Shoal Bay Beach Constructions No. 1 Pty Ltd v Mark Hickey and the persons listed in Schedule A to this Statement of Claim trading as at all material times Sparke Helmore - [2021] NSWSC 1499 - NSWSC 2021 case summary — Zoe

NSWNSWSC

Shoal Bay Beach Constructions No. 1 Pty Ltd v Mark Hickey and the persons listed in Schedule A to this Statement of Claim trading as at all material times Sparke Helmore

[2021] NSWSC 1499

Supreme Court of NSW|2021-11-09|Before: Adamson J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2021-11-09

Before

Adamson J

Catchwords

[1988] HCA 15 Jones v Dunkel (1959) 101 CLR 298
[1959] HCA 8 Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522
[1985] HCA 37 Rennie Golledge Pty Ltd v Ballard (2011) 82 NSWLR 231

Source

Original judgment source is linked above.

Catchwords

[1988] HCA 15 Jones v Dunkel (1959) 101 CLR 298[1959] HCA 8 Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522[1985] HCA 37 Rennie Golledge Pty Ltd v Ballard (2011) 82 NSWLR 231

Judgment (36 paragraphs)

[1]

nveyancing Act 1919 (NSW), s 88B Corporations Act 2001 (Cth), s 459G Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 Calderbank v Calderbank [1975] 3 All ER 333 Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522; [1985] HCA 37 Rennie Golledge Pty Ltd v Ballard (2011) 82 NSWLR 231; [2012] NSWCA 376 Renold Australia Pty Ltd v Fletcher Insulation (Vic) Pty Ltd [2007] VSCA 294 Scottsdale Homes Pty Ltd v Gemkip Pty Ltd [2008] QSC 326 Stambolziovski v Nestorovic and Camanaro Prestige Properties Pty Ltd t/as Sydneyhome Real Estate [2015] NSWCA 332 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86 Watson v Foxman (1995) 49 NSWLR 315 Yager v Fishman & Co [1944] 1 All ER 552 Texts Cited: Practice Note SC Gen 16 Category: Principal judgment Parties: Shoal Bay Beach Constructions No. 1 Pty Ltd (Plaintiff) Mark Hickey and the persons listed in Schedule A to this Statement of Claim t/as at all material times as Sparke Helmore (Defendants) Representation: Counsel: D Weinberger (Plaintiff) A Zahra SC / J Burnett (Defendants)

[3]

Introduction

By statement of claim filed on 2 July 2019, Shoal Bay Beach Constructions No. 1 Pty Ltd (the plaintiff) claims damages for alleged negligence and breach of contract against Mark Hickey and others, trading as Sparke Helmore Lawyers (the defendants).
The plaintiff is the assignee of Shoal Bay Beach No. 1 Pty Ltd (the developer). From about early 2014, the developer constructed and developed 53 units on land which it owned on Bullecourt Street in Shoal Bay (the property). It eventually sold the units. On 18 June 2018, the Federal Court made an order for the winding up of the developer and the appointment of a liquidator. On 13 March 2019, the developer's liquidator assigned to the plaintiff all of its claims against the defendants.
Although the plaintiff puts its case on breach on various bases, the plaintiff alleged that the defendants' breach was their failure to alert the developer to the dates by which extension of time notices would need to be served on the purchasers of Lots 50 and 52 to avoid such purchasers becoming entitled to rescind the contracts within seven days of the Registration Dates, as occurred. The plaintiff submitted that, had the defendants alerted the developer to the dates in sufficient time, the developer would have been able to validly extend the Registration Date under the contract and the purchasers would not have been entitled to rescind.
The plaintiff claims damages on the following bases: 1. the differential between the sale price in the original contracts and the price at which each of Lots 50 and 52 was ultimately sold; 2. the costs incurred by the developer and the costs of the purchasers for which it became liable as a result of proceedings brought in the Equity Division of this Court by the purchasers of Lots 50 and 52 for declarations that the rescission of their contracts was valid and for orders that the deposits be returned (the Equity proceedings); and 3. interest on (1) and (2) at the commercial rates at which the developer was borrowing funds at the relevant times.
The defendants denied that they were negligent or in breach of contract. They contended that, on several occasions, they explained to the developer how the contract worked by reference to specific clauses and the relevant Registration Dates for each contract. The defendants submitted that the developer was a sophisticated client which engaged experts who were well aware of the significance of the Registration Dates and the potential for the purchasers to rescind if no valid notice for extension was served in time. Further, the defendants submitted that if they were found to be liable, the developer was entitled to no more than nominal damages as it could not establish that it would have issued extension of time notices to the purchasers of Lots 50 and 52 had it been alerted to the issue in time or that, if it had, the purchasers would not have validly rescinded in any event. In the alternative, the defendants submitted that the damages ought be limited to the differential between the price in the rescinded contract and the price at which the unit was ultimately sold. They argued that interest ought be at court rates, rather than at the commercial rates claimed by the plaintiff. They submitted that the costs of the litigation were not caused by the defendants and were, in any event, too remote.

[5]

The developer and Adrian Mastronardo

Carmelo Adrian Mastronardo (known as Adrian) was a director of the developer from 21 October 2013 to 23 November 2016 and from 25 January 2017 onwards. He was its principal, made all key decisions regarding the development and was, as he put it, "in full control". He was an experienced property developer, having been the project director between about 1984 and 2009 at Remo Corporation Pty Ltd, a family construction and property business, which had undertaken substantial off-the-plan developments. He was also a director of Veritas Property Group Pty Limited (Veritas) from its incorporation in 2007 until 2019 (other than for a short period in 2012).
Mr Mastronardo became bankrupt on 23 September 2020 on the application of the Commonwealth Bank of Australia. The developer was the plaintiff's sole shareholder. The developer was deregistered but was subsequently reinstated by this Court (Rees J) on 6 August 2021, for the purposes of these proceedings. Shortly thereafter, Mr Mastronardo's sister, Antonella, became a shareholder of the plaintiff company.
By the time of the hearing on 8 November 2021, Mr Mastronardo had been a director and secretary of at least 19 different companies.
When Mr Mastronardo was cross-examined by reference to the standard form contract for the sale of the lots in the development on the property, he said that he never looked at the contract because he was not interested in checking that its terms were acceptable. He described his way of doing business, which I accept, as follows: "My general way of operating is I just appoint people very good at what they do and rely on them to do the job and just, basically, I - you know, I'm not a real reader. That's not one of my - that's not my role, to read the contract. My role is to manage the operation and make sure I've got the right people in the right place."
Mr Mastronardo explained that he was not particularly concerned with individual clauses of contracts. He would ask the builder how long it needed to build the building and then allowed a margin of, say, 50%, which would then be incorporated into the contracts for sale. He was also concerned to give the developer flexibility to accommodate delays such as those caused by wet weather.

[6]

The experts engaged by the developer

Mr Mastronardo concerned himself with the "big picture" and surrounded himself with experts to deal with the mechanics of the development. To that end, he engaged several people to manage and progress the development of the property on behalf of the developer and in accordance with his instructions. These people included Ben Suttor, Geoff Gazzard, Ian Mirels and Guy Robinson.
Mr Suttor was a director of Suttor Innovation, a firm engaged in building project management and development. He was a very experienced building construction development project manager who had worked for Multiplex. Mr Suttor was in charge of "setting up all the construction and the rollout" of the Shoal Bay development and reported directly to Mr Mastronardo. Mr Mastronardo had instructed Mr Suttor to liaise with the defendants regarding the contracts for sale.
Mr Mirels was a chartered accountant who had worked at Ernst & Young and Franklins. He was the general manager of Veritas from December 2002 to June 2011 before he became Chief Financial Officer of the Johnson Property Group from July 2011 to June 2014. He was engaged by the developer to work about two days a week. He reported directly to Mr Mastronardo, who expected him to liaise with the defendants on such matters as the Registration Date, taking into account how long the builder indicated it would need to complete the development. As far as Mr Mastronardo was concerned, Mr Mirels was "the key player in the contracts" and if something needed Mr Mastronardo's attention, he expected that Mr Mirels would pick up the phone and call him. Mr Mastronardo described Mr Mirels' role as the manager of the builder, the agent and the sales.
Mr Robinson, the managing director of Robinson Real Estate, a real estate agency, was engaged by the developer to sell apartments in the Shoal Bay development. He reported primarily to Mr Mirels and had little to do with Mr Mastronardo directly once the project was underway.
Mr Gazzard is a chartered accountant, experienced Chief Financial Officer and Chief Executive Officer, who has been the accountant for Veritas since 2016.

[9]

The contracts for sale of lots in the development

The developer started to market the lots in early 2014. The clauses of the contracts will be referred to in more detail below. In substance, the contracts provided for a "Registration Date" (being the date by which certain documents, including the Strata Plan, had to be registered) which was to be a certain period after the Contract Date. There was also provision to enable the developer to extend the Registration Date by a period of up to six months, as long as a valid notice was given at least one month prior to the Registration Date. If registration of the relevant documents had not occurred prior to the Registration Date, either party had an automatic right to rescind the contract. The purchaser was required to rescind within seven days of the Registration Date and, in that event, was entitled to have the deposit returned.
The first contracts specified a Registration Date (see below) of 18 months from the Contract Date. For example, on 20 June 2014, a contract was entered into between the developer as vendor and Alfio and Katia Arlotta as purchasers for Lot 40 for the total sum of $490,000. The Registration Date was 18 months from the Contract Date. Thus, the Registration Date for that contract was 20 December 2015.
Later contracts (including for Lots 50 and 52) specified a Registration Date of 12 months from the Contract Date.
On 15 December 2014, Mr Ferguson sent a document entitled "Updated Sales Schedule" to Mr Mirels which included the properties sold to that date, being Lots 4, 8, 9, 15, 19, 22, 24, 25, 27, 28, 29, 30, 32, 33, 34, 35, 37, 38, 39, 40, 42 and 43. The schedule included a column headed, "Sunset Date (*6 month extension is also available in addition)". The term "Sunset Date" was used by the parties as an alternative term for Registration Date. The Sunset Date for Lot 40 was recorded in the schedule as 20 December 2015, being 18 months after the Contract Date. Neither the requirement that notice of an extension be given one month prior to the Sunset Date, nor the actual date for such notice in respect of any given lot, was apparent from any of the schedules provided by the defendants to the developer.
Mr Mirels examined the schedule carefully, as is evident from the following response sent a couple of hours later: "Andrew please delete comment for unit 204. Price is actually $389k"
Later that day, 15 December 2014, Mr Mirels and Mr Ferguson exchanged emails as follows: "Mirels: Andrew are those sunset dates with allowable extension? Or are they drop dead dates that buyers can rescind? Ferguson: The dates don't include the 6 months extension Mirels: Andrew please can you also include a sentence re 6 month extension and date with this extention [sic]. Do we automatically get this extention [sic] or only under certain circumstances? Ferguson (who attached the special conditions to his email): Refer to special condition 43 of the Contract regarding extensions. The extension must be notified a minimum of 1 month prior to the Registration Date and the reasons you can delay are set out in 43.1 a to 43.1 e. 43.1e. is very wide."
On 17 March 2015, Mr Ferguson sent an email to Mr Mirels which appears to answer a question asked of him by Mr Mirels in an earlier email: "3. As you know, the sunset dates are set out in the Sales Schedule. The earliest sunset date is 16 November 2015. Question: Will an extension to the dates be needed or is the construction timing OK? Answer: Not yet. Completion expected December 2015. 6 month extension for delays is noted. Noted you need to exercise right to extend one moth [sic] prior to sunset date."
Mr Ferguson sent a further Updated Sales Schedule to Mr Mirels on 10 July 2015, which included details of all lots for which contracts had been exchanged. As with the previous version, it included a column headed "Sunset Date (*6 month extension is also available in addition)".

