Sharjade Pty Ltd v RAAF

Sharjade Pty Ltd v RAAF - [2008] NSWSC 1003 - NSWSC 2008 case summary — Zoe

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Darwinia hereby formally confirms the appointment of the Developer Consortium to undertake the development of the Retirement Village on the following terms and conditions: (1) That the Developer Consortium will be responsible for: a). undertaking the overall development of the Village in accordance with the requirements of the Local Council and other approving authorities requirements, that of the parties hereto and of the financier(s) of the development. b). obtaining the necessary planning and regulatory authorities approvals to the development of a Retirement Village and associated facilities. c). arranging the financing for the development of the Village including the provision of the purchase guarantee to the Commonwealth. d). the overall and detailed planning process for the development including the project and construction management in accordance with the costs and assumptions detailed in pages 1 to 5 inclusive of the Financing Plan annexed hereto. e). the overall and detailed marketing arrangements for the Village in accordance with the sales prices detailed in the annexed Financing Plan. f). the long term management rights to the Village subject only to satisfactory performance and the management fees being acceptable and within industry norms. It is understood however that the manager of the Village will liaise closely with Darwinia from the outset to ensure that Darwinia's role and obligations to its members is clearly preserved at all times. (2) That a Project Management Group ("PMG") be established comprising of representatives from Darwinia, the Developer Consortium and the financier(s) of the development with a representative from the Department of Veterans' Affairs invited to attend. (3) That the PMG will meet at least monthly, and more frequently if so desired by the parties, at which it will review the progress of the development and assign responsibilities as appropriate. Kezarne Pty Ltd will provide the PMG with a monthly progress report which will form the basis of the monthly meeting of the PMG. The Chairman of the PMG will be selected by Darwinia and the Developer Consortium. (4) That Darwinia and RAAFA will actively promote and assist the Developer Consortium in effecting the sale of the Self Care and Hostel units to its members as a key priority and will commit to achieving pre-sales of up to 40 per cent of the Self Care Units (80 Self Care Units) in the proposed development by the end of the 12 month option period and prior to execution of the lease for the land. RAAFA also undertakes to encourage its members to attend sales presentations relating to the development and in distributing promotional and other material to its members. (5) In accordance with the Contract of Sale entered into with the Commonwealth, Darwinia will have the exclusive right to effect the sale of Self Care and Hostel units to its members of RAAFA and members of other ex-service organisations within the first 3 years from date of exchange of contracts. Darwinia will also have the right within the first 2 years from date of exchange of contracts to limit the sale of Self Care and Hostel units to members of the RAAFA only if it so chooses. (6) That at the end of 3 years from commencement of the exchange of contract that the Developer Consortium may sell the remaining Self Care and Hostel units to members of the general public, provided that all efforts to sell the units to members of RAAFA and the other ex service organisations has been carried out. (7) The Developer Consortium will retain an on-going involvement in the further development of the Retirement Village on identical terms to that detailed herein including the on-going management of the Retirement Village. (8) The Developer Consortium undertakes that in the event that it effects a sale of any Self Care or Hostel units to members of the general public at a price exceeding $335,000 (Three hundred and thirty five thousand dollars), indexed from date of exchange of the option and contract arrangements, that it will reimburse to the Commonwealth such surplus. (9) That Darwinia will provide either directly or through others up to $175,000 (One hundred and seventy five thousand dollars) towards the initial costs that the Developer Consortium will incur in completing the detailed planning of the Retirement Village. The monies to be incurred, which will be subject to approval by the PMG, will include the costs incurred in obtaining Development Application approval and in developing promotional material to assist Darwinia in marketing the development to members of the RAAFA and that of other ex-service organisations, if it so chooses, to obtain the required pre-construction sales commitments. (10) That Darwinia, as the owner of the Village, will do all things to assist the Developer Consortium in its efforts to develop the Village and accepts that it will have no claim to any of the finances in the development, until such time as the initial sale of all the Self Care and Hostel Units in the Retirement Village have been completed and the financing obligations incurred by the Developer Consortium have been met in full. Darwinia will then be entitled to receive a share of the profits of the development as detailed in Clause 11 hereunder. (11) That RAAFA has established a special purpose wholly owned subsidiary company known as Darwinia Estate Pty Limited to undertake the development on its behalf. (12) The Developer Consortium agrees that any residual profits from the initial sale of the Self Care and Hostel units, after meeting all costs involved with development and sale of the units, will be shared in the proportions of 85:15 to the Developer Consortium and Darwinia respectively, subject to achievement of a development profit of at least $8,000,000 (Eight million dollars) or greater sum. In the event that a lower than $8,000,000 (Eight million dollars) development profit is realised, the profits will be then be shared as follows: Amount of Profit Developer Consortium RAAFA (% share) (% share) 1m but less than $4m 98.0 2.0 >$4m but less than $5m 97.0 3.0 >$5m but less than $6m 95.0 5.0 >$6m but less than $7m 90.0 10.0 >$7m but less than $8m 87.5 12.5 >$8m 85.0 15.0

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(13) It is further agreed between the parties that security arrangements to be entered into by the Developer Consortium with the selected Bank will encompass the following: a).A Loan Agreement covering the advance and repayment of monies to finance the construction of the Village as agreed including the payment of interest to the Commonwealth when due. b).First Registered Mortgage over the land by Darwinia to the selected financier c).A Bank Guarantee from an Australian Bank, in a form acceptable to the Commonwealth for the purchase consideration of $5,700,000 (Five million seven hundred thousand dollars) or such other sum as may be agreed . d).A Village Management Agreement which will detail the scope of the services to be provided, the amount of the payment for such services and the arrangements for payment thereof. (14) It is also agreed between the parties that subject to the project proceeding, as determined in the 12 month option period, that Darwinia will enter into a Form of Loan and Licence Agreement with the incoming residents. The licence will grant security of tenure to the incoming residents and will detail the conditions of lifetime occupancy of their unit in the Village. The detailed agreement will incorporate the following: a).That the full purchase consideration payable by the incoming resident is to be denominated as a loan. b).That the residents' entitlement to occupation under the terms of the Licence to be granted will incorporate lifetime occupancy or earlier exit if desired. c).That a Deferred Management Fee arrangement (ie the amount to be retained from re-sales of units) will apply, which will entitle Darwinia to retain up to 25% of the resale value of an individual unit, or lesser amount as may be agreed from time to time, for on-going capital and maintenance works in the Village. d).That the Agreement will detail the services to be provided by the Manager of the Village which are to be covered by the management fee and those which are to be charged to the residents on an user pay basis. (15) This Agreement is conclusive and supersedes all other Agreements that may have been entered into by the parties prior to this date. 5 Air Commodore Michael signed the Agreement for and on behalf of Darwinia and Mr Akbarian signed for and on behalf of Kezarne. The novation of the benefit and burden of the Heads of Agreement from Kezarne to Sharjade occurred on 24 April 1998 from which time Turnbull & Partners ceased to be involved in the Consortium and the development. Option Agreement - 24 October 1995 6 On 24 October 1995 the Commonwealth and Darwinia entered into an Option Agreement in the following terms:

