the Agreement for Sahab to consent to a development application that is not based on the Jago Concept Plans.
4. On proper analysis, the Statement of Claim might simply have stopped after the assertion that Sahab has failed and refused to provide the necessary consent to the form of development application provided to it on 29 November 2018, as alleged in the Statement of Claim. Sahab might then have asserted, in its defence, that it was not obliged to consent to the development application provided to it on 29 November 2018, because that development application was not based on the Jago Concept Plans. Senses might then have filed a reply asserting that Sahab was estopped from denying that the development application provided to it for consent was based on the Jago Concept Plans. I consider that, in essence, that is the effect of the pleadings.
5. Clearly enough, it would have been open to Sahab and Senses to vary the Agreement, by agreeing that Sahab would be obliged to consent to a development application based on plans prepared by Two Form. In that regard, cll 16.2 and 16.4 of the Agreement would be relevant, in so far as those clauses provide that the Agreement contains all agreements, understandings, promises and undertakings between the parties and that the Agreement cannot be altered, modified or amended except by written agreement. However, no self-imposed limitation made by parties to a contract will destroy the power of the parties to vary that limitation. [1] Thus, it would have been open to the parties to vary the Agreement by agreeing that cl 16.4 would not apply to a variation of cl 3.4 to provide that Sahab was obliged to consent to a development application based on the plans prepared by Two Form. No such variation is alleged by Senses and it is common ground that no variation of the Agreement has ever been formally entered into. I do not consider that the "boilerplate" provisions have any present application.
6. Senses contends that the circumstances in which the Jago Concept Plans were superseded by the plans prepared by Two Form involved the waiver of Sahab of such rights as it had, under the Agreement, to require that the development application should be based on the Jago Concept Plans. It says that the whole course of conduct of Kenneth Kanjian and all of the communications with Kenneth Kanjian on behalf of Senses demonstrate such waiver, commencing with what Senses characterises as a "completely unequivocal invitation" not to upgrade or renovate the current improvements but "to start from scratch". Senses says that Sahab made an election not to assert that the right that it had to require conformity with the Jago Concept Plans and to accept the revised concept, for the construction of a new building, embodied in the plans prepared by Two Form.
7. The facts of any particular case are often open to the application of the doctrine of estoppel or the doctrine of waiver, such that estoppel may be relied on in aid of waiver. [2] The doctrine of waiver is to prevent a person from taking up two inconsistent positions in certain circumstances. The doctrine looks chiefly to the conduct and position of the person who is said to have waived, in order to determine whether that person has approbated, so as to be prevented from reprobating. It is necessary to determine whether such a person has elected to get some advantage to which that person would not otherwise have been entitled so as to deny the person a later election to the contrary. [3] Waiver is an intentional act done with knowledge, whereby a person abandons a right or privilege by acting in a manner that is inconsistent with that right or privilege. [4]
8. The essential ingredients of the doctrine of estoppel are:

• a representation, or conduct amounting to a representation, intended to induce a course of conduct on the part of the person to whom the representation is made;
• an act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made; and
• detriment to the person to whom the representation is made as a consequence of that act or omission. [5]

1. More particularly, an estoppel can be based upon a representation by a person in an existing contractual relationship that that person will not enforce strict contractual rights. [6] The object of the doctrine is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission that, unless the assumption be adhered to, would operate to the detriment of that other person. Whether the departure by one party from the assumption would be considered unjust or unconscionable will depend upon the part taken by the departing party in occasioning the adoption of the assumption by the other party. If the other party would be placed in a position of material disadvantage if departure from the assumption were to be permitted, the first party will be estopped from the departure. [7] Further, after a formal contract is entered into, the parties to the contract may so conduct themselves that provisions of the contract are treated by them as no longer relevant or as varied in some way or as suspended in operation. [8]
2. Estoppel by convention does not depend upon a representation of existing fact. [9] In the case of estoppel by convention, there must be some mutually manifest conduct by the parties that is based on a common, albeit a mistaken, assumption. The representor's participation in that conduct can then be relied upon by the representee as a basis for an estoppel. [10] Whether a departure by a party from an assumption made by both parties would be unjust depends upon the part taken by that party in occasioning its adoption by the other party. The first party may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations or because that party directly made representations upon which the other party founded the assumption. [11]
3. Senses emphasises that its case is framed, in the alternative, on a conventional estoppel, namely, that both parties to the Agreement treated the words "must be based on [the Jago Concept Plans]" as no longer binding, or as being varied in some way or as being suspended in operation, thereby giving rise to both a promissory estoppel and a conventional estoppel, such that the development application need not be based on the Jago Concept Plans.
4. Sahab does not contend that Kenneth Kanjian's dealings and communications with Senses and its directors were made without authority so as not to be binding on Sahab. That is to say, whatever was said and done by Kenneth Kanjian was done on behalf of Sahab so as to be binding on Sahab. Sahab draws a distinction, however, between the conduct of Kenneth Kanjian as being conduct of Sahab, on the one hand, and the state of mind of relevant individual persons necessary to constitute an assumption giving rise to a conventional estoppel.
5. The dealings between Senses and Sahab began with the approach made by Kenneth Kanjian. The negotiations for the Agreement were conducted entirely by Kenneth Kanjian and the representatives of Senses had no dealings with Sonia Kanjian or any other member of the Kanjian family. Kenneth Kanjian was the only director of Sahab put forward by it to conduct negotiations with Senses. He also acted as solicitor for Senses in connection with the Agreement. The name of his firm is on the title page of the Agreement and his firm's facsimile number is the mode of service specified in the Agreement and in the form of the Lease. The law firm of Kenneth Kanjian is specified as the address for service on Sahab as landlord.