[10]

The contract for the sale of Lot 52

On 6 August 2015, a contract was entered into for the sale of proposed Lot 52 between the developer, as vendor, and Gregory and Georgina Forbes, as purchasers for the sum of $800,000, of which $80,000 was paid as a deposit on exchange of contracts. The contract contained additional provisions beyond those contained in the 2005 edition of the standard form contract for the sale of land. These additional provisions included the following.
Clause 31 defined "Builder" as "the builder or builders appointed by the Vendor or on behalf of the Vendor from time to time to construct the Development." "Completion Date" was defined as the date for completion pursuant to cl 48. "Extended Registration Date" was defined to mean 18 months from the Contract Date. "Registration Date" was defined as 12 months from the Contract Date. "Strata Documents" were defined to mean the Strata Plan, the By-Laws, and any necessary s 88B instrument.
Clause 42 made provision for conditions precedent to completion. It relevantly provided: "42.1 Completion of this Contract is subject to and conditional on: … b. the registration at the LPI [Land and Property Information] of the required Strata Documents to complete the sale of the Property to the Purchaser on or before the Registration Date; … 42.2 Subject to clause 43, if any of the conditions precedent contained in clause 42.1 are not satisfied on or before the Registration Date, either party may rescind this Contract by written notice to the other party and neither will have any claim against the other except for any antecedent breaches . 42.3 Where the Purchaser rescinds this Contract pursuant to clause 42.2, the Purchaser must serve the Vendor a valid written notice of rescission not later than seven (7) days after the Registration Date or Extended Registration Date, as the case may be, time of the essence. If the Purchaser does not rescind within that time then the right of rescission lapses immediately. …"
Clause 43 provided for time for registration to be extended as follows: "43 Extension of time for registration 43.1 A minimum of 1 month prior to the Registration Date, and despite any other clause in this Contract, the Vendor may extend the Registration Date by each day the Vendor or the Builder has been delayed by reason of: a. inclement weather or conditions resulting from inclement weather; b. any civil commotion, combination of workmen strikes or lockouts affecting the progress of the Development or affecting the manufacture or supply of materials for the construction of the Property; c. any matter or thing beyond the control of the Vendor including but not limited to a delay in supply to the Vendor or the Builder or a delay experienced by the Vendor in dealing with its consultants or a delay in obtaining any necessary consents, certificates, licences, not limited to any Consents of any kind from Council or other authority or Government Agency or registering the Strata Documents; d . a delay in any Consent required for construction of the Development by Council or other Government Agency; or e. anything else beyond the Vendor's control. 43.2 A certificate by the Builder in relation to extensions of time under this clause 43 is final, conclusive and binding on the parties. 43.3 Extensions of time under this clause 43 cannot be claimed whereby the Registration Date is extended beyond the Extended Registration Date."
Clause 48 relevantly provided: "48 Completion 48.1 The Completion Date is the later of the following: a. 35 days after the date of this Contract; b. 14 days after the Vendor notifies the Purchaser in writing that all conditions precedent in clause 42.1 have been satisfied; and c. 14 days after the Vendor serves the Purchaser with an occupation certificate within the meaning of the Environmental Planning and Assessment Act 1979 (NSW) (being an interim occupation certificate or a final occupation certificate) in relation to the Property. 48.2 The Purchaser acknowledges: a. written notification from the Vendor's solicitors that the conditions precedent contained in clause 42.1 have been satisfied is conclusive evidence the conditions precedent have been satisfied; and b. the Purchaser may not take any Action on the validity of the notice referred to in clause 48.2a."
I accept Mr Mastronardo's evidence that he had not read the contracts for sale and that he relied on those people the developer had engaged and the defendants to monitor such matters as the Registration Date and any need for an extension of time.

[12]

Delays in the progress of the development on the property

On 12 August 2015, Mr Ferguson sent a further schedule to Mr Mirels under cover of an email in which he said, "Updated schedule attached as requested." The Sunset Date for the contract for the sale of Lot 40 was identified in the schedule as 20 December 2015. By this time, contracts for the sale of Lots 50 and 52, had been exchanged. There was no date in the Sunset Date column for these lots but, as with other entries, the date on which contracts had been exchanged (6 August 2015 for Lot 52 and 7 August 2015 for Lot 50) were set out in the final column in the schedule.
On 27 October 2015, Mr Mirels and Graeme Schmarr (a real estate agent from PRD Port Stephens who had been engaged by the developer to assist with the sale of the lots) sent an email to all the purchasers of lots in the development, informing them that, as a consequence of wet weather, the expected completion date had to be adjusted to January or February 2016. They also informed purchasers that there were only 13 units left. Mr Mastronardo explained that he encouraged his team to communicate with purchasers and keep them well informed as part of "public relations."
On 23 November 2015, Mr Mirels asked Mr Ferguson for another "list and status". In response, Mr Ferguson provided another updated sales schedule in a similar format to those which had previously been provided. As with the one provided in August 2015, the Sunset Date for Lots 50 and 52 was blank.
In December 2015, a dispute arose between Mr Mastronardo and Mr Mirels concerning the latter's remuneration for work performed on the development which was to include a unit in the development. It would appear that the dispute was resolved as Mr Mirels continued to work for the developer and liaise on its behalf with the defendants.
On 21 December 2015, the Arlottas, the purchasers of Lot 40, rescinded their contract by notice which was sent by their licensed conveyancer to the defendants. Mr Ferguson sent it to Mr Mirels in an email which included the following explanation: "The sunset date for this Contract was 20 December 2015."
At Mr Mirels' request, Mr Ferguson forwarded the email to Mr Mastronardo. Although Mr Mastronardo could not recall reading the email, he said in cross-examination that he would have spoken to Mr Mirels about it and told him to "sort it out." He did not appear to be particularly troubled by the rescission of the contract for the sale of Lot 40 because it was one of the early lots and therefore part of a "cheaper release" which meant that there was a reasonable prospect of the developer making money on the resale.
On 30 December 2015, Mr Mirels wrote to Ms Murray (who had assumed conduct of the file in December 2015) and Ms Faulkner as follows: "A unit in level 4 recently rescinded due to sunset date. Please can you confirm which unit and that this was a genuine rescission and not a change in contract name to a related party."
On 12 January 2016 (following what I infer was the summer break for the defendants' firm), Ms Murray responded by informing Mr Mirels that "[a]partment 410 (Lot 40) rescinded on 21 December 2015." She continued: "Contracts were exchanged on 20 June 2014 and the vendor failed to register the plan within 18 months i.e. by 20 December 2015."
By email sent on 18 February 2016, Mr Mirels asked Ms Murray to provide an updated sales status schedule with Sunset Dates. He explained that "[w]e are having an issue with the builder and PC [practical completion] will [be] reached a lot later than expected." On 19 February 2016, Ms Murray sent an updated sales schedule with Sunset Dates. It recorded the Sunset Dates for Lot 52 as 6 August 2016 and for Lot 50 as 7 August 2016, being 12 months after the respective Contract Dates. Mr Mastronardo did not recall seeing the document although he accepted that he had "probably gone through something of this nature" with Mr Mirels. He confirmed that he was "more interested in the prices we're achieving, what sort of take up we had, that sort of stuff, not so much all this sort of detail."
On 23 February 2016, Ms Murray sent a further email to Mr Mirels as follows: "I recently provided you with an updated sales schedule showing the Sunset Date relevant to all exchanged contracts. If the vendor wishes to extend the Registration Date in the contracts, special condition 43 applies. This clause requires that a minimum of 1 month prior to the Registration Date (i.e. the Sunset Date) the vendor can extend the Registration Date for any of the following: … [list of reasons for delay taken from cl 43.1 above] … The notice must include a certificate by the Builder outlining the reason the extension to the Registration Date is required. From a review of the Sunset Dates, you will need to issue extension notices to the following purchasers and notices need to be sent 1 month before the dates below. [A table which included contracts for sale with Sunset Dates in April 2016 was set out in the email.] The Extended Registration Date is the date 18 months after the contract date so an extension will be a further 6 months. Where Sunset Dates for other purchasers have already passed, if the purchaser did not exercise its right to rescind under cl 42.2 within 7 days of the original Registration Date the purchaser cannot now rescind." [Emphasis in original.]
Mr Mirels forwarded this email to Mr Mastronardo with the following text (which was copied to Ms Murray): "If we can get builder to sign off on delays as per below items in Helen's [Ms Murray's] email (inclement weather, strike and then a very broad term of whatever etc) then we can exercise option in contract for sale to extend sunset date. It gets tricky because for example Ian Gordon advised the roof re-design which caused delay according to builder has not been accepted by us as an acceptable delay for LDs so it's not that straight forward. I have asked Greg to please provide a list of delays that doesn't prejudice you with Builtform. I will then send to Helen to draft letter and put purchasers on notice. According to Helen you only get extension for time proven and not an automatic extension for 6 months (Helen by copy please confirm). Helen please can you talk through with Adrian [Mr Mastronardo] as he might have some ideas."
At 7.10am on 24 February 2016, Mr Mirels sent an email to Ms Murray asking her to call Mr Mastronardo and explain it to him. Mr Mirels also wrote: "In the meantime I am also trying to get information from our newly appointed construction manager (Greg Hastie) to provide to you."
Ms Murray does not recall having telephoned Mr Mastronardo in response to this email and has not been able to locate a file note of any such conversation.
At 9.02pm on 24 February 2016, Mr Mirels sent an email to Ms Murray with the subject heading "Extension letter" as follows: "1) Do you have builder info to sen[d] to purchasers? 2) Fabio Valero is chasing FHO [First Home Owner] I sent you."
Ms Murray responded by email sent at 10.03am on 25 February 2016 as follows: "A draft notice is attached. Someone connected with building needs to add up the actual delay days and insert them into the document. I have plucked the suggested reasons for delay from Greg Hastie's email but they can of course be changed. Days of delay can be up to 6 months . 182 days."
The attached draft was in the following terms: "Notice of Extension of Time Pursuant to clause 43 of the Contract and as the builder appointed from time to time by the vendor we certify the following delays which permit the vendor to extend the registration date as follows: (a) Inclement weather or conditions resulting in inclement weather [ ] days (b) A delay in supply to the vendor or the Builder [ ] days (c) A delay in the vendor dealing with consultants [ ] days (d) Matters beyond the vendor's control relating to design and construction changes [ ] days and (e) Suspension of contractors on the Development by the vendor [ ] days. Total days extension [ ] days. Date: For and on behalf of the Builder."
Mr Mirels forwarded Ms Murray's email to Greg Hastie (the new construction manager) and asked him to "insert details as per below. This is urgent for extension of time." Mr Hastie's signature block on the email identified him as "Director, Cost Consulting & Project Management" of AltusPageKirland.
At 1.44pm on 25 February 2016, Mr Hastie sent an email to Ms Murray and Mr Mirels entitled "Extension Letter" as follows: "Please find the attached. I have based the delay periods on: 1. Current extension of time to 17 March per the superintendent, and have based all of this delay on inclement weather 2. Anticipated delay of 1 month due to supplier delays 3. Anticipated delay of 2 months due to design changes Let me know if this is acceptable."
The attached notice said: "Notice of Extension of Time Pursuant to clause 43 of the Contract and as the builder appointed from time to time by the vendor we certify the following delays which permit the vendor to extend the registration date as follows: (a) Inclement weather or conditions resulting in inclement weather 85 days (b) A delay in supply to the vendor or the Builder 30 days (c) Matters beyond the vendor's control relating to design and construction changes 61 days. Total days extension 176 days. Date: …………………………………….. For an on behalf of the Builder"
At 1.54pm on 25 February 2016, Mr Mirels wrote to Ms Murray and asked her to finalise the notice so that he could send it to the Building Superintendent, Todd Corbett, for sign off. He said: "We won't be able to get the current builder to sign however hopefully we will have a new builder on site soon and will ask them for a sign off for other upcoming expiring contracts for sale."
At about this time, the original builder left the site. This caused inevitable delays in construction but also meant that there was no builder who could certify the delay for the purposes of a notice of extension of time of the Registration Dates of the contracts. The developer hoped to overcome this problem by having the Building Superintendent sign such a notice in the period when there was no builder on site.
At 3.55pm on 25 February 2016, Ms Murray sent an amended notice which included a sign-off by "Building Superintendent, Todd Corbett - RPS". At 4.34pm on 25 February 2016, Mr Mirels sent an email to Mr Mastronardo, which was copied to Ms Murray, Mr Gazzard and Mr Hastie, in which he asked Mr Mastronardo whether it was "ok to send [the draft notice] to Todd Corbett to sign." In the same email, Mr Mirels wrote: "Helen will then advise purchasers (as listed below) on the respective due dates of an extension of time to the sunset date."
The email contained a table with three columns, the apartment number, the name of the purchaser and the "Current Registration Date (Sunset Date)". The email concluded: "Please note in accordance with the contract for sale the builder should be the person to actually sign this letter. Once you have appointed new builder we will ask him to sign this letter. Helen (by copy) in that regard, I think we should only send Todds (superintendent) letter to the minimum number of above list by reference to due date pending actual builder sign off. Hopefully that won't be long now. Do you agree?"
At 4.41pm on 25 February 2016, Ms Murray responded to Mr Mirels as follows: "I agree we should only issue the interim letter to those whose sunset dates are between 1 and, say 10 April. If it will take longer to appoint a builder and have the letter resigned let me know."
On 26 February 2016, Mr Mirels sent the draft notice to Mr Corbett for his signature. On 29 February 2016, Mr Hastie sent an email to Mr Corbett and Mr Mirels, which was copied to Ms Murray, asking him to sign the notice and return it that morning.
On 29 February 2016, Mr Corbett responded to Mr Mirels and Mr Hastie (in an email copied to Ms Murray): "I advise it is my opinion the works have been delayed by: • 85 days due to inclement weather or conditions resulting from inclement weather; & • Circa 61 days due to matters beyond the vendor's control relating to design & construction changes (eg: Level 5 etc). or circa 146 days total noting I'm not in receipt of an EOT [Extension of Time] claim from the Building Contractor for the circa 61 days due to matters beyond the vendor's control relating to design & construction changes (eg: Level 5 etc)."
On 29 February 2016, Mr Hastie emailed Ms Murray (copied to Mr Corbett and Mr Mirels) asking her to adjust the notice in accordance with Mr Corbett's response and reissue it for signing. Further correspondence ensued with Mr Corbett, who indicated that he was not comfortable signing the notice as he had not made any determination regarding the 61 days which were allegedly beyond the vendor's control. Ultimately, he agreed to sign off for 85 days and sent a signed notice to that effect at 2.55pm on 29 February 2016.
On 29 February 2016, following receipt of the signed notice from Mr Corbett, Mr Mirels and Ms Murray spoke on the phone. Ms Murray noted what Mr Mirels said (but not her responses) in a file note as follows: "… - for anything which is immediate - do notices for 1st weeks only. Wants to wait for new builder to be appointed then re-assess position - ring each week + see if they should be extended!"
On 1 March 2016, the defendants sent letters to the solicitors for the purchasers of Lots 32 and 33 which enclosed Mr Corbett's extension of time notice.
On 16 March 2016, Mr Mirels sent the extension of time notice to Mr Mastronardo (copied to Ms Murray) and said: "Greg Hastie needs to confirm it[']s accurate/ current and then James can sign."
Mr Mastronardo responded to Ms Murray (copied to Mr Gazzard and Mr Mirels): "What you have sent is what James will sign, I notice it has Todd's name at the bottom Helen, please amend as required, liaise with Geoff and he will organise James to sign and return to you today."
Further emails were exchanged on 16 March 2016 in which Mr Hastie said that Mr Corbett had confirmed the extension of time for the weather but that the additional 61 days was "based on nominal delays and not actual delays." He foreshadowed further delays. The defendants were unaware of who "James" (referred to in Mr Mastronardo's email above) was. Mr Mirels confirmed that he was from Fortis Development and Construction Co (Fortis) and "is the new builder stepping into the existing construction contract with Builtform to complete the works." Mr Mastronardo subsequently confirmed that it was intended that "he [James Maruzza of Fortis] will finish all the works."
Ms Faulkner amended the notice of extension of time to include the 61 days in addition to the 85 days for inclement weather and to identify Mr Maruzza as the person who was to sign the notice. The notice was signed in that form by Mr Maruzza on 16 March 2016. As far as the evidence reveals, Fortis remained the builder on site until the construction of the development was completed.
The evidence does not reveal when Fortis became the builder on the site or when Builtform left the site. Mr Mastronardo was unsure of the precise timing. He recalled that he was "in discussions with a few builders at the time" and "[a] lot of things were going on." Mr Mastronardo said, in cross-examination, that the departure of the builder put a "bad stigma on the project" although "the market was still strong". He said that it was "not a good thing to happen on a project." He became very concerned because he "need[ed] to deliver projects and complete them and bring the money back in the door."
On 18 March 2016, Ms Faulkner sent an updated schedule to Mr Mirels in the usual format. She recorded in the column entitled "Sunset Date (*6 month extension is also available in addition)" the original Sunset Date and any extension which had been notified and the date on which it had been notified. The schedule indicated that extension notices had been served for contracts with Sunset Dates in April and May 2016.
On 21 March 2016, Mr Gazzard sent an email to Ms Murray and Ms Faulkner asking them, at Mr Mastronardo's request, to amend the schedule which had been sent on 18 March 2016 "to reflect the actual latest sunset date incorporating the extensions plus a column for the $ deposit being held." Later that day, Ms Faulkner sent the amended list to Mr Gazzard.