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To observe all normal lease conditions, such as a prohibition on transfer and sub-letting except by way of sub-lease to purchasers of the self care and hostel units in the development, without the prior approval of the Commonwealth. Development Application - 15 March 1996 7 It is clear that Mr Akbarian moved very promptly to retain the appropriate consultants to take the necessary steps towards the preparation and submission of the relevant documentation to the Council for Development Consent. The Development Application was lodged on 15 March 1996. A Project Management Group was established in October 1995 and met on a regular monthly basis. It dealt with a number of enquiries raised by the Council and various other authorities including the New South Wales National Parks and Wildlife Service regarding the environmental impact of the development on threatened species such as the Red Crowned Toadlet and the Giant Burrowing Frog. There were also concerns raised in respect of the proximity of the development to the National Park and the threat of bushfires. All of these matters caused resistance from the local residents and it was necessary to deal with various objections raised by them in the Council. 8 It is obvious that during the period up to the granting of development consent the plaintiff/Mr Akbarian worked tirelessly in dealing with all the matters raised by the Council, coordinating various consultants and responding to issues both environmental and otherwise to meet the requirements of the Council. Development Consent- 18 March 1998 9 Two years later, on 18 March 1998, the Council consented to Darwinia's Development Application on various conditions including a condition that the Project be commenced by 18 March 2000. Extensions of the option period 10 The delay that was caused by the Council's various requirements and residents' resistance to the development meant that Darwinia had to seek an extension of the option period from the Commonwealth. Those extensions were granted, the final one of which was to expire on 24 December 1998. Option exercised - 23 December 1998 11 On 23 December 1998, by letter wrongly dated 23 December 1999, Darwinia exercised its option to purchase the Land. On 14 January 1999, the Department of Finance and Administration wrote to Air Commodore Michael advising that the Domestic Property Operations Group acknowledged the exercise of the option to purchase the Land. It also advised that all files had been sent to its solicitors, Black Dawson Waldron (BDW), "for the preparation of the contract for sale". Finance Proposal - 13 January 1999 12 On 13 January 1999 ING Bank provided Darwinia with a draft of the proposed terms and conditions for a loan facility of $28.5 million for the development. Although the letter was addressed to Darwinia, this proposal had been "arranged" by the plaintiff pursuant to its obligations under clause 8(1)(c) of the Heads of Agreement. The letter advised that the proposal carried the support of the National Manager Commercial Property Finance and, if ratified by the local credit committee, it was to be sent to ING's Regional Office in Singapore for a decision. Air Commodore Michael reviewed the draft, made some minor changes and signed it on 1 February 1999. Proposed Contract terms 13 On 16 February 1999 the then solicitors for Darwinia, Solomon Garland Partners, wrote to BDW (Ms Anne Banks) enclosing proposed terms of the Contract for the Sale of the Land. That document noted that the date for exchange of Contracts would "depend on purchaser's finance" and the Completion Date would also "depend on the terms of the purchaser's finance (approval pending)". Ms Banks, by letter dated 8 March 1999, requested advice from Solomon Garland Partners as to whether Darwinia had received a response from its financier and if not, the likely estimate of the timing of a response. On 9 March 1999 Solomon Garland Partners by letter signed by Rita Ibrahim, wrote to Ms Banks at BDW as follows: I am instructed that the financier has verbally approved finance the purchase of the site however the letter of approval setting out the terms and conditions of the finance has not been issued yet. Mr Moss Akbarian, my client's joint venturer, has informed me that he hopes to receive the approval letter today. 14 The solicitors with the carriage of the matter for Darwinia at Solomon Garland Partners were Rita Ibrahim and Stephen Healy. ING offer of finance - 11 March 1999 15 On 11 March 1999 ING and its associated company Mercantile Mutual Life Insurance Company Limited (MML) made an offer to the plaintiff for a total facility of $30 million, with ING providing a facility for $22.5 million and MML providing a facility for $7.5 million. Settlement of the facility was conditional upon the provision of certain security and the satisfaction of certain conditions precedent. The security included a first registered third-party mortgage from Darwinia over the Land; a registered first fixed and floating charge from Darwinia and the plaintiff over their assets and undertakings; unlimited joint and several guarantees by Darwinia and Mr Akbarian and his associated companies; and a registered first charge over the shares in the plaintiff. That offer also provided that upon acceptance of the terms and conditions a "non-refundable fee of $70,000" ($15,000 of which the plaintiff had already paid) was payable. There was also a fee of $415,000 (which included the $70,000) payable on the initial drawdown of the facility. 16 On 29 March 1999, Ms Banks requested details of the Finance proposal from Mr Healy but by this stage Mr Healy had decided that there were a number of issues that needed to be resolved before responding to ING or the Commonwealth's request. Discussion of issues - April 1999 17 Mr Healy wrote to Air Commodore Michael on 12 April 1999 in relation to issues that he regarded as necessary for resolution, a number of which arose as a consequence of the conditions in the ING offer as they related to the proposed contract with the Commonwealth. Mr Healy was concerned about the stamp duty payable by Darwinia if the duty were to be imposed on a more recent valuation of the land at $14 million rather than the purchase price of $5.8 million. Other questions raised for consideration were how Solomon Garland Partners' fees were to be paid and by whom and who was acting for the plaintiff. Mr Healy was also concerned about the nature of the title of the Land and whether the loan term, which was 18 months, was sufficient. 18 On 15 April 1999 a meeting took place between Mr Healy and Ms Ibrahim and Air Commodore Michael and two other representatives of RAAFA. Mr Akbarian was not present at this meeting. The minutes of that meeting noted that RAAFA wanted to allow 18 months to obtain 100 sales with the right to settle early with the Commonwealth. It was noted that GST on the Land purchased and on pre-sale contracts would need to be covered with Mr Akbarian. It was also noted that the plaintiff was to be responsible for Solomon Garland Partners' fees and that Mr Akbarian was to advise who was acting for the plaintiff. Alternative finance 19 On 14 April 1999 Mr Akbarian met with Neil Wilson, a director of Sakkara Pty Limited (Sakkara) in relation to its possible involvement in the development, in particular, in relation to the funding of the development. Mr Wilson advised that he had discussed the development in broad terms with Balmoral Corporation Ltd (Balmoral) and that there was "keen interest". 20 On 15 April 1999 Sakkara wrote to the plaintiff advising that it had met the previous evening with the Chairman of Balmoral and confirming "in the strongest possible terms our interest in working with you on this exciting project". Sakkara then put a proposal to the plaintiff for Balmoral to provide $400,000 for marketing in April 1999; $5.8 million for the Land in June 1999; and a further $1.3 million for acquisition and other costs in July 1999. A condition of the proposal was that the funds were to be secured by first registered mortgage and part assignment of the development agreement. Other conditions included joint review of the "product" and establishment of a marketing and sales strategy; the negotiation of a building contract with completion guarantee with Bovis or a similar company; that proceeds from the sale of the development would be used to repay the debt and share 50/50 between the plaintiff and Balmoral; and that the plaintiff would pay a monthly management and RAAFA liaison fee. 21 This offer was pursued further between the plaintiff, Sakkara and Balmoral until Balmoral made a final offer on 20 April 1999 for funding of $8 million with a profit share of two thirds to the plaintiff and one third to Balmoral. Mr Akbarian advised Balmoral the terms were generally acceptable subject to a Deed being entered into between the parties. Negotiations between the plaintiff and Balmoral continued with a number of draft deeds and proposals for various amendments. Meeting - 11 May 1999 22 On 11 May 1999 Mr Healy met with Mr Akbarian. The notes of this meeting record that the Heads of Agreement were to be turned into a Joint Venture Agreement. It was also noted that Mr Akbarian was to be responsible for Solomon Garland Partners' fees and that Mr Akbarian thought that Solomon Garland Partners could act for both parties (except in relation to the joint-venture). It was decided that Mr Healy was not to write to ING yet and that "[a]ll of the finance requirements will be dealt with in the Joint Venture Agreement which is to be prepared immediately". It was also noted that Mr Akbarian's entities' profit share through the joint venture was to be secured by a second mortgage. Joint Venture Agreement 23 On 18 May 1999 Mr Healy forwarded a draft Joint Venture Agreement to Mr Akbarian. This was a proposal in which a new company, controlled by Mr Akbarian, would enter into a joint venture with Darwinia to develop that Land on the basis that the Commonwealth would sell the freehold title of the Land to Darwinia, a matter that Mr Healy intended to pursue with Ms Banks. There were subsequent discussions and meetings in relation to the draft Joint Venture Agreement and Mr Akbarian responded in writing suggesting some amendments to the agreement. The last letter Mr Akbarian wrote to Mr Healy suggesting amendments was dated 12 November 1999. There was no response to this letter.