Relief

1. The question then is what relief should be granted to Senses. Sahab says that, if any estoppel is established, the appropriate remedy would be the award of equitable compensation to Senses in respect of the detriment that would be incurred if it is now required to prepare a development application based on the Jago Concept Plans. Senses, on the other hand, contends that Sahab should not be permitted to depart from the assumption that it induced Senses to make. It seeks orders to the effect of the following:
2. An order that, within three business days from the date of the fulfilment by Senses of its agreement noted in order 2 below, Sahab deliver to Senses a signed development application in respect of the Premises in the form of the document appearing on the USB key being Exhibit MR-2 to the affidavit of Michael John Reid sworn 18 December 2018. 2 Note that Senses agrees, without admissions, that it will supplement the development application referred to in order 1 with a further report from SLR Consulting Australia Pty Ltd to incorporate the views expressed by Benjamin Alan Dewhurst in para 13 of his affidavit sworn 17 July 2019.
3. Prima facie, the effect of an estoppel is to prelude departure from a particular state of affairs. However, if relief framed on the basis of that assumed state of affairs would be inequitably harsh, it may be appropriate to award some lesser form of relief. [12] That is to say, a reasonable expectation on the part of one party to a contract as to a particular state of affairs, being an expectation that has been created or encouraged by the other party to the contract, should be given effect to, unless giving effect to the expectation would be out of all proportion to the detriment suffered by the first party. That is to say, if giving effect to the expectation would be out of all proportion to the detriment, good conscience would not require the second party to be held to the relevant state of affairs. [13]
4. I do not consider that there would be anything inequitably harsh, from Sahab's point of view, in enforcing adherence by Sahab to the assumed state of affairs described above. The reference in cl 3.3 to the estimated cost of the lessee's works rather than any characteristics of the lessee's works indicates that there would be no detriment to Sahab by reason of substituting the plans prepared by Two Form for the Jago Concept Plans. There is evidence that the cost of the plans prepared by Two Form is in fact greater than the $5,500,000 stipulated in cl 3.3. [14] The revised fee proposal issued by Two Form to Mr Collins estimated a total project build cost of $6 million. No basis has been established for awarding monetary damages to Senses in place of enforcing adherence to that state of affairs. Compelling Sahab to give effect to the expectation of Senses would not result in a disproportionate benefit to Senses, such that the good conscience of Sahab would not require it to adhere to the expectation that it created.
5. More particularly, payment of an amount corresponding to, for example, the costs wasted in preparing the current development application would not constitute sufficient reparation for the detriment sustained by Senses. In particular, it would not compensate Senses appropriately for the time and effort on the part of its own staff and officers, including its directors. Nor would it compensate Senses for its ongoing expense in the monthly fees that it is required to pay under the Agreement, the extent of which is not capable of accurate prediction. Finally, such relief would not compensate Senses for the delay in entering the childcare centre market at the time when it considered that that business opportunity was advantageous to it. Further, giving effect to the assumption made by Senses would not result in any hardship at all on the part of Sahab.

Conclusion

1. It follows from what I have said above that Senses is entitled to the relief claimed by it. [15] However, the parties have requested that I defer dealing with the question of costs until my conclusions have been published. Accordingly, at this stage, I will make no orders but will direct the parties, within 7 days, to bring in short minutes to give effect to the conclusions indicated above and to provide for argument on the question of costs.

Appendix 1 Extract from the Agreement for Lease dated 10 May 2018 (cll 3.1 - 3.4): DEVELOPMENT APPLICATION 3.1 As soon as practicable after the commencement of this agreement, the lessee at its cost and expense must act expeditiously and with all due care, skill and diligence to prepare or cause to be prepared the development application. 3.2 The development application must be based on the architectural drawings and must include all information and documents which the Council reasonably requires to enable it to be assessed. 3.3 The lessee, lease guarantor and agreement guarantors represent to the lessor that they estimate on reasonable grounds that the cost of the lessee's works including the cost of consultants retained for that purpose will not be less than $5,500,000 including GST. 3.4 The lessee must provide copies to the lessor of the development application and its supporting drawings, schedules, reports and the like. The lessor must consent to the development application and must sign all documents reasonably required by the lessee to enable the development application to be lodged by the Council.

Endnotes

1. See GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [219].
2. See Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; [1920] HCA 64 at 326-327.
3. See Craine at 326.
4. See Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 at [30].
5. See Thompson v Palmer (1933) 49 CLR 507; [1933] HCA 61 at 520 and 526.
6. See Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11 at 432-435.
7. See Thompson at 547.
8. See Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC1066 at [82].
9. See Coghlan v SH Lock (Australia) Ltd (1985) 4 NSWLR 158 at 166.
10. See Coghlan at 167.
11. See Thompson at 547; Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641; [1937] HCA 58 at 676.
12. See Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39 at 443; and Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [42] and [48].
13. See Ashton v Pratt [2000] NSWCA 12 at [42].
14. Affidavit of Michael John Reid sworn 19 December 2018, citing revised fee proposal at Exhibit MR-1 pg 158.
15. See [97] above. 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: 11 September 2019