[13]

Attempts to negotiate extensions to the Registration Date with the purchasers of Lots with Registration Dates in June and July 2016

On 22 March 2016, Ms Murray, Mr Mastronardo and Mr Gazzard spoke on the phone. Ms Murray recorded in a file note what she was told as follows: "June-July - get an EOT [extension of time] - $100,000 more - In the next 7 days no builder on site completion May/June currently ref. [illegible] 31 Dec October answer asap variation of contract benefit in the escalation of price"
Ms Murray's affidavit evidence as to the import of the file note (which was tendered by Mr Weinberger, who appeared on behalf of the plaintiff) was as follows: "'Rather than issue extension of time notices under the contracts, we want to negotiate an extension for an agreed period of time with each of the purchasers' 'We will start by negotiating with the contracts that are due for completion in June and July 2016. The purchasers will probably agree because the units are worth $100,000 [more] and they would want the benefit of the increase in value' 'We need to negotiate the extensions in the next 7 days' 'There is no builder on site at present but we think we can complete in May or June 2016' 'We are currently refinancing' 'We want the extensions to be until 31 December. No, they should be until 31 October' 'Can you draft letters inviting the agreed extension and request answers as soon as possible.'"
Mr Mastronardo explained his rationale for seeking the purchasers' agreement to the extensions in his cross-examination as follows: "… whatever contracts are going to expire that we can't force the purchaser to extend any further, we're just going to have to negotiate a new contract, basically. And the ones there, you need to speak - we're not going to escalate the price, although the price had gone up. They would've benefit. And that was basically - call it the carrot to have them remain in the purchase of the unit, so that would've made it easier for us to - because we were short of funds, because the builder - whatever happened there, and we needed to raise more money. So, the funder wanted to know what's at risk, which was - earlier was at about 4 - $3 million that could fall over. So, those ones there were our focus because that's - you know, a bird in the hand's two in the bush. So, we just wanted to make sure that those people remained as purchasers. It was easier to - yes."
Following this conversation on 22 March 2016, Mr Gazzard sent an email to Ms Murray attaching a schedule of sales in which he highlighted in yellow all contracts which had a Sunset Date before the end of July 2016. He said: "As discussed please find attached. I have highlighted all contracts to expire before the end of July. If you could please prepare the letter to send to these buyers requesting them to extend the sunset date until the end of October using the wording re non-escalation as discussed with Adrian [Mr Mastronardo]."
Mr Gazzard's schedule included the following totals at the columns of money amounts: Sale price Deposit Contracts at risk [Balance] [Properties] at valuation $11,110,000 $18, 419,700 $4,044,000 -$1,010,000 -$1,674,518 (GST) $1,745,710 -$367,636 $14,375,700 $10,100,000 $16,745,182 (NET) $3,676,364 $13,068,818 $6,060,000 $13,068,818 $19,128,818

[14]