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Response to ING - 19 May 1999 24 On 19 May 1999 the plaintiff wrote to ING confirming that it was happy to provide the balance of the commitment fee of $55,000 immediately upon the receipt of confirmation that ING agreed to the amendments proposed in the executed letter of offer. The plaintiff advised that it needed four months from the date of payment of the balance of the commitment fee in order to comply with the requirements regarding pre-sales. Later events overtook this offer and it ultimately lapsed. BDW request response 25 On 23 May 1999 Ms Banks wrote to Mr Healy requesting: a report on the progress of obtaining finance; comments on the revised Terms Sheet for the contract of Sale of the Land; and an indication on the timing of the sale for the Commonwealth to consider. Ms Banks noted that from the Commonwealth's perspective, the matter was "becoming protracted" and that it would like to see that Darwinia would be in a position to make "real progress with the sale" as from 21 June 1999. BDW advice - 30 June 1999 26 On 30 June 1999 Ms Banks wrote by e-mail to her client summarising a telephone conversation with Mr Healy on that day. Ms Banks advised that RAAFA had been negotiating "the Joint Venture arrangements with the developer" and it was hoped that this would be finalised that week. The e-mail noted that there was tension between RAAFA and the developer with the developer wanting the right to sell the units to the general public and RAAFA wanting the Commonwealth to hold firm and require units to be sold to ex-servicemen. The e-mail also referred to RAAFA wanting confirmation that the Commonwealth agreed to proceed on the basis of freehold title. Ms Banks noted her understanding that this was acceptable provided there was an earlier settlement date. Ms Banks then referred to RAAFA's request for the transaction to proceed by an Option Agreement conditional on 100 sales being achieved, and if achieved with a relatively short settlement date; and if not achieved with the Commonwealth retaining the Land. It was suggested that this option period would give elderly people a comfortable time to sell their homes. Ms Banks noted a number of issues arising out of this proposal including the length of time the Commonwealth was willing to hold the price at $5.8 million, and whether interest was payable on the purchase price. Freehold Proposal - 7 July 1999 27 On 7 July 1999 a meeting took place at BDW's office attended by Mr Healy and Ms Banks. Subsequent to that meeting a document entitled "RAAFA's Freehold Proposal" was prepared by Ms Banks and settled by Mr Healy. That document noted RAAFA's aim to simplify the transaction by dispensing with the Lease so that freehold title was to be transferred immediately. It was proposed that the option agreement would be conditional upon Darwinia achieving 80 unconditional pre-sales to ex-servicemen by a particular date. The Commonwealth indicated that it would like certainty by the end of 1999 with an "absolute drop dead date" by 30 June 2000. The document also referred to a Deed being entered into between Darwinia, Mr Akbarian, the builder, the bank and the Commonwealth in relation to the development. The document noted Mr Akbarian's proposal that the two periods of three years in the ex-servicemen's covenant be reduced to 18 months.

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As mentioned above, the architects are aware of this timetable and are ready to produce and bind the packages immediately upon the receipt of your letter. Further Sakkara negotiations 30 It is clear that in the meantime Mr Akbarian continued to negotiate with Sakkara, which was becoming rather impatient with the lack of progress on achieving agreement. On 15 July 1999 Mr Wilson wrote to Mr Akbarian noting they had been negotiating for some months and observing that it was difficult to see how there could be any remaining issues that would prevent the signing of the proposed agreement. Mr Wilson also noted that any further delay would mean that the impact of the GST, to take effect from July 2000, would add to the cost of housing with the possible adverse impact on the number and rate of pre-sales. Mr Wilson asked Mr Akbarian to "act quickly". 31 Air Commodore Michael's affidavit evidence was that Mr Akbarian sent him a copy of this letter from Mr Wilson on that date. In the meantime Mr Wilson had been making direct approaches to RAAFA/Darwinia. Mr Wilson, with two other representatives of Sakkara, met with Air Commodore Michael on about 4 August 1999. Air Commodore Michael's affidavit evidence was that he could not recall what was said at this meeting, however on 10 August 1999 he received a letter from Sakkara/Mr Wilson with a proposal for its involvement in the development on the basis of "one-third RAAFA, Sharjade and Sakkara/Glenwish". This appears to be the first time that any suggestion was made to Darwinia that it could increase its share of the profit from the development from its 15% (maximum) that it had agreed with the plaintiff in the Heads of Agreement. 32 Although it is not detailed in the evidence, it is clear that on 12 August 1999, Air Commmodore Michael and Mr Akbarian had a conversation arising out of Mr Wilson's approach to Air Commodore Michael. On 18 August 1999 Mr Akbarian wrote to Air Commodore Michael advocating the plaintiff's commitment to the development and setting out some of the history and difficulties that had been experienced in obtaining development approval and referring to the specific features of the development that made if difficult to obtain finance. That letter urged Air Commodore Michael to proceed with the planned presentation to members as soon as possible because of the approaching peak season for marketing residential developments. Freehold Proposal rejected - 3 August 1999 33 On 3 August 1999 Ms Banks advised Mr Healy that the Freehold proposal was "clearly outside the terms of the Option Agreement of 24 November 1995" and that the "Commonwealth was not in a position to proceed otherwise than in accordance with the terms of the Option Agreement". 34 On 13 August 1999 Ms Banks asked Mr Healy for confirmation that RAAFA was able to proceed on the terms set out in the Option Agreement of 24 November 1995. On 18 August 1999 Mr Healy responded to Ms Banks advising that RAAFA was able to proceed by way of Lease and Contract but asked whether it was possible for there to be an Option to purchase for the purpose of deferring the payment of stamp duty.

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Marketing Presentation Delayed 40 There were a number of factors that appear to have delayed the marketing presentation. A wife of one of the RAAFA members was asked for her comments in relation to the finishings of the various units. That took a little time and was not provided until early September 1999. Another factor that delayed the presentation was the apparent illness of Air Commodore Michael. Mr Akbarian had been advised that Air Commodore Michael was recuperating at home and that Darwinia/RAAFA could not proceed in his absence. 41 However on 15 September 1999 Mr Healy sent the draft contract for the Sale of Land forwarded to him by Ms Banks to Air Commodore Michael and sought his instructions. 42 Mr Healy and Ms Banks had a telephone discussion prior to 3 October 1999 in which Ms Banks advised Mr Healy that the Commonwealth was "looking for an exchange of contracts by 31 December 1999". Ms Banks asked for the draft timetable for progression to exchange of contracts on that basis. Meeting - 3 October 1999 43 Mr Healy and Mr Akbarian gave evidence that they met on 3 October 1999 with Air Commodore Michael at which there was discussion in relation to a range of issues relating to the development. By this time Mr Healy was a partner of Gadens Lawyers. The agenda for the meeting included reference to finance with questions such as: the identity of the financier; what the financier required as to pre-sales; the bank guarantee; and interest on the purchase price. There was also an item entitled Joint Venture Agreement with the question, "are the terms of this agreed". The agenda also noted that it was necessary to provide a timetable to the Commonwealth. It is apparent that the date of this meeting was a little later than 3 October 1999 because of a conversation between Ms Banks and Mr Healy referred to below. It is also apparent that Mr Healy drafted a letter to Air Commodore Michael on 6 October 1999 advising that he had been trying to contact him for some time but understood that he was unwell. It is probable that the meeting took place after 3 October 1999, (probably on 19 October 1999) but obviously before 21 October 1999 when Mr Healy wrote to Ms Banks, as referred to below, enclosing the proposed draft timetable. Telephone Discussion - 6 October 1999 44 On 6 October 1999 Mr Healy and Ms Banks had a telephone discussion. Although the detail of that conversation was not the subject of separate evidence, Ms Banks wrote to Mr Healy on 14 October 1999 in the following terms:

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Plaintiff Responds - 7 February 2000 76 On 7 February 2000 Mr Akbarian responded to Mr Healy's letter of 31 January 2000. He enclosed the copy of the letter to the Council dated 26 October 1999 that sought the 12 month extension of the Development Consent. He set out the detail of the marketing plan. He confirmed his instructions to the architects. He referred Mr Healy to the timetable that had been prepared and reminded him that the meeting of members on 16 November 1999 had to be rescheduled because of Air Commodore Michael's unavailability. That letter also confirmed that Mr Akbarian would be happy to enter into negotiations with GDK with a view to finding a speedy agreement which was commercially fair and acceptable, including a profit share agreement based on their level and conditions of investment in the development. That letter also enclosed a cheque for $5,695.20 in favour of Gadens bringing the total amount paid to it, or at least to Mr Healy, to $11,661.20. 77 On 8 February 2000 Mirvac approached Mr Akbarian suggesting it was interested in exploring possible participation in the development. On 10 February 2000 Mr Akbarian forwarded Mirvac's letter to Mr Healy. Mr Akbarian advised that he would be holding further discussions with Mirvac to explore the possibilities and then organise a meeting with RAAFA with a view to obtaining the best possible options. On the same day Mr Akbarian forwarded a report from Cox Richardson to Mr Healy advising that the Council had confirmed that it has all the documents necessary "demonstrating good cause" for an extension of the Development Consent and that it was to be placed before the Council for approval the following Tuesday. Proposed joint venture with GDK - 9 February 2000 78 On 9 February 2000 Wing Commander Craigie forwarded to Mr Healy a pro forma draft Development Agreement for a proposed joint venture between GDK and Darwinia. On 14 February 2000 Mr Craigie noted that the next meeting with GDK was on 17 February 2000. He suggested that Darwinia instruct Mr Healy to prepare and send an appropriate acknowledgement that Darwinia recognised that the plaintiff was unable to fulfil the expectations of the development and that it would have to look elsewhere for assistance in achieving its objective in creating the retirement village.

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The above will hopefully allow an exchange of contracts with the Commonwealth by 31 July 2000. We are instructed that although this represents a delay of 3 months on the originally proposed timetable, the delay was not caused by matters within our client's control. The original timetable given to the Government envisaged a meeting of RAAFA's members on 16 November 1999. This meeting did not happen until 17 December 1999, immediately prior to the new year break. This meant that serious marketing to members could not commence until February 2000. Further, recent events, your recent correspondence and your client's discussions with GDK have further disrupted the timetable. 83 Freehills requested confirmation from Gadens that RAAFA agreed to proceed with the timetable as outlined in its letter. 84 On 13 March 2000 Mr Healy was instructed by Darwinia to send a letter to Freehills giving Mr Akbarian time to conduct the marketing campaign and obtain finance subject to the Commonwealth's approval, with an expiry date of 30 June 2000. However on the same day Ms Banks telephoned Mr Healy and advised that the Commonwealth had instructed her to give Darwinia 28 days to provide a bank guarantee and exchange contracts. Ms Banks advised Mr Healy that the matter had been referred to the Minister's office and the action was coming from quite a high level. In those circumstances it was decided not to offer the plaintiff the three months for the marketing campaign and obtaining finance. Further Demands - 15 March 2000 85 On 15 March 2000 Gadens responded to Freehills' letters of 18 February 2000 and 28 February 2000. This letter was most argumentative. However it did commence with faint praise. It suggested that RAAFA did not deny that the plaintiff was committed to the project and had devoted considerable time and effort to the project which "has been appreciated". The letter went on to suggest that finance had not been arranged as required; pre-sales had not been achieved; the time limit in the letter of 7 February 2000 was reasonable having regard to previous delays; and Mr Healy stood by his allegation that Mr Akbarian said that he would not be responding to the previous letter as he had no obligation to do so. There was also a further allegation that Mr Akbarian had said that he intended to approach the Commonwealth to purchase the Land and proceed with the development without Darwinia. The letter included the following:

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I am, of course, aware of the previous requests we have made, however, on this occasion I believe our dealings with the Mirvac Group will be beneficial and conclusive. More Legal Advice - 28 April 2000 90 In April 2000 the Commonwealth briefed Mr B W Rayment QC to advise whether Mr Goldberger's letter of advice was correct and whether the Commonwealth could rely upon the Notice that had been served on 17 March 2000 and to terminate the contract with Darwinia after the expiry of the 28 day period on 14 April 2000. Mr Rayment provided his opinion on 28 April 2000 that on the proper construction of the Option Agreement, the obligation to provide a bank guarantee was dependent for its performance upon the agreement of the Commonwealth to the proposed bank. Mr Rayment said that the Commonwealth could indicate in advance that it would, for example, agree to a bank guarantee from any licensed banker. However he expressed the view that this would not suffice to make the obligation one which was immediately enforceable. Rather he took the view that such obligation was concurrent with the obligation to enter into a Contract for the Sale of Land and the Lease for 99 years. Mr Rayment's opinion was that the bank guarantee must be provided together with the Contract of Sale and at the same time as the Lease is entered into and that "indeed the subject matter of the Bank guarantee will be payment of the purchase price under the Contract of Sale". Mr Rayment also expressed the view that because the obligations were concurrent the Commonwealth must tender a Contract of Sale and a Lease before calling for the guarantee. He also expressed the view that the Option Agreement impliedly required a Contract of Sale and Lease to be settled between the parties and if not settled, the Court could settle it for them. 91 Mr Rayment suggested that the liability for the payment of interest was less clear. He observed that it was not clear whether the obligation to pay interest was concurrent with the obligation to enter into a Contract of Sale and Lease. He also remarked upon the possible effect of the extension of the option period creating uncertainty because the consideration for the obligation to pay interest was expressed to be "the Commonwealth entering into the Option Agreement, the Contract of Sale and the Lease". He expressed the view that it may be that the obligation to pay interest would not arise unless and until the Contract of Sale and the Lease had been entered into. He was not prepared to advise that there was no risk of an action for damages for wrongful repudiation if the Commonwealth were to terminate for non-payment of interest without at least tendering a Contract of Sale and a Lease prior to making time of the essence for the payment of the money in question.