Mr Mastronardo was not precise about time but he recalled that he wanted to raise funds on the project and "the funder wanted to make sure that we had enough sales to cover the funding." He told Mr Gazzard to make sure that every contract is "binding and none of them can fall over". Mr Mastronardo explained in cross-examination: "[W]e didn't have the builder at that time, everything was on hold, what's going to be our worst-case scenario in terms of what contract can we rely on at the end of the project to be settled? So, that's what I would have [been] trying to achieve out of that."
Mr Mastronardo wanted the contracts "at risk" of being rescinded by the purchasers to be identified so that the developer could "get those contracts to re-engage".
Again, Mr Mastronardo confirmed that he was more concerned about the "big picture" and would have relied on Mr Mirels and Mr Gazzard to "sort it out." He added: "My general practice with my team is I talk to them on the phone. I don't like reading a lot of stuff. That's not my strong point."
On 24 March 2016, the defendants sent letters in the following form to the solicitors or conveyancers for the purchasers of Lots 4, 9, 15, 19, 30, 32, 33, 36 and 43 (being the lots with Sunset Dates which were due to expire in June and July 2016): "Contracts were exchanged on [date]. Accordingly the Registration Date for the purposes of special condition 42 is [date]. The vendor instructs us that it will not achieve completion of the project by the Registration Date. While the vendor is able to make an extension of time claim pursuant to special condition 43 of the contract our client would prefer to vary the Registration Date from the current Registration Date to a new Registration Date of 31 October 2016. Would you please take your client's instructions as to whether you[r] client is prepared to extend the registration date as set out above and we will provide you with a Deed of Variation for execution by your client. We request that you respond to this request no later than 6 April 2016 so that up-to-date information can be provided to our client's financier for the continued financing of the project. If your client will agree to vary the Registration Date to 31 October 2016 our client's financier may require the parties to enter into a Deed of Variation."
Mr Mastronardo confirmed in his affidavit evidence that as at 26 March 2016, he was still "seeking a new builder to complete the development." At that time he did not believe that the development could have been completed by June 2016 because the following matters were still required to be done to achieve Practical Completion and obtain registration of the Strata Plan, including notifying the Local Council of Practical Completion; inspection by a building certifier; lodgement of the proposed Strata Plan; obtaining consents from the financiers and mortgagees of the property; and lodging documents with the Land Registry Services.
At 6.57am on 29 March 2016, Mr Gazzard wrote to Ms Murray asking whether there had been any progress on extension of sunset dates. At 8.09am on 29 March 2016, Ms Murray responded by informing him that the letters had been sent out by facsimile but that, given the Easter break (Easter Day was 27 March 2016), she would not expect any response until later that week "at the earliest". At 8.13am on 29 March 2016, Mr Gazzard asked Ms Murray to email a copy of the letter to him. She responded by sending the pro forma letter but he requested that she send a copy of "every letter sent out" and a "list of who they were sent to". Mr Gazzard concluded his email by saying, "[w]e need this urgently."
A file note made by Ms Murray on 29 March 2016 recorded that she had a telephone conversation with Mr Gazzard on that day. She recorded: "Office copies of letters is fine. How many went out? All on spreadsheet, Which clause lapses. The right of rescission 42.3 I will email to him."
At 4pm on 29 March 2016, Ms Murray sent an email to Mr Gazzard as follows: "Clause 42.3 attached says; 'Where the Purchaser rescinds this Contract pursuant to clause 42.2, the Purchaser must serve the Vendor a valid written notice of rescission not later than seven (7) days after the Registration Date or Extended Registration Date, as the case may be, time [is] of the essence. If the Purchaser does not rescind within that time then the right of rescission lapses immediately.' Where the notice is not served in time the right to rescind lapses."
At 4.01pm on 29 March 2016, Ms Faulkner sent an email to Mr Gazzard which attached copies of all of the letters the defendants had sent to the lot owners referred to above.
On 29 March 2016, Mr Schmarr sent an email updating the purchasers, which forwarded the following "message from [Mr] Mastronardo" as follows: "As you are aware the project is currently running behind schedule. Firstly, what is beyond our control, for example the amount of inclement weather experienced, namely 85 days to date; there is not much we can do about that. However, the previous builder has been unable to suitably resource our project and accordingly I have made the decision to replace the builder with a new builder, Fortis Constructions, who are a reputable builder with a fantastic track record and who have the necessary resources to complete [the Shoal Bay development] expeditiously. The projected new construction completion date will now be 30 June 2016. While this delay has had its downside it also has had its upside as your unit value has increased since you purchased. Based on the Sydney market statistics we consider this will continue in Shoal Bay as well."
Mr Forbes (the co-purchaser of Lot 52) responded to Mr Schmarr, expressing his disappointment with the delay. On 30 March 2016, Mr Schmarr forwarded this exchange to Mr Mastronardo, who responded to Mr Schmarr (which was copied to Mr Mirels): "I see the problem with updates. I think in future we don't tell them nothing they have contracts exchange and we just stick to the contract, if they expire then we can resell them for more I guess"
Later that day, Mr Mastronardo wrote to Mr Mirels (copied to Mr Schmarr) and told him to "sort it". In cross-examination, Mr Mastronardo denied that he was "not particularly sympathetic to Mr Forbes' concerns" and maintained: "I like my purchasers happy."
On 30 March 2016, Ms Faulkner sent Mr Gazzard a schedule which identified those purchasers who had agreed to an extension of the Registration Date to 31 October 2016 (which at that time was only the purchasers of Lots 19 and 33). On 31 March 2016, Ms Faulkner sent a revised list, which added the agreements of Lots 4 and 9. On 4 April 2016, Mr Gazzard wrote to Ms Faulkner and asked her whether answers had been received from all purchasers to whom requests for extension had been sent. She responded and informed him that the purchasers of apartments which corresponded with Lots 15, 30, 32, 39 and 43 had not yet replied but that she had called their solicitors and been told that they were still waiting for responses from their clients.
At some time in early April 2016, Mr Mastronardo increased the prices of the remaining units. He explained the reason for the increase as follows: "[T]ypically what we normally do, we tend to - once we've got our debt covered, we tend to - you know, so we start - when we start selling we always sell at a cheaper price and sort of - well, you know, I don't want to call them a loss leader but basically we just increase the - the less units on the project, you know, the more we can sort of push the price."
On 11 April 2016, Mr Gazzard asked Ms Faulkner for an update about further responses. She confirmed that she had phoned the purchasers' solicitors, who were still waiting for responses from their clients. Ms Faulkner sent a further updated list on 13 April 2016 which recorded the agreement of the purchasers of Lots 4, 9, 19, 30, 33 and 43 and confirmed that "[a]ll outstanding purchasers were chased up yesterday."
The developer required the information which was repeatedly being sought from the defendants because of their attempts to refinance the development. On 13 April 2016, Mr Gazzard wrote to Mr Mirels (copied to Mr Mastronardo) as follows: "Please see attached a spreadsheet I prepared for funding purposes. Ian this needs to be updated for the latest prices. I need to send to Steve [Hodges] asap. Ian can you please send me the latest price list after Adrian increased them last week and I also need confirmation that the ground unit has in fact been sold so I can update the attached and how much for. Please Ian I am not highlighting or bolding any text but I urgently need to get this to Steve so we can get the funding back on track."
Mr Mastronardo's response to the email was to instruct Mr Gazzard to "chase up" the defendants to see if any more purchasers had agreed to extend the Registration Date. On 4 May 2016, Ms Faulkner sent a further schedule which indicated that she was expecting confirmation of the agreement by the purchaser of Lot 15 to an extension in the week commencing 9 May 2016; the solicitor for the purchaser of Lot 32 was still waiting for a response from the client and the solicitor for the purchaser of Lot 39 was recorded as having recommended that the client agree to an extension and that confirmation was expected in the week commencing 9 May 2016. Later on 4 May 2016, Mr Mirels asked Ms Faulkner what the legal position was with the two who had not elected to extend and whether they were locked in or still able to "get out of [the] contract." The evidence does not reveal Ms Faulkner's response to that question.
On 31 May 2016, Mr Mirels asked Ms Faulkner to send an updated schedule. In an updated schedule provided on 1 June 2016, the date of exchange of contracts for Lots 50 and 52 was correctly recorded as 7 and 6 August 2015 respectively and the Sunset Dates for these contracts as 7 August 2016 and 6 August 2016 respectively. Mr Mastronardo did not recall whether Mr Mirels had discussed the document with him. He explained that the position had changed and said: "Look, by that stage, we had funding. Everything was rolling. There wouldn't have been any real reason for them to - other than if something was going - something needed my input."
On 4 May 2016, Mr Mastronardo communicated with Steven Hodges, the Senior Credit Manager of Balanced Securities, about an unregistered mortgage over one of the properties he owns on Pile Street in Gladesville and a valuation of that property. At 10.23am on 4 May 2016, Mr Mastronardo told Mr Hodges by email that he was waiting on a fourth valuation, which he hoped would be forthcoming and would enable a further drawdown of $525,000. Mr Hodges responded that "[t]hat payment will be crucial for going forward." Mr Mastronardo, in a further email to Mr Hodges said that the valuation would be ready "tomorrow sometime" and further: "[t]hey sold next door last week for 7.095M- I'm only looking to achieve 5.5M on the val."
Mr Mastronardo confirmed that he had told Mr Hodges that he expected that the development and sales of the units would be completed by July 2016. These communications led to a further email from Mr Hodges to Mr Mastronardo at 1.35pm on 4 May 2016 which said: "If it all pans out as you plan, we will be releasing the caveat [lodged in respect of the unregistered mortgage] in July when the sales come in."
On 31 May 2016, Mr Mirels asked Ms Faulkner for an updated schedule, which she provided on 1 June 2016. As with earlier versions, the schedule indicated that the Sunset Dates for Lots 52 and 50 were 6 August 2016 and 7 August 2016 respectively.
On 31 May 2016, Mr Schmarr, on behalf of the developer, sent an update email to purchasers of lots in the development, including Mr Forbes, which said: "Subject: The Shoal Apartments | A message from the Managing Director of Veritas Property Group As we are nearing completion of construction I am pleased to advise that our new builder is progressing really well and we are expecting construction completion to be end of June or early July. Please take this opportunity to let family and friends know that there are only 11 units left and they can still secure a unit now at the current prices. On completion there will be another price increase."
Mr Mastronardo explained that a strata plan can be registered before Practical Completion or the issuance of an Occupation Certificate because a Strata Plan can be registered as long as the walls between strata units are fixed.
Ms Murray was on annual leave between 6 June 2016 and 7 July 2016.

[15]

The first alleged breach and its consequences

No instructions were given to the defendants prior to 6 July 2016 to give notice to the purchasers to extend the Registration Date for Lot 52 or prior to 7 July 2016 to give notice to the purchaser to extend the Registration Date for Lot 50. Accordingly, when these dates passed without a notice having been given, the purchasers of those lots obtained a right to rescind their contracts, as long as the right was exercised within 7 days of the Registration Dates (6 and 7 August 2016).
As at July 2016, Mr Mastronardo knew that the construction of the development on the property had not yet been completed, that no occupation certificate had been issued and the strata plan had not been lodged for registration.
On 14 July 2016, Mr Gazzard sent an email to Ms Faulkner, Mr Mastronardo and Mr Mirels, which was copied to Ms Murray in which he said: "We are expecting to obtain OC [occupation certificate] within 4 weeks . Registration will be after that (I am told up to 4 weeks). Can you please check the sunset dates on the attached spreadsheet and advise if they are correct ? I note some are expiring in August/September if they are in fact correct - please check. What does this mean if they are correct ? Please treat as urgent."
Following this email, Ms Murray spoke to Mr Mirels and "the Project Surveyor", who may have been Mr Gazzard. Her confirmation email, sent at 10.57am on 15 July 2016, is referred to below.
On 15 July 2016, Ms Murray and Mr Mirels spoke on the phone. Mr Mirels instructed her to issue extension of time notices for any contracts with Sunset Dates in July or August 2016. Following that conversation, at 10.57am on 15 July 2016, Ms Murray sent an email to Mr Gazzard, which was copied to Mr Mastronardo and Mr Mirels, in which she said: "I discussed the steps to completion with Ian Mirels and the Project Surveyor yesterday Given we have 1 issue of Occupation Certificate 2 Council endorsement of the Strata Plan 3 LPI registration (usually 3/4 weeks itself) to get through we recommend the same Extension Of time Notices served earlier are now served on those purchasers with July, August and September registration dates. The Notice signed by James Mazzura [sic, Maruzza] (attached) gives an extension of 146 days."
The attachment to the email was the notice referred to above, signed by Mr Maruzza on 16 March 2016, which certified a total extension of time of 146 days (85 for inclement weather and 61 days due to matters beyond the vendor's control).
Mr Gazzard responded to Ms Murray by email sent at 12.28pm on 15 July 2016, confirming that he had spoken to Mr Mastronardo and that they agreed to instruct her to issue the notices.
On 18 July 2016, Ms Murray spoke to Mr Mirels who told her (as recorded in her file note) that the certifier was coming the following day and needed something from the surveyor; that the whole site was a "complete schmozzle", that the "SA" (Strata Application) had been lodged in mid-December 2015 and that the "SP" (Strata Plan) would need to be certified.