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Finance i) The original financiers to our consortium lost interest in the project due to delays in the council (arising from the Commonwealth's intervention) and in negotiations with the Commonwealth for the price of the land. However we proceeded with obtaining alternative finance based on the presale of the units to RAAFA members pursuant to the terms of our Heads of Agreement with RAAFA. We successfully obtained the finance but had to go through a lengthy process of investigations including a new valuation required by the bank due to the unusual conditions included in the option agreement. The finance approval was obtained on 11th March 1999. It was however impossible to achieve the required number of presales within the limits in the finance approval. We therefore proceeded with the preparations for presale marketing to RAAFA members. This was done in full consultation with RAAFA. A copy of marketing documents is Annexed and marked S 14. The Marketing program commenced by a presentation to the members of RAAFA which received full and enthusiastic support by the members. Shortly after the commencement of the marketing program we received expressions of interest from ten members of whom eight placed a deposit with RAAFA's solicitors. Whilst our company considered the response of the members very encouraging given the feedback received by our company and the New Year holidays we were advised by RAAFA's solicitors that we needed to provide the finance for the land immediately. This resulted in a forced change of direction by our company to obtaining finance for the purchase of the land prior to the presale to RAAFA members although our company was not obliged to do so under the Heads of Agreement with RAAFA. At the same time we also received a number of verbal and written joint-venture proposals from Mirvac who requested and were provided with copies of contractual documents. Mirvac also requested to be introduced to RAAFA which we organized. Sometime after receiving all the information and meeting with RAAFA Mirvac decided not to proceed with the project giving no reasons. However we have agreement with another partner who [is] ready to proceed with the project as soon as the are approved by RAAFA.

[218]

Termination The Commonwealth's purported termination of the Sale Contract is unlawful for a number of reasons including: s Finalisation of sale contract: The Option Agreement required the parties to enter into a Contract for Sale upon exercise of the option. A draft contract was prepared by the Commonwealth's solicitors and Darwinia provided its comments on the draft. Despite this a final version was not provided by the Commonwealth or its solicitors. We still await the supply of the final version of the proposed contract. s Invalidity of Notices: the purported "Notice to Perform Contractual Obligations" and Termination Notice were invalid for various reasons. In particular, they relied on an incorrect interpretation of the Option Agreement and required the payment of monies Darwinia was not required to pay. The first notice required Darwinia to pay interest calculated from the date of the Option Agreement (i.e. prior to the exercise of the Option). Darwinia was not obliged to do so: - the obligation was to pay interest on so much of the purchase price as was outstanding from time to time - no purchase price could be outstanding at a time when the option was not exercised; interest is payable annually in advance with the first payment due on the first anniversary of the Option Agreement if interest were payable from the date of execution of the Option Agreement then the first payment of interest "in advance" would be due on the date of the Option Agreement not its first anniversary. Clause 2.3 of chapter 3 of the contract for sale of the land drafted by the solicitors for the Commonwealth provides for the interest payment on the contract date which had not occurred. s Delay by Commonwealth: the delays to the project were of the Commonwealth's own making as discussed above. 103 RAAFA/Darwinia ultimately decided to proceed with the development with Rosecorp Pty Limited a company controlled by Mr Wilson who had made the approach via Sakkara. Balmoral was also involved in this joint venture. The Bank of Adelaide funded the project and Darwinia changed its name to the name of the present defendant. Once again there were problems with the Council and it was necessary to go to the Land and Environment Court to appeal from the refusal of the development application submitted by Rosecorp on behalf of the defendant. The Court ultimately approved the project and the village was completed and was fully operational by June 2008 with 160 dwellings constructed and approximately 125 sold and occupied. The fourth and final stage of the development was proceeding at the time of trial.

[219]

Proceedings Commenced - 2006 104 The plaintiff was unable to obtain any agreement from Darwinia or the Commonwealth for its continued involvement in the development. It commenced these proceedings in 2006. The plaintiff makes claims for damages against Darwinia for wrongful termination of the Heads of Agreement and for breach of contract and for tortiously conspiring with the Commonwealth to wrongfully terminate the Heads of Agreement. The plaintiff also makes claims against the Commonwealth that it conspired with Darwinia to wrongfully terminate the Heads of Agreement and knowingly induced Darwinia to breach its contract with the plaintiff. During the trial of the matter the plaintiff made application to amend its pleading to include a quantum meruit claim and an estoppel claim. Hearing July 2008 - liability only 105 The hearing of the matter was limited to liability (order made 30 May 2008) and proceeded on 7, 8, 9, 10, 11, 14, 15, 16, 17, 21, 23 and 24 July 2008. Final written submissions were filed on 11 August 2008. Mr Akbarian represented the plaintiff, Mr J Simpkins SC leading Mr N Owens, of counsel, appeared for Darwinia and Mr M Speakman SC leading Mr D Moujalli, of counsel, appeared for the Commonwealth. Construction of the Option Agreement 106 Much will depend upon the construction of the Option Agreement, in particular, the timing of Darwinia's obligations to provide the bank guarantee and to pay interest on the purchase price. Darwinia submitted that the development of the Land was a commercial arrangement and it was necessary for the business efficacy of the arrangement that the parties would comply with all their obligations "within a reasonable time". In support of this submission Darwinia cited the following passage of Campbell JA's judgment in Handley v Gunner [2008] NSWCA 113 at [124]: 124 There are various statements in textbooks to the effect that generally, where a contract does not specify the time for performance of an obligation, that obligation must be performed within a reasonable time (eg JW Carter, et al, Cases and Materials on Contract Law in Australia , 5th ed (2007) LexisNexis Butterworths, par [28-04]; Chitty on Contracts , 29th ed (1999) Sweet & Maxwell, par [21-020]). Such statements are empirical generalisations, not propositions of law - it well may be that in all or practically all contracts such an implication would be made, but that is because the tests for implication of the term are satisfied in relation to each particular contract. 107 Darwinia also relied on Dixon J's (as his Honour then was) statement in Reid v Moreland Timber Company Pty Ltd (1946) 73 CLR 1 at 13 that "[a]n implication of a reasonable time when none is expressly limited is, in general, to be made unless there are indications to the contrary". This proposition is not controversial. The real question is whether and if so, in what respect, it is applicable in the circumstances of this case. Obviously the implication of such a term is not applicable where a contract provides for the time at which the obligation is to be performed. 108 Darwinia was not obliged to provide the bank guarantee until certain pre-requisites had been satisfied. The first of those was Darwinia's decision to proceed with the purchase of the Land. That was satisfied on 23 December 1998 when Darwinia notified the Commonwealth of its intention to exercise the option. The second pre-requisite was the entry into of the Contract for Sale of the Land (including the Lease) and including the term stipulated in the Option Agreement that Darwinia would have a period of up to but not exceeding six years from the date of execution of the Contract of Sale, within which it would be required to pay the full purchase price of $5.8 million. That pre-requisite was not satisfied. 109 I am satisfied that the provisions in the Option Agreement: (a) that after Darwinia decided to purchase the Land, the Commonwealth and Darwinia would then enter into a Contract for the Sale of the Land to Darwinia for the purchase price of $5.8 million; (b) that Darwinia had up to six years to pay the "full purchase price"; and (c) that the guarantee was to ensure that Darwinia had the capacity to make "such payment"; evidence the parties' intention that the guarantee was to be provided at the time of the entry into (or exchange) of the Contract for the Sale of the Land and the Lease. Another aspect of the Option Agreement that supports such a conclusion is the reference to the "execution of the Contract of Sale". 110 If this were an agreement pursuant to which the Contract of Sale was to come into force on the notification of Darwinia's intention to proceed with the purchase, there would have been no need for the provision that the parties would "then enter into" the Contract of Sale nor would there have been the need for the provision for the execution of the Contract of Sale. It is clear that by the use of the word "then" in the Option Agreement, the parties intended that the Contract of Sale would be entered into and executed closely proximate to the time that Darwinia notified its intention to proceed, but that was something that the parties - the Commonwealth and Darwinia - had to effect. It was not an automatic or deemed entry into or execution of the Contract of Sale. 111 The provision in the Option Agreement in relation to the payment of interest was an undertaking by Darwinia to pay interest on the purchase price of $5.8 million in consideration for the Commonwealth entering into the Option Agreement, the Contract of Sale and the Lease. The trigger for the payment of interest was the entry into the three agreements. In other words the Commonwealth had to enter into the Contract for Sale of the Land and the Lease with Darwinia before interest started to accrue. As I have said, the parties envisaged that the Commonwealth and Darwinia would enter into these latter two agreements in close proximity to the notification to the Commonwealth by Darwinia that it wished to proceed with the purchase of the Land. The provision that the first interest payment was "due" on the first anniversary of the Option Agreement supports that conclusion. However the parties delayed that process and indeed did not enter into or execute the Contract for Sale or the Lease. Darwinia's liability to make the payment of interest on the purchase price was therefore never triggered.

[223]

118 On 10 September 1999, the Commonwealth's solicitors had sent to Darwinia's solicitors a draft contract asking them to treat it "very much as a first draft" and subject to any amendments requested by the Department. The Commonwealth's solicitors asked for Darwinia's solicitors' comments on the draft within two weeks and also requested a draft timetable for the period to exchange of contracts. The response took a little longer than two weeks but by letter dated 21 October 1999, Darwinia's solicitors suggested a number of amendments to the draft contract and provided a draft timetable in which an extension of time for exchange of contract to 30 April 2000 was sought. One of the questions raised in Darwinia's solicitors' letter of 21 October 1999 was whether DOFA wanted to approve the plans and specifications because it was anticipated that work on the plans and specifications for submission to Council with the building application would take place from "approximately mid-December". The special conditions of the draft Contract for the Sale of the Land reflected the Commonwealth's then position that the bank guarantee was to be provided on exchange of the Contracts for the Sale of the Land (SC Chapter 3, 3). 119 It appears that the Commonwealth's solicitors did not respond to Darwinia's solicitors' letter of 21 October 1999. The process of settling the agreed terms of the Contract for the Sale of the Land stalled at this stage because of Mr Mannion's desire to work out what the Commonwealth's legal position was and whether it could "get out of" the Option Agreement. Mr Goldberger's advice and draft Notice deflected the process from one in which the Contract for the Sale of the Land was being finalised to one in which the Commonwealth was considering making demands for the provision of the bank guarantee and the payment of interest. 120 The plaintiff was obliged under the Heads of Agreement to arrange the finance for a bank guarantee from an Australian Bank for the "purchase consideration" in the amount of $5.7 million (cl 13 (c)). The difference of $100,000 between this provision and the $5.8 million mentioned earlier in the Heads of Agreement (cl 4) and in the Option Agreement is somewhat of a curiosity but was not the subject of any detailed submissions. In any event, the use of the expression "purchase consideration" in the context referred to above lends further support for the conclusion that the guarantee was to be provided at the time of exchange of the Contract for the Sale of the Land, rather than at the time Darwinia notified the Commonwealth it wished to proceed with the purchase. 121 The first demand Darwinia made on the plaintiff to provide a bank guarantee of $5.8 million was by Darwinia's solicitors' letter dated 4 February 2000. It was not a demand under the Heads of Agreement but one of a number of pre-conditions to a purported offer to the plaintiff, available for acceptance within 14 days, to elect to proceed with the development on some new, yet to be identified, basis. It was an ill-conceived letter that developed out of the draft letter that Wing Commander Craigie had suggested, which Mr Healy was not willing to adopt.

[230]