[16]

The late service of notices of extension of time

On 18 July 2016, Ms Murray sent out the letters giving notice of an extension of time to purchasers with Sunset Dates in July and August 2016, including the Forbes' solicitors, Coelho & Coelho. On 20 July 2016, Mr Gazzard sought confirmation from Ms Murray and Ms Faulkner that the letters had been sent and requested copies of the letters. She sent him the pro forma letter and Ms Faulkner subsequently confirmed by email sent on 21 July 2016 that they had been sent to the purchasers of the apartments which corresponded to Lots 6, 18, 19, 27, 41, 49, 50 and 52. It was common ground that the notices in respect of Lots 50 and 52 were invalid as they had not been sent in time.
On about 20 July 2016, Mr Coelho spoke with Ms Murray by telephone. Her file note recorded: "[cl] 43 one month prior to registration date notice is probably invalid"
On 20 July 2016, at 9.09am, Mr Gazzard sent an email to Ms Murray and Ms Faulkner which attached a deed executed by the developer, which rescinded the Contract for the Sale of Lot 15 and substituted a new contract with the name of the purchaser altered and the Registration Date changed from 24 June 2015 to 31 October 2016.
On 22 July 2016, Mr Mirels asked Ms Faulkner for an updated "sunset date spreadsheet". She provided the updated schedule shortly after his request. The column for the Sunset Date for Lot 52 said: "6/08/2016 (extended by 146 days to 30/12/2016)"
The column for the Sunset Date for Lot 50 said: "7/08/2016 (extended by 146 days to 31/12/2016)"
The statements in parentheses were only true if the purchasers did not exercise their right to rescind within seven days of the original Registration Date as the Registration Date had not been validly extended since the notice of extension had not been served in time (one month prior).
At 11.45am on 22 July 2016, Mr Mirels sent an email to Ms Murray in response which said: "What's happening with the ones in the list that have expired or is this a typo. My understanding was that we previously got extensions on all those units."
At 12.37pm on 22 July 2016, Ms Murray responded by email as follows: "l have explained on numerous previous occasions to various people how the sale contract for [the Shoal Bay development] in relation to the Registration Date. So there is no further confusion : 1 Pursuant to special condition 42 registration of the Strata Documents by the Registration Date is a condition precedent to the sale. 2 If the vendor fails to register the Strata Documents by the Registration Date (as relevant to each individual contract and as shown on your spreadsheet) the purchaser is entitled to rescind pursuant to special condition 42.3 of the contract. However, for a rescission to be valid the notice of rescission must be served not later than 7 days after the Registration Date. 3 This means that if a Registration Date in a sale contract is 22 July 2016 to rescind validly the purchaser must serve a notice of rescission within 7 days of that date. If the purchaser fails to serve the notice of rescission within that 7 day period the right of rescission is lost. I am not saying that purchasers will not try to rescind the contract on other grounds but on the simple ground of failure by the vendor to register the Strata Documents by the Registration Date this is how the contract works. If you wish to know what is happening with a Registration Date which has passed in your spreadsheet and the 7 day period has expired and we have not notified you of a rescission the contract remains on foot and will do so until completion. If you decide to serve any further EOT [extension of time] notices be aware you need to serve them at least one month before the Registration Date in the contract which is the date in the spreadsheet." [Emphasis in original.]
At 1.30pm on 22 July 2016, Mr Mirels responded to Ms Murray as follows: "Hi Helen Please can you confirm if you agree. We have 2 situations . 1) where we are entitled to an extension of time because of builder delays and that is currently 146 days. We need to utilize this clause for ALL contracts and give us the extra time to deliver building. 2) where you have written to buyers on Geoff[']s instruction asking them to agree to a later sunset date. Which as I understand it you did and they all agreed. All we are saying now is for those contracts on your list showing expired/ due to expire dates what can we do to ensure the buyer can't rescind given that registration at the land title office is only likely to occur in September/October. Please can you advise us what to do in order to protect our interests for those units that have expired/due to expire."
At 1.57pm on 22 July 2016, Ms Murray responded: "Your instruction is not clear. The spreadsheet is attached again. Which matters does the highlighted comment below relate to?"
At 2.05pm on 22 July 2016, Mr Mirels wrote to Ms Murray as follows: "Helen all we are concerned about is the date when the contract falls over and [the] buyer can walk away and we need to refund deposit. I refer to this as the sunset dates or extended sunset dates or whatever terminology you want to use. Please just list dates so we know that we have done everything possible to extend as far as possible and what those drop dead dates for each unit [are]. There appear to be some contracts that have expired/fallen over in terms of sunset dates/extended sunset dates according to list sent by Nicole today. Please advise us as our solicitor."
At 6.03pm on 22 July 2016, Mr Mastronardo sent an email to Mr Mirels which was copied to Ms Murray, Ms Faulkner and Mr Gazzard in which he said: "What the hell have the solicitors been doing, looks like sleeping to me I want clarity on this by Monday Not good enough we should have been notified"
At 6.36pm on 22 July 2016, Ms Murray responded to Mr Mastronardo as follows: "Adrian I have actioned all the instruction[s] we have received from both Ian & Geoff promptly since taking over this file at the start of this year. I do not understand what you have 'not been notified of'. There have been no recent rescissions. On receiving instruction as Registration Dates approach I have issued either Extension of Time notices as instructed by Ian or, as instructed by Geoff sought variations to the Registration Date until October 2016 all of which were agreed. Everyone with a Registration Date up to the end of September 2016 has the EOT notice extending their Registration Date by 148 days. The extended dates are in the spread sheet sent to Ian earlier today (attached) as is the information about the purchasers who have agreed to extend to October. Where a purchaser has a long past Registration Date (eg 4/12/15) and has not rescinded within 7 days of that date the purchaser has lost the right to rescind on the ground of failure to register the Strata Plan."
At 6.12am on 26 July 2016, Mr Mirels wrote to Ms Murray: "Then I think all is good. For those purchasers that '... has lost the right to rescind …' Please can you just insert that comment into [the] sunset date table and resend spreadsheet to us. Then it would appear that all contracts are on foot which is our objective and we have done everything possible in accordance with the contract to keep them this way. Please confirm."
Ms Murray responded at 8.07am on 26 July 2016: "I will resend the list as requested below. When Nicole and I reviewed the dates last week all were 'on foot' If we are to issue EOT notices to further purchasers (after October) please remember the notice must be served one month before the Registration Date in the spread sheet to be valid ie in September for an October date."
At 3.20pm on 28 July 2016, Ms Murray sent an updated list. The Sunset Dates for Lots 52 and 50 were said to be of 30 December 2016 and 31 December 2016 respectively, which was correct unless the purchasers exercised their rights to rescind, which had to be exercised within 7 days of the Registration Dates (6 and 7 August 2016), which is what occurred.

[17]

The rescission of the contracts for Lots 50 and 52 by the purchasers

On 10 August 2016, the solicitors for the purchasers of Lots 50 and 52, served notices of rescission of the sale contracts on Ms Murray, who, at 4.40pm, forwarded them to Mr Mirels, Mr Gazzard and Mr Mastronardo. In her covering email, she explained the legal position (regarding the time within which notice to extend the Registration Date had to be served) and said: "… We did not receive your instruction to issue notices of the Extended Registration Date until 18 July 2016 when notices were served. … In those circumstances the rescission notices enclosed are validly served given that the vendor has failed to register the registration documents by 7 August 2016 . On a rescission the deposit is refundable to the purchaser in full."
At 4.45pm on 10 August 2016, Mr Mirels responded: "What is this? Have we extended the period, the [rescission] is not valid Please advise"
At 9.12am on 11 August 2016, Mr Gazzard wrote to Ms Murray as follows: "Ian will be contacting you today. Adrian has requested I send this email. Under no circumstances must any money be returned to the purchaser until further notice as we are conducting our review of how this could possibly have occurred."
Ms Murray responded at 9.49am on 11 August 2016: "Can I discuss this with you please? The purchaser has been able to rescind because the vendor failed to register its Strata Plan by the 12 month anniversary of their contract. An extension notice was served in early July but not the required month before the Registration Date to be effective. Since Andrew left we have received periodic instructions to issue EOT [extension of time] notices to various groups of purchasers as their sunset dates approached but have never received an instruction to issue an EOT notice to ALL purchasers as Ian Mirels now alleges." [Emphasis in original.]
At 12.03pm on 11 August 2016, Mr Maruzza emailed Mr Forbes as follows: "Sorry to hear, I had a quick discussion regarding the purchase of your apartments and it seems that the contract is still on foot as far as he is aware. The notices you are referring [to] have been served. Our direction is to proceed with your contract request."
Jennifer Coelho, the Forbes' solicitor, forwarded this email to Ms Murray and asked her to confirm that she had informed her client that the contracts for Lots 52 and 50 had been rescinded.
On 16 August 2016, Mr Hickey sent an email to Mr Mastronardo and Mr Mirels as follows: "I have spoken to James Coelho, lawyer for purchase[r]s of lots 50 and 52 and told him that we would be vigorously defending his purported rescission on the basis of estoppel in that there were significant variations to the contract which were completed based on representations that they would proceed with the sale if the works were done. See my open letter today in response to his letter of yesterday and my without prejudice letter. lt is imperative given the adverse press around the project (see attached) that you provide me with details of the builder, builder's experience and commitment to finalising the project to the high quality that was represented under the contract and marketing information. This is crucial given the extended delays and fear most purchasers are currently experiencing. As you can appreciate people fear that an insolvent builder may mean that the project is not built to the best standard. We have to overcome this perception by producing information that demonstrates a new builder has the experience and the project is on track to be finished in a good and tradesman like manner. Any information on this would be helpful. We will be providing this information to James Coelho as soon as you provide it to us."
By 9 September 2016, Mr Mastronardo had informed the defendants that he held them responsible for the rescission of the contracts for Lots 50 and 52. There were discussions (the precise content of which is not revealed by the evidence) which led to the defendants being instructed to write to the Forbes' solicitors to try to get them to accept that they were bound by the contracts for sale.
Mr Hickey appointed Richard Anich of the same firm to handle the matter and to draft a letter to the Forbes' solicitors. Mr Hickey's letter to the developer said, in part: "It is unfortunate you have taken this view [that the defendants are responsible]. Whilst we have been endeavouring to resolve this issue with the purchasers as your solicitors in relation to this project, we do not accept that this firm has any liability to [the developer] if the matter cannot be satisfactorily resolved. In this regard I note the following; 1. A schedule of all the sales, which included a reference to the 'sunset date' was sent to Ian Mirels on 10 July and 23 November 2015 and 19 February and 1 June 2016. The reference to the 'sunset dates' in these schedules highlighted to you the need to extend the contract dates as and when required. 2. Ian Mirels was clearly aware of this because in an email on 18 February 2016 he requested an updated sales status schedule with sunset dates and noted that you were having an issue with the builder and PC [Practical Completion] will reached a lot later than expected. 3. Helen Murray sent an email to Ian Mirels on 23 February 2016 in which she drew his specific attention to the need to give any notice under clause 43 at least 1 month prior to the registration (sunset) date. 4. We have also seen an email dated 23 February 2016 from [Mr Mirels] to you forwarding to you Helen's email of that date. 5. We have also seen an exchange of emails between you and [Mr Mirels] which concludes with an email from you to Ian [Mirels] on 25 February 2016 where you confirmed instructions to issue an extension notice in relation to the 9 units with April registration dates. This email chain includes an email from Ian Mirels to Helen Murray on 25 February 2016 where he says- ' ... hopefully we will have a new builder on site soon and ask them for sign off for other upcoming expiring contracts for sale.' 6. Clearly you and Ian were aware of the issue of sunset dates and the need to issue notices of extension when it became apparent to you that delays in the construction program would necessitate an extension. We were not in a position to know how the construction was progressing or whether delays in construction were likely to delay the timing of registration of the plan of subdivision. That was a matter solely within your knowledge and control. 7. An updated schedule was provided to you on 1 June 2016. We were entitled to rely on your office to advise us if, being aware of the relevant sunset dates as you were, you considered there was a need to issue an extension notice under the contract, just as you had done in February. We are happy to continue to act for you in attempting to resolve this matter but that is on the understanding that you accept that this firm is not responsible for any loss which the vendor company may suffer should the matter not be resolved satisfactorily. Please contact me if you wish to discuss the contents of this letter or if you have any comments or further instructions in relation to the draft letter to the Forbes' solicitors."
The developer must have instructed the defendants to send the draft letter which was attached to Mr Hickey's email of 9 September 2016 to the Forbes' solicitors because it was dated 9 September 2016 and sent on that day, or on the following Monday, 12 September 2016. By that time, the Forbes' had instructed a different firm of solicitors: McCauley, Peters & Cripps (McCauley). In substance, the letter refuted the purchasers' rejection of the developer's allegation that the purchasers were estopped from rescinding the contracts because of the changes they had requested be made to the apartments. The letter concluded: "In the circumstances, we remain of the view that it is in the best interests of both parties to complete the contracts and avoid a costly dispute. Any proceedings commenced by your clients will be strenuously defended. We are instructed [that] our client's representatives are prepared to meet with your clients, with or without legal representatives, at a time which is mutually convenient to discuss these matters further."
On 12 September 2016, McCauley responded by continuing to refute the allegation of estoppel. They also requested documents referred to in the defendants' letter dated 9 September 2016. Their letter included the heading, "WITHOUT PREJUDICE SAVE AS TO COSTS". The defendants responded by letter dated 28 September 2016, to which were attached copies of 14 documents said to be relevant to changes requested by the Forbes' to the apartments on Lots 50 and 52. Once again, the letter concluded with a suggestion that the parties meet to resolve the dispute. At about this time, the developer terminated the defendants' retainer.
The plan of subdivision of the property into 53 units was endorsed on 10 October 2016 and registered as SP 93143 on 24 October 2016.