131 Darwinia relied on exactly the same submissions in relation to the failure by the plaintiff to provide the bank guarantee and the payment of interest to submit that the plaintiff was unable to obtain the necessary finance for the development, amounting to a repudiation which Darwinia was entitled to accept. It was submitted that consequent upon that acceptance Darwinia was entitled to terminate the Heads of Agreement for such repudiation. 132 The plaintiff had proposed to the Project Control Group Meeting on 18 November 1999 that it would be better to approach a lending facility with a number of pre-sales. The marketing presentation had been delayed by Darwinia. The August marketing presentation meeting could have gone ahead and did not. The November meeting could have gone ahead and did not. The final proposal, put forward by Darwinia, for the marketing meeting to take place on 17 December 1999, a week before Christmas involving prospective retirees, seems to me to have been commercially naïve. Notwithstanding Mr Akbarian's concerns and requests in July 1999 that the marketing meeting be held at the peak time for such meetings, Darwinia chose to put this meeting at probably the worst time of the year. That adversely affected the plaintiff's capacity to obtain the pre-sales for the development. I am also satisfied that the distractions of January 2000 and February 2000, including springing an offer on the plaintiff to get out of the development without prior notice, had the inevitable consequence of delaying the pre-sales and the process of obtaining finance. 133 There were then the quite unreasonable demands in Mr Healy's letter of 4 February 2000. I have absolutely no doubt that the reasons Mr Healy wrote the letter of 4 February 2000 included that: (a) Mr Akbarian did not accept GDK's offer of $300,000 to get out of the project; and (b) Mr Craigie was pressuring Mr Healy to write the letter. Indeed Mr Healy said in his oral evidence that he felt pressured by Mr Craigie (tr 434). The other factor driving this conduct, at least from the point of view of RAAFA/Darwinia, was that it had the opportunity to get a better profit arrangement than the 85/15 split to which it was bound with the plaintiff. If it went forward with GDK it could achieve a 60/40 split with a prospect (apparently realistic) of a 50/50 split. 134 I am satisfied that this change in attitude towards the plaintiff and Mr Akbarian was probably caused by the search for a better profit arrangement. At no stage prior to January 2000, when the negotiations with GDK became more intense, had there been any suggestion that Mr Akbarian was other than open and honest with RAAFA/Darwinia. There is no doubt that during the meetings in late January 2000 it was suggested that Mr Akbarian was not telling the truth in relation to the obtaining of finance and in relation to the application for extension of the development consent. To suggest to him that he had to prove to RAAFA/Darwinia that such had been done came from the hostile attitude engendered by Mr Craigie's memoranda to Air Commodore Michael, copies of which were sent to Mr Healy. Mr Akbarian told the truth about the finance and also about the application for development consent. It was not the plaintiff or Mr Akbarian who caused the delay in the marketing presentation meeting. The plaintiff had done everything necessary to have the materials ready for the presentation in August 1999. There was no reason to delay it further. However it was decided that a wife of one of the RAAFA members would look at the finishings. That was done by early September and the meeting could have taken place immediately thereafter. The architects had prepared the package and Mr Akbarian had prepared an appropriate covering letter for Air Commodore Michael. Still the meeting did not take place. Late suggestions by RAAFA/Darwinia for models and other things caused the delay until December, on the eve of the Christmas holiday season. This was disastrous timing for marketing of residential property and within three days of that presentation RAAFA/Darwinia was conducting further meetings with GDK. 135 The steps taken by RAAFA/Darwinia from January 2000 through to 13 March 2000 deflected the plaintiff away from the actions it could have taken to have the development move forward. In the meantime Mr Akbarian was pressing on with surveys and the like and asking Darwinia for proper instructions in relation to preparing the site for the development. 136 The plaintiff secured finance for $30 million in March 1999. Notwithstanding that this offer of finance had expired by the time of the purported termination, it was not correct to claim that the plaintiff had been unable to secure finance for the development. As late as 18 November 1999 the Project Control Group Committee, on which the plaintiff and both defendants were represented, endorsed delaying application for finance until pre-sales were secured. Darwinia's conduct in January and February 2000 was antithetical to its contractual obligations to assist the plaintiff to effect the pre-sales.

[232]

Failure of Contingent Condition/Implied Contractual Right 138 Darwinia submitted that the Heads of Agreement were subject to a contingent condition, namely, the continued existence of a binding Contract for the Sale of the Land. It was submitted that such condition is necessarily implied in order to give the Heads of Agreement business efficacy. It was submitted that it was obvious that the development could not be carried out without the Land and that the development was tied to the particular Land. Darwinia also submitted that an alternate way of putting this aspect of its case was that the Heads of Agreement conferred a right upon both Darwinia and the plaintiff to terminate the Heads of Agreement in the event that a Contract for the Sale of the Land "fell over". It was submitted that the parties must be taken to have intended that if, for whatever reason, the contemplated purchase of the Land "fell over" the Heads of Agreement would end or could be brought to an end. Accordingly it was submitted that the Heads of Agreement impliedly provided that upon non-fulfilment of that condition, the agreement was at an end or, Darwinia and/or the plaintiff had the right to terminate the Heads of Agreement. 139 I am not satisfied that the circumstances of this case justify the termination of the Heads of Agreement, simply because the Option Agreement was purportedly terminated. The Heads of Agreement anticipated that there would be a Contract for the Sale of Land between the Commonwealth and Darwinia, so that Darwinia could purchase the Land and Darwinia and the plaintiff could develop it. The Commonwealth always intended that Darwinia would have a contract to purchase the Land on the same favourable terms as that which the Option Agreement anticipated, but for the Commonwealth having the capacity to fix the timeframe within which the Land would be purchased so that it had more control over the finalisation of settlement than it did under the Option Agreement. When the Option Agreement was terminated, the side letter made it abundantly clear that the Land was still available for Darwinia to purchase at the same price with interest capitalised. Not only did Darwinia achieve that agreement from the Commonwealth but it also achieved an agreement with the Commonwealth, set out in the side letter, that if the sale did not proceed the Commonwealth would not require any interest payment. 140 Performance of the Heads of Agreement was still possible because the Commonwealth was willing to sell the land to Darwinia, albeit under a different contract. The Land was still available and Darwinia had not decided to abandon the development. There was no failure of a contingent condition and Darwinia was not entitled to terminate the Heads of Agreement on this basis.

[234]

Inducing Breach of Contract 144 The plaintiff claims that the Commonwealth either directly or indirectly interfered with the plaintiff's contract with Darwinia. The plaintiff claimed that the Commonwealth knowingly or recklessly procured or induced the wrongful termination of the Heads of Agreement by Darwinia. In the particulars provided prior to trial, the plaintiff claimed that by its conduct in resolving with Darwinia to terminate the Option Agreement for the purpose of Darwinia terminating its contractual obligations with the plaintiff, the Commonwealth interfered directly with the contractual relationship between the plaintiff and Darwinia. There are a number of problems with this claim. There is no basis in the evidence that the Commonwealth "with Darwinia" resolved to terminate the Option Agreement for the purpose of Darwinia terminating its contractual obligations with the plaintiff. The Commonwealth took its own course because of its concerns that the process of the sale of the Land had become so protracted. There is nothing in the evidence that establishes that there was any combination or agreement between the Commonwealth and Darwinia to facilitate Darwinia terminating its Heads of Agreement with the plaintiff. 145 The side letter seems to have inspired suspicion in the plaintiff that such combination existed. At no stage during the evidence was it established that the side letter was anything other than the Commonwealth positioning itself so that it could have a better arrangement whereby it could control the date upon which settlement of the sale of the Land would occur. There were political sensitivities at work in respect of the provision of retirement accommodation to ex-service personnel. The evidence discloses that DOFA officers were concerned that if the Commonwealth terminated the Option Agreement there may be some political backlash against it. One of the reasons that the side letter was provided was so that Darwinia understood that the Commonwealth was keen to provide the Land at the then discounted price ($5.8 million compared to the valuation of $14 million) to Darwinia so that it would not complain. This was not a sinister plot to get rid of the plaintiff. It was a way in which the Commonwealth could extract itself from a contract that did not provide the stringent timelines that it wished to have in a contract. It was not an act that had the inevitable consequence of terminating the Heads of Agreement. Accordingly the plaintiff's claim of direct interference with the contractual relationship fails. 146 The plaintiff made the alternative claim that the interference was indirect. Although the claim outlined by Mr Akbarian was a little unclear, I am assuming that the plaintiff claims that Darwinia terminated its contract by reason of an unlawful act by the Commonwealth, being the termination of the Option Agreement. To succeed in this claim the plaintiff would have to establish that: (a) the Commonwealth did something which procured the breach by Darwinia; (b) the Commonwealth had sufficient knowledge of the Heads of Agreement; and (c) the Commonwealth had the intention to bring about a breach or to interfere with the performance of the Heads of Agreement. The plaintiff needs to establish all of these matters: Independent Oil Industries Ltd v Shell Co of Australia Ltd (1937) 37 SR (NSW) 394 at 414 per Jordan CJ. In Short v The City Bank of Sydney (1912) 12 SR (NSW) 186 (approved in Short v The City Bank of Sydney (1912) 15 CLR 148 at 155, 156, 161) Street J said at 203:

[237]

Conspiracy 149 The plaintiff's claim against Darwinia in conspiracy must fail because the plaintiff has failed to prove any agreement or understanding between Darwinia and the Commonwealth that the Commonwealth would terminate the Option Agreement to enable Darwinia to terminate the Heads of Agreement. The closest the plaintiff came to establishing any discussion between the Commonwealth and Darwinia in relation to the plaintiff was Mr Mannion's evidence that during his meetings with Darwinia prior to March 2000, he was led to believe that Darwinia was considering terminating the plaintiff's contract. The letter from Air Commodore Michael to the Minister for Finance and Administration on 12 April 2000 seeking an extension of time to enable the Contract for the Sale of the Land to be completed, seems to me to weigh heavily against any conclusion that the Commonwealth and Darwinia were in agreement that the Option Agreement should be terminated so that it could rid itself of the plaintiff. 150 I am not satisfied that the plaintiff has discharged the onus of establishing any agreement or arrangement between the Commonwealth and Darwinia amounting to a conspiracy. Accordingly the plaintiff's claim against Darwinia in conspiracy will fail. 151 The plaintiff made a claim against the Commonwealth in conspiracy. The Commonwealth did not conspire with Darwinia to get rid of the plaintiff. Mr Mannion made an error of judgment in taking his notes that he had made in a journal with him when he left the Commonwealth Department and went to work for the ACT Government. That journal no longer exists. Had that journal been available I have little doubt that it would have been most helpful to determine what happened at those meetings. In those circumstances Mr Mannion was trying to recall some eight years later what had occurred at two meetings, possibly three, with Darwinia prior to the time that the Commonwealth served its Notice to Darwinia. Mr Mannion claimed, and I believe him, that it did not matter to him (or the Commonwealth) whether Darwinia maintained its development contract or arrangement with the plaintiff or with any other developer. He claimed, and I believe him, that the Commonwealth was interested in bringing the sale of the Land to a conclusion irrespective of the identity of the developer. It is true that Mr Mannion was informed by Darwinia that it was having some difficulty with the developer obtaining finance and that he got the "impression" that Darwinia was considering terminating its relationship with the plaintiff. However the Commonwealth did not agree with Darwinia that it would terminate the Option Agreement so that Darwinia could terminate its agreement with the plaintiff. The plaintiff failed to establish that any of the Commonwealth officers were aware of the terms of the Heads of Agreement.

[239]

Application to amend 153 Although the plaintiff was represented by solicitors in the year 2000 and from time to time apparently had access to persons who were legally qualified, Mr Akbarian represented the plaintiff at trial. On the second day of the trial I asked Mr Akbarian whether the plaintiff sought the payment of any money on a quantum meruit basis. It was not until the seventh day of the trial that Mr Akbarian provided a draft pleading that contained a form of quantum meruit claim. That draft pleading claimed reimbursement of all the plaintiff's costs, including a reasonable margin for overhead and profit, on the basis that as a result of the wrongful termination of the Heads of Agreement the plaintiff lost its right to have the benefit of the Heads of Agreement. 154 Although the application was not decided during the trial the plaintiff proceeded to cross-examine Darwinia's witnesses on the basis that a quantum meruit claim could be made. Mr Akbarian cross-examined Air Commodore Michael in relation to the work and services that had been provided by the plaintiff and its predecessor Kezarne and Mr Akbarian in preparation for the development. Air Commodore Michael gave evidence that the plaintiff and Mr Akbarian did "a lot of work" with AEM; that the plaintiff was involved with the survey; that it met and effectively lobbied the Department of Veteran Affairs; that they travelled to Canberra to meet with the Department and to negotiate for the purchase of the Land; that they travelled to Perth to visit retirement villages; that they co-ordinated and provided services necessary for the lodgement of the development application; that they met with architects and members of the Environmental Protection Authority and the National Parks and Wildlife Service; they made presentations to the local residents and attended planning control meetings; they negotiated with Mirvac; they obtained finance from ING and met with various other financial institutions; they got in the proposed construction costs; obtained valuations; attended meetings with banks; obtained development approval from the local Council; arranged for the preparation of the marketing material; attended the marketing presentation meetings and other meetings required by Darwinia. Air Commodore Michael gave the following evidence (tr 554):

[245]

The reasonable reimbursement and remuneration for the costs and benefits of such work and services include: (a) a share in the increased value of the Land as a result of the Plaintiff's performance of works and services; (b) labour costs for time spent on the development of the Land by the Plaintiff, its servants, employees and agents; and (c) actual costs of disbursements paid for by the Plaintiff, including, but not limited to, payment of Council fees relating to the development of the Land and payment by the Plaintiff of part of the First Defendant's legal costs. 156 That proposed amendment also included a claim in estoppel based on a common assumption that the plaintiff would perform work and provide services in relation to the development of the Land and that the plaintiff would be reimbursed and remunerated for the work and services it performed. The claim alleges that the plaintiff performed work in relation to the development of the Land in reliance upon the common assumption including increasing the value of the Land and incurring labour and other costs. It is alleged that Darwinia has resiled from the common assumption by refusing to reimburse or remunerate the plaintiff and that it has suffered loss and damage. 157 The plaintiff has a number of problems with the application to amend. A significant problem in relation to the quantum meruit claim is that there is no claim that the Heads of Agreement were ineffective. The whole of the plaintiff's case is based upon an effective and binding contract the terms of which are contained in the Heads of Agreement. In those circumstances there is "neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration": Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 per Deane J at 256; Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635 at 663 [79]; Coshott v Lenin [2007] NSWCA 153 at [10]. 158 The other problem the plaintiff faces in relation to the quantum meruit claim is the limitation period of six years: s 14(a) of the Limitation Act 1969. In a quantum meruit claim time runs from when the defendant received the benefit that gave rise to the obligation to make restitution: Coshott v Lenin per Mason P at [17]. The plaintiff filed its Summons on 3 March 2006. Any work or services conferring a benefit on Darwinia after 3 March 2000 would be the subject of a claim, if it were available. It seems to me that even if the plaintiff could overcome the problem outlined above in relation to the Heads of Agreement, there was no work or services performed by it after 3 March 2000 that conferred a benefit on Darwinia. 159 The plaintiff also has problems in relation to its proposed estoppel claim. The pleading is very deficient in that it makes no proper allegation as to how the common assumption was reached, other than, of course, the reference to the Heads of Agreement. In any event the Heads of Agreement contained a most attractive commercial arrangement for the plaintiff in that it was to have 85% of the profit from the development. Far from evidencing a common assumption that the plaintiff would, along the way, be paid for the services it provided to Darwinia, the parties intended that the plaintiff would have the benefit of the profit share to compensate it for any cost it may have incurred during the development of the Land. 160 It would be very difficult for any defendant to know when the alleged common assumption arose and on what basis the common assumption arose as the matter is presently pleaded. 161 I am satisfied that the plaintiff's application to amend its pleading should be dismissed.

At a glance

Court

Decision date

Before

Source

Judgment (247 paragraphs)

Parties

Cases Cited (11)