[18]

The Equity proceedings

By summons filed in the Equity Division of this Court on 27 October 2016, the erstwhile purchasers of Lots 50 and 52 commenced the Equity proceedings against the developer for return of the deposits paid to it. The solicitor on the record for the purchasers was Jonathan Yuill of McCauley. The summons sought declarations that the contracts for the sale of Lots 50 and 52 had been validly rescinded and orders for return of the deposits and costs.
By the time the summons had been served, the developer had instructed new solicitors, Rigelsford Jensen & Co (Rigelsford), who had been recommended by its in-house solicitor, Phil McLeod. By letters sent on 28 October 2016, Rigelsford enclosed completion notices for Lots 50 and 52, which notified a Completion Date of 15 November 2016. Rigelsford informed Mr Yuill that the developer did not accept that the contracts had been validly rescinded.
Mr Weinberger submitted that the developer's new solicitors ought be taken to have adopted the stance taken by the defendants in endeavouring to resolve the dispute with the purchasers. He contended that they were entitled to treat that stance as amounting to legal advice given to the developer as to its true position. I reject this submission. I am not satisfied that the defendants ever gave legal advice to the developer that the purchasers were estopped from rescinding the contracts. The new solicitors were obliged to form their own view of the legal position and advise the developer accordingly. The defendants were well aware that the notices of extension which purported to extend the Registration Dates for Lots 52 and 50 were invalid and advised the developer of this.
On 3 November 2016, Rigelsford sent a letter entitled "[w]ithout prejudice save as to costs", which included the following offer, which was not accepted: "In these circumstances and with a view to avoiding an expensive day in court for both parties, our client is prepared to agree to complete both of the contracts of sale for lots 50 and 52 and waive any right to charge the first and second plaintiffs for the additional variations (estimated at $40,000 but subject to final quantification), with the proceedings to be discontinued and each party to bear their own legal costs. This offer is made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333."
On 15 November 2016, the developer once again, changed its solicitors. On 18 November 2016, Laurence & Laurence Commercial Lawyers (Laurence & Laurence) filed a notice of appearance on behalf of the developer in the Equity proceedings. Also on 18 November 2016, Laurence & Laurence sent a letter to McCauley foreshadowing a demand for the costs of variations to works on Lots 50 and 52 which was to be the subject of a cross claim in the Equity proceedings, a draft of which was provided.
On 24 November 2016, Laurence & Laurence wrote to the defendants to inform them that counsel briefed for the developer had advised that the notices of rescission were validly served and that the developer was obliged to refund the deposits. They put the defendants on notice that the developer would be consenting to the orders sought by the purchasers and would proceed to market the apartments and commence proceedings against the defendants for any financial loss suffered as a result of rescission of the contracts.
Also on 24 November 2016, Laurence & Laurence wrote to McCauley in a letter headed, "[w]ithout prejudice save as to costs", offering to consent to the orders sought in the summons on the basis that there would be no order as to costs and that the developer would still be entitled to maintain its claim for works done to the apartments at the purchasers' request. McCauley responded, also by Calderbank letter, offering to resolve the proceedings on the basis of declarations confirming the validity of the rescissions, orders for return of the deposits, a deed of release of all claims and an order that the developer pay the purchasers' costs in the sum of $60,000. This offer was not accepted.
Ultimately, Emmett AJ made orders declaring the rescissions valid, orders for return of the deposits, with interest from 17 August 2016, and an order that the developer pay the purchasers' costs of the Equity proceedings on an indemnity basis up to 24 November 2016 and on the ordinary basis thereafter. The Court also noted that the plaintiffs would not assert that the developer was estopped from claiming amounts for additional works done on the apartments.
By letter dated 13 December 2016, McCauley informed Laurence & Laurence that the total costs would be $59,091.55, including senior and junior counsel's fees, solicitors' costs and court fees.

[23]

Liability for negligence and breach of retainer

The plaintiff put its claim for damages on two bases: breach of the term of the contract of retainer which obliged the defendants to exercise due skill and care in advising and performing legal work for the developer; and the negligence of the defendants. These causes of action are, in a case such as the present, co-extensive: Hawkins v Clayton (1988) 164 CLR 539 at 544 (Mason CJ and Wilson J) and 582 (Deane J); [1988] HCA 15.
Section 5A of the Civil Liability Act 2002 (NSW) (the Act) provides that Part 1A, which relevantly includes ss 5B, 5C, 5D, 5E, 5O, 5R and 5S, "applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise." Part 4 of the Act, Proportionate Liability, by s 34, relevantly applies to a claim for economic loss in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care. By reason of these provisions, and in the absence of any limitation issue, it is convenient to address the defendants' liability in contract and tort together.
The defendants will be liable if it failed to take precautions against a foreseeable, not insignificant risk of harm to the developer which a reasonable person in their position would have taken. In determining whether a reasonable person in the defendants' position would have taken precautions, the Court is to take into account the possibility of harm if care were not taken, the likely seriousness of the harm and the burden of taking precautions as well as the social utility of the activity that creates the risk of harm: s 5B of the Act.
The plaintiff alleges that the defendants were in breach of their retainer and duty of care in two main respects, which will be addressed in turn: 1. failure to alert the developer as to the time by which valid extension of time notices for Lots 50 and 52 had to be served to validly extend the Registration Dates, failing which the purchasers would have a right to rescind; and 2. advising the developer that it had a defence to the purchasers' claims that they had validly rescinded the contracts for Lots 50 and 52, thereby causing it to incur costs, and a liability for the purchasers' costs, in the Equity proceedings.

[24]

General principles

The obligations of a solicitor to a client are well established. The relationship is a fiduciary one, as well as giving rise to a common law duty of care. The nature and extent of the duty is to be determined by reference to the circumstances, including the degree of sophistication of the client. Although expert evidence is admissible on the question of whether a solicitor has been negligent or otherwise in breach of his or her duty, it is open to the Court to decide the question in the absence of such evidence by reference to general principles: Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 654 (Kirby P).
The defendants, for whom Mr Zahra SC appeared with Mr Burnett, cited several authorities for the proposition that a solicitor is not negligent for telling a client what the client already knows. For example, they relied on Yager v Fishman & Co [1944] 1 All ER 552 (Yager) in which the Court of Appeal dismissed a claim against solicitors by a client who alleged that the solicitors had not reminded a client of the date by which a lease could be determined (the opportunity to have determined the lease having arisen on a previous occasion).
Yager was applied in Scottsdale Homes Pty Ltd v Gemkip Pty Ltd [2008] QSC 326 (Scottsdale) where an option agreement drafted by the plaintiff's solicitor, Mr Goodman, allowed for a caveat to be lodged. Mr Goodman advised his client to lodge a caveat. The client subsequently instructed Mr Goodman to withdraw the caveat. The client failed to lodge a further caveat to protect its interests. Chesterman J found that Mr Goodman was not negligent for failing to repeat earlier advice.
His Honour's findings about the circumstances of the retainer of Mr Goodman were as follows: "[93] Mr Goodman was not retained to act generally for Scottsdale with respect to its dealings with Gemkip. He was engaged to perform particular tasks pursuant to particular instructions given from time to time by Mr Hart. Scottsdale employed persons experienced in conveyancing and effecting property transactions. As well it retained the services of a number of solicitors in addition to the third defendant. [94] There is no doubt that Scottsdale fell into the category of 'experienced client'. There is not only the evidence of Scottsdale's extensive business of buying and selling real property and employment of conveyancing clerks, there is Mr Quinlivin's own admission that he understood the nature and function of caveats. [95] The plaintiff's case is that Mr Goodman was negligent in not telling an experienced client, for the second time, that it would be advisable, and in Scottsdale's interests, to obtain Gemkip's consent to a caveat over Stage 1 to protect its rights until registration of the plan of subdivision, when the advice had been given and understood. [96] Accordingly to Jackson & Powell on Professional Negligence, 3rd ed, para 4-106: 'As a general rule, there is no duty on a solicitor to remind a client of advice once it has been given. In West London Observer v Parsons … the defendant solicitors acted for lessees. The lease could be renewed if the lessees gave notice on March 25 … and were not, on that date, in breach of covenant. The defendants explained the provisions for renewal both in … October 1950 and … April 1951. It was held that the defendants were not negligent in failing to repeat that advice in or shortly before March 1953.' … [104] The application of the principles I have just discussed lead to the conclusion that Mr Goodman was not negligent. The 'general rule' that it is not negligent not to remind a client of advice already given should be applied in the circumstances of the case."
For the reasons given below, I consider the present case to be distinguishable from both Yager and Scottsdale.

[25]

Alleged failure to advise the developer regarding notices for extension of the Registration Dates for Lots 50 and 52

As can be seen from the factual narrative above, as established by the documents and Mr Mastronardo's evidence, the defendants were retained to act on behalf of, and advise, the developer on several aspects of the development. Their retainer extended to drafting contracts, giving notices under contracts, obtaining registration of the documents required before completion and acting on completion. They played a continuing role in informing the developer about the contracts which had been entered into for each of the 53 lots, including the Registration Dates; whether any extension had been notified (by service of the notice signed by Mr Maruzza which provided for an extension of 146 days); and whether any extensions had been agreed to by purchasers. Although there was some correspondence between Fortis and Mr Forbes about building work to be done to particular apartments, correspondence relating to the contracts for particular lots principally passed between the defendants and the solicitors for the various purchasers.
Like the client in Scottsdale, Mr Mastronardo engaged people "in-house" who were experts in property management and associated contracts (although they were not lawyers), such as Mr Gazzard, Mr Mirels, Mr Robinson and Mr Suttor. The evidence revealed that the developer had an in-house lawyer, Phil McLeod. However, there is no suggestion that he was involved at any time prior to the rescission of the contracts for Lots 50 and 52. Thus, the developer relied exclusively on the defendants for legal advice, including concerning the contracts, which the defendants had drafted on the developer's instructions. The defendants' retainer also included drafting extension of time notices and communicating with the purchasers' solicitors about agreements to extend time.
In the period leading up to early July 2016 (when notices had to be served if the Sunset Dates for the sale contracts for Lots 52 and 50 were to be extended), the defendants knew the following: 1. in March or April 2016, the developer had managed to engage a new builder, Fortis, which was expected to complete the construction work for the development of the property; 2. in early 2016, the developer had been able to refinance the project and wanted to keep all contracts on foot; 3. there had been a number of slippages in the date predicted for Practical Completion which had been estimated, variously, to occur in December 2015 (in an email dated 17 March 2015); "January/February 2016" (in the update to purchasers sent on 27 October 2015); "a lot later than expected" (in an email dated 18 February 2016); May or June 2016 (communicated orally to the defendants on 22 March 2016); and by 31 October 2016, which was the date which had been agreed with purchasers whose contracts had Registration Dates in June and July 2016; 4. on 29 February 2016, the developer who was hoping that the new builder would certify a longer period of delay (of up to 176 days) instructed the defendants to send Mr Corbett's notice (which certified a delay in works of 61 days) only "for anything which is immediate" and to "ring each week" to see if contracts should be extended; 5. on 16 March 2016, Mr Maruzza, who subsequently became the builder, certified a delay of 146 days; 6. the developer had instructed the defendants to serve extension notices for contracts with Sunset Dates in April and May 2016; 7. on 22 March 2016, the developer had instructed the defendants to negotiate extensions (as opposed to sending Extension of Time notices) of the Registration Date to 31 October 2016 for contracts for the sale of Lots 4, 9, 15, 19, 30, 32, 33, 39 and 43, which had Sunset Dates in June and July 2016 and had been extremely anxious to ascertain from the defendants, on a daily basis, which purchasers in that category had agreed to such extensions; 8. on 4 May 2016, Mr Mirels wanted to know (and asked the defendants to tell him) what the legal position was with the (then) two purchasers with contracts with Sunset Dates in May and June 2016 who had not yet agreed to the extension of time (which would have put the defendants on notice that Mr Mirels did not fully appreciate the import of cll 42 and 43 of the contracts for sale); and 9. if notice to extend the Registration Date was not given by 6 July 2016 (for Lot 52) and 7 July 2016 (for Lot 50), the purchasers would have an automatic entitlement to rescind the contracts within seven days of 6 August 2016 (for Lot 52) and 7 August 2016 (for Lot 50), and that, if the right was exercised, the defendants would be obliged to return the deposit.
The narrative reveals that the defendants told the developer of the effect of cll 42 and 43 of the contracts for sale on a number of occasions and also set out the clauses for the developer's edification. The defendants ought to have known that Mr Mastronardo was an experienced developer but left it to others to instruct the defendants as to the terms of the contract, with the possible exception of price. Mr Mirels was the main contact point for the defendants concerning the contracts (although Mr Gazzard also played a role).
It is plain from Mr Mirels' email of 15 December 2014 (extracted above), that he did not appreciate the effect of cll 42 and 43 in that he did not know whether the developer was entitled to an extension irrespective of the circumstances. Mr Ferguson referred him to cl 43, which he summarised and attached to the email. Mr Mirels asked him on 17 March 2015 whether an extension to the dates would be needed (a matter of which Mr Mirels, if he had appreciated the import of the clauses, would have been in a better position to answer).
Mr Zahra, in submissions, made much of the rescission of the contract for Lot 40, which he contended ought to have taught the developer (and Mr Mirels, in particular) what could happen if the Sunset Date was not extended. Ms Murray explained, in her email to Mr Mirels on 12 January 2016, that the developer had failed to register the plan within 18 months of the contract date of 20 June 2014. Although the explanation was correct and obvious to any lawyer (or a paralegal such as Ms Faulkner) there was a degree of subtlety to this answer, which the defendants could not have assumed the developer would appreciate. This was particularly so as the earlier contracts, including the contract for Lot 40, specified a Registration Date 18 months after the Contract Date, whereas the later ones (including for Lots 50 and 52) specified a Registration Date of 12 months after the Contract Date and an Extended Registration Date of 18 months after the Contract Date.
Although the Sunset Dates (which, as explained above, were also known as the Registration Dates) were set out in numerous schedules, the date on which a notice had to be given to extend the date for each contract was not.
Ms Murray provided a more complete instruction to Mr Mirels in her email of 23 February 2016, emphasising that a notice of extension needed to be given a minimum of one month prior to the Registration Date. However, the explanation was given in a context where all notices of extension were to be given by the defendants, since they were directed to the purchasers' solicitors. The issue of extension notices became acute at the end of February 2016, when the developer was particularly anxious not to lose any contracts through rescission by the purchasers, which led to the attempts to get Mr Corbett, and later, Mr Maruzza, to certify an extension. The contracts with Registration Dates in June and July 2016 were to be dealt with, if possible, by negotiation.
Thus, the narrative indicates that, for all contracts with Sunset Dates in 2016, the developer had given instructions to the defendants to try to extend the Registration Date by agreement, or to extend it by notice. Therefore, contracts up to and including those with Sunset Dates in July 2016 had been the subject of instructions from time to time.
The defendants appreciated that, if notice were not given at least a month in advance, the developer would be exposed to the risk that the purchaser would rescind. They knew that it had happened once before in circumstances where the developer did not appear particularly troubled (indeed, Mr Mastronardo thought he would be able to make a profit on the resale because Lot 40 had been one of the earlier lots). However, they were privy to communications in 2016 which showed that, by that time, each contract was important to the developer. Further, they had no reason to be confident that Mr Mirels appreciated the full import of cll 42 and 43, since his questions (importantly, before 14 July 2016) betrayed that his understanding was incomplete.
Mr Gazzard's email of 14 July 2016, in which he asked Ms Murray to check the Sunset Dates "expiring in August/September" is capable of bearing two interpretations. Either Mr Gazzard, like Mr Mirels, did not fully understand the effect of cll 42 and 43 and the explanations which the defendants had given to them throughout 2016, or he realised that the crucial dates had passed and he wanted to make it look as if it was the defendants' fault. This question cannot be determined in the absence of evidence. The Jones v Dunkel inference does not entitle me to infer the latter explanation. In any event, Mr Gazzard's email was sent after the relevant dates (6 and 7 July 2016) and is therefore not causally connected with the developer's loss.
Mr Weinberger criticised the defendants for not alerting the developer to their exposure to the risk of the purchasers of Lots 50 and 52 rescinding their contracts. He submitted that this failure, together with other correspondence such as the email on 22 July 2016 in which Ms Murray alleged that Mr Mirels' instruction was "not clear", amounted to a consciousness of guilt: that is, that Ms Murray appreciated that the defendants had been negligent in not seeking instructions with respect to Lots 52 and 50 before 6 and 7 August 2016 and were attempting to cover it up.
It is possible that Ms Murray was concerned that the developer would blame her if the contracts were rescinded. I am satisfied that her knowledge of the effect of cll 42 and 43 was such that she appreciated, at the time she sent the notices on 18 July 2016, that they were invalid with respect to any contracts with a Sunset Date prior to 18 August 2016, including the contracts for Lots 52 and 50. She knew by 20 July 2016 that Mr Coelho, the purchasers' solicitor, was of a similar view and that, if the purchasers of Lots 50 and 52 were minded to rescind, they would have the right to, as long as their rights were exercised in the 7 days after the Registration Dates. Whatever she said, or did not say, to the developer about that risk made no difference to whether it ensued. I am not persuaded that her communications amounted to a consciousness of guilt.
I do not place particular weight on what Mr Mirels, Mr Gazzard or Mr Mastronardo said in communications with the defendants after the notices of rescission were sent by the purchasers of Lots 50 and 52 on 10 August 2016. The developer was plainly trying to attribute the whole of the blame to the defendants. It is not known whether Mr Mastronardo also blamed Mr Mirels, whom he regarded as being in charge of the contracts on behalf of the developer.
It was common ground that the defendants were entitled to rely, in their defence of the plaintiff's claim, on any defences which would have been available to the developer: see the summary in Renold Australia Pty Ltd v Fletcher Insulation (Vic) Pty Ltd [2007] VSCA 294 at [24]-[25] (Chernov JA, Ashley JA and Whelan AJA agreeing). The defendants raised s 5O of the Act (standard of care for professionals), ss 5R and 5S of the Act (contributory negligence) and apportionment under Part 4 of the Act (relating to concurrent wrongdoers).

[27]

Conclusion regarding alleged failure to advise

The risk of harm (that the purchasers would rescind the contracts if notice was not given in time) was plainly foreseeable and not insignificant. A reasonable person in the defendants' position would have alerted the developer to the need to give notice in accordance with the contracts if an extension was required. The burden of taking the reasonable precautions to avoid the risk of harm (s 5B(2)(c) of the Act) was relatively small as all that was required was an email or telephone reminder of the relevant date, or for the date by which an extension had to be notified to be included in the schedules provided by the defendants to the developer from time to time. The quantum risk of the purchaser rescinding the contact if the notice was not given (s 5B(2)(a) of the Act) in time was unknown but it was, in the circumstances, an unnecessary risk, against which the developer could, had reasonable precautions been taken, have been protected. The likely seriousness of the harm was measurable and comprised the requirement to return the deposit and the risk that the Lot would have decreased in value since the contract was entered into. The activity that created the risk of harm was the sale off-the-plan of developed lots, which involves an inevitable delay between the Contract Date and the Registration Date and requires a contractual mechanism to address the potential for further delay. Such sales of off-the-plan lots are a common way of assisting in the finance of such developments, which have considerable social utility.
I am satisfied that the defendants were in breach of their retainer and negligent by not alerting the developer to the imminent deadline (6 and 7 July 2016) for the service of notices for the contracts for Lots 50 and 52. It was not a question of a solicitor being required to remind a client of something which had already been imparted. The terms of the contract were not straightforward to non-lawyers; those associated with the developer had already demonstrated that they did not understand how cll 42 and 43 worked; and the updated schedule highlighted the Sunset Date but not the date by which notice of extension was required to be given. Reasonable care required the defendants to seek instructions from the developer prior to 6 July 2016 about its intentions with respect to the contracts to ascertain whether the defendants ought send extension of time notices to the purchasers' solicitors.
The other defences raised and the damages flowing from this breach will be considered below after the further allegation of negligence is addressed.

[28]

Alleged negligent advice given regarding the Equity proceedings

Mr Weinberger argued that the defendants had advised the developer that it had an arguable defence to the claims sought by the purchasers in the Equity proceedings and that their negligence had caused the developer to expend its own costs and become liable to pay the purchasers' costs on the basis ordered by Emmett AJ.
I am not satisfied that the defendants advised the developer that it had a defence to the claim for declarations that the contracts for Lots 50 and 52 had been validly rescinded or for return of the deposits paid by the purchasers. It is plain that Ms Murray appreciated that the notices of rescission were valid and effective to terminate the contracts and that the legal effect of cll 42 and 43 of the contracts was that the deposits had to be repaid. She advised the developer of this on 22 July 2016 in her email of 12.37pm. In her covering email with which she sent the notices of rescission to the developer on 10 August 2016, she told them that, because the notice to extend time had not been served in time, the rescission was valid and the deposit was "refundable to the purchaser in full." What Ms Murray said in these communications was correct in law and showed that she fully appreciated how the contracts worked.
I infer that the developer, in addition to blaming the defendants for what had happened, sought advice on any angle that could be taken by it to negotiate a settlement with the purchasers which would result in a better outcome than an acceptance that the contracts had been validly rescinded and the purchasers were entitled to have the deposits returned. I infer that Mr Hickey and Mr Anich advised the developer that they could argue that the purchasers were estopped from rescinding in light of the extra costs incurred by their requests for additional work to be done on their apartments. I do not accept that the defendants advised the developer that this argument had legal merit or would provide grounds to refuse to return the deposit or claim that the contracts were still on foot.
Rather, the defendants were endeavouring to identify some grounds for negotiating a settlement of the dispute which would put the developer in a better position than it found itself in as a matter of law. The obligations on solicitors which apply in respect of legal proceedings (that claims are not to be made without reasonable prospects of success) do not apply to the present situation where the developer was still hoping to be able to negotiate its way out of its strict legal obligations. I am not satisfied that the defendants' conduct in this respect was negligent or in breach of their retainer. Indeed, it was specifically intended to work to the developer's advantage and took place before the Equity proceedings had commenced.

[29]

Contributory negligence and apportionment

As referred to above, the defendants have raised contributory negligence and apportionment as defences to the plaintiff's claim (which would have been available to them had the developer sued them directly).
The persons alleged to have contributed to the harm, Mr Mastronardo, Mr Mirels and Mr Gazzard, were all persons through whom the developer acted. Although Mr Mastronardo was the developer's guiding mind, it was his practice to delegate matters to Mr Mirels and Mr Gazzard, who relevantly acted as the developer's agents. The injured party cannot be both contributorily negligent and a concurrent wrongdoer under s 34 of the Act: Rennie Golledge Pty Ltd v Ballard (2011) 82 NSWLR 231; [2012] NSWCA 376 at [128]-[132] (Campbell JA, Basten JA agreeing at [15] and Barrett JA agreeing at [157]). In this context, I consider that Mr Mastronardo, Mr Mirels and Mr Gazzard are better seen as agents of the developer, rather than separate potential wrongdoers.
The relevant test for contributory negligence in this context was set out in Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 at [30] (Gleeson CJ, McHugh, Gummow and Hayne JJ), as follows: "A finding of contributory negligence turns on a factual investigation of whether the plaintiff contributed to his or her own loss by failing to take reasonable care of his or her person or property. What is reasonable care depends on the circumstances of the case. In many cases, it may be proper for a plaintiff to rely on the defendant to perform its duty. But there is no absolute rule. The duties and responsibilities of the defendant are a variable factor in determining whether contributory negligence exists and, if so, to what degree. In some cases, the nature of the duty owed may exculpate the plaintiff from a claim of contributory negligence; in other cases the nature of that duty may reduce the plaintiff's share of responsibility for the damage suffered; and in yet other cases the nature of the duty may not prevent a finding that the plaintiff failed to take reasonable care for the safety of his or her person or property. Contributory negligence focuses on the conduct of the plaintiff. The duty owed by the defendant, although relevant, is one only of the many factors that must be weighed in determining whether the plaintiff has so conducted itself that it failed to take reasonable care for the safety of its person or property." [Footnotes omitted.]
Section 5R of the Act requires the Court to apply the same principles to the question whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm that are applicable in determining whether a person has been negligent. Thus, the standard of care required of the developer (person who suffered harm) is that of a reasonable person in the position of that person, and the matter is to be determined on the basis of what that person knew or ought to have known at the time.
The defendants submitted that the negligence of the developer was so gross that any liability ought be reduced by 100%, as permitted by s 5S of the Act. I do not accept this submission. As referred to above, the contractual provisions were, for non-lawyers, relatively complex. The developer was entitled to rely on the defendants' expertise throughout the transactions and could not reasonably be expected, in all the circumstances referred to above, to bear the full responsibility for monitoring the dates by which extensions of time had to be notified.
In the period leading up to 6 and 7 July 2016, Mr Mirels was the relevant mind of the developer for the purposes of extensions of the Registration Dates. He had been told on a number of occasions how cll 42 and 43 operated and that a notice of extension had to be given at least a month before the Registration Date. Although he does not appear to have appreciated the import of the provisions, a reasonable person in his position would have done so and would have realised that, since the Registration Dates for Lots 52 and 50 were 6 and 7 August 2016, the dates by which notices of extension had to be given were 6 and 7 July 2016. Mr Mirels knew of Mr Mastronardo's desire to keep all contracts on foot as there were still unsold units (thereby making it less likely that Lots in respect of which contracts had been rescinded could readily be sold). He also knew that there were financial imperatives operating on the developer which meant that any reduction in the deposits paid (by such deposits having to be refunded) would affect the security available to the financier. In these circumstances, I am satisfied that developer's failure to instruct the defendants to give notices for contracts with Registration Dates in August and September 2016 prior to mid-July 2016 when such instructions were given, constituted a failure to take reasonable precautions against a risk of harm within s 5R of the Act.
On this basis, I asses the reduction for the developer's contributory negligence at 30%. This figure takes into account the matters referred to above, including the number of times the defendants had drawn the matter to the developer's attention, as well as the relative complexity of the terms of the contract and the fact that the schedules did not separately identify the date by which notices of extension were required to be given.

[31]

Whether the defendants' breach caused the developer to suffer loss

The defendants' primary submission on damages was that the plaintiff was not entitled to more than nominal damages for breach of the contract of retainer as the plaintiff had not discharged its onus of proving causation. Mr Zahra submitted that the plaintiff had not established to the requisite standard (the balance of probabilities: s 5E of the Act) what the developer would have done if the defendants had alerted it to the impending deadline for extension of time notices to be given. Section 5D requires the matter to be determined subjectively in light of all the relevant circumstances.
What the developer would have done in relation to Lots 50 and 52 can be inferred from what the developer actually did in relation to Lots 50 and 52, as well as in relation to all other contracts for Lots in the development which had Sunset Dates in August and September 2016: it instructed the defendants to serve notices of extension of time. Although it was out of time for Lots 50 and 52, its intention with respect to the other lots demonstrates that it had the same intention for all lots with Sunset Dates in August and September 2016. There were other occasions when Mr Mastronardo was sanguine about the rescission of a contract, such as with respect to the contract for Lot 40 which, being one of the earlier lots had been sold at a cheaper price. By July 2016, Mr Mastronardo did not want to lose any contracts: the value of the lots had not increased as he had hoped, due, at least in part, to the bad press which the development had received when the builder had left the site; and he had refinanced on the basis of the deposits constituting security for the loan.
The other integer relevant to causation in the present case is what the purchasers of Lots 50 and 52 would have done if they had been served with extension of time notices within time to extend the Registration Dates. Mr Zahra submitted that the purported certification by Mr Maruzza was invalid as he had not been appointed the builder at the time he had signed the notice and did not have knowledge of the delays in the project before he came onto the site to finish the construction work. Thus, Mr Zahra submitted that the certificate was not conclusive and did not bind the purchasers.
As set out above, cl 43.2 provides that "[a] certificate by the Builder in relation to extensions of time under this clause 43 is final, conclusive and binding on the parties." It does not provide that "the Builder" must have personal knowledge of the reasons for the delay, or that the person must have been the builder for the whole or any part of the period of delay.
The validity and effectiveness of the notices of extension of time, had they been sent, is not the question. In the present case, the question is whether the purchasers of Lots 50 and 52 would have challenged the notices, had they been sent in time, on the basis outlined by Mr Zahra. The only evidence on the subject is that on 20 July 2016 and in subsequent correspondence, the purchasers' solicitor, Mr Coelho, informed Ms Murray of his view that the notices were invalid as they were not sent in time. No suggestion was raised as to an alternative objection which the purchasers could have made to the validity of the notices. I am not satisfied that there is any real possibility that, had the notices been sent in time, the purchasers would otherwise have objected to the notices or rescinded on an alternative basis.
I consider that the requirements of factual causation and scope of liability (s 5D(1) of the Act) are met. I am satisfied that, but for the defendants' negligence, the developer would have instructed the defendants to serve notices to extend time. In that event, the purchasers would not have had a right to rescind the contracts and the developer would not have suffered loss amounting to the sum of the differential between the original contract price for Lot 52 ($800,000) and the actual price obtained for Lot 52 ($675,000) of $125,000 and the differential between the original contract price for Lot 50 ($725,000) and the agreed figure for the value of Lot 50 ($522,500) of $202,500.
Mr Weinberger submitted that even if I were not satisfied that the second allegation of negligence (negligent advice about the developer's rights against the purchasers of Lots 50 and 52) was made out, the plaintiff was still entitled to be compensated for the amounts expended by the developer on legal costs in the Equity proceedings because they were incurred as a result of the negligent failure to alert the developer to the deadline for extension of time notices.
I accept that factual causation within the meaning of s 5D(1)(a) of the Act is made out for damages on this second basis, since it is merely a restatement of the "but for" test and had the contracts not been rescinded, the Equity proceedings would not have been commenced and the costs would not have been incurred.
I am not, however, satisfied that it is appropriate for the scope of the defendants' liability to extend to the harm so caused (as required by s 5D(1)(b) of the Act). The defendants gave correct legal advice to the developer as to its position. The developer chose to retain other solicitors who may have given different advice. I do not accept Mr Weinberger's submission that there is an analogy between the developer's position in September 2016 and that of a person who has been negligently injured by, say, a motorist, and who then seeks medical attention as a result of the injuries sustained and is further injured as a result of the negligence of a doctor or hospital. It is well established that in the latter case, the original tortfeasor (the driver of the motor vehicle) is liable for the subsequent negligence of the doctor or hospital: Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522; [1985] HCA 37.
Further, the present case is to be distinguished from cases relied on by Mr Weinberger, such as Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86 (Pitcher Walton). In Pitcher Walton, it was held that a solicitor negligently failed to file a notice under s 459G of the Corporations Act 2001 (Cth) (to set aside a statutory demand) within the requisite time. This failure resulted in a presumption of insolvency. The Court (Tobias JA, Beazley and Giles JJA agreeing) found, at [92] and [95]-[97], that the client's legal costs of rebutting the presumption and being found liable for the costs of the application for an order winding up the client fell within the kind, type or class foreseeable as a result of the solicitor's negligence and was "not unlikely to flow from the breach".
In the present case, after the defendants had negligently failed to alert the developer to the deadline for the notice to extend time, the defendants gave the developer non-negligent advice as to its true legal position. The defendants attempted, unsuccessfully, to obtain a better result for the developer than the true legal position by negotiation. The developer then chose to terminate the defendants' retainer and obtain advice from new solicitors. Contrary to the defendants' advice (as to the true legal position), the developer initially took an untenable position in the Equity proceedings. The developer subsequently received advice from counsel, briefed by the new solicitors, which accorded with that given to the developer by the defendants, after considerable costs had been incurred. The developer then capitulated and was ordered to pay the purchasers' costs, including for a period on an indemnity basis. I am not persuaded that it is appropriate that the defendants ought be liable for the loss suffered by the developer after it terminated the defendants' retainer in these circumstances. I am not satisfied that the type of loss (costs incurred in resisting a proper claim for relief) fell within the reasonable contemplation of the defendants as being not unlikely to flow from the breach. Accordingly, I reject this aspect of the damages claim.

[32]

Claim for interest

Mr Weinberger submitted that the developer's loss (and therefore the damages to which the plaintiff is entitled) included interest at commercial rates assessed by reference to the cost of its finance. He relied on business records which comprised statements from Balanced Securities and Optima which recorded the amounts outstanding to the developer from time to time.
An injured party may be entitled to an award of damages which includes interest if the injured party can show that it incurred interest at a higher rate than the court rate for pre-judgment interest as a result of the defendants' breach. In the present case, although the developer was out of pocket as a result of the rescission of the contracts (which was caused by the defendants' breach), it has not shown that it was liable to pay interest as a consequence. The evidence of its financial affairs is insufficiently clear to draw that inference.
The evidence of the developer's indebtedness is insufficient to show a connection with the development of the property. Mr Mastronardo's evidence was that he was involved with "several different projects at the time". Further, there are entries which are extraneous to the development of the property by the developer. For example, one of the Optima statements records that there was a loan of $629,884 from Optima to Elip, the trustee of the discretionary trust of which Mrs Mastronardo was the sole beneficiary. The same statement records a loan to Mr Mastronardo of $300,000 which was drawn down on 22 December 2017 on the developer's account with Optima. Other entries in the statements of Balanced Securities and Optima are similarly opaque, such that it cannot be known how much of the plaintiff's indebtedness to these lenders arose from matters concerning the development of the property and how much related to other projects or to other persons or entities. It is also of significance that the developer's indebtedness to Balanced Securities was nil prior to February 2017.
The liquidator's report to creditors dated 3 August 2018 recorded that Veritas owed the developer over $1.5 million. I am not satisfied, on the evidence adduced, that, had the funds for Lots 50 and 52 been received pursuant to the original contracts, they would have been applied to reduce the developer's indebtedness to Balanced Securities and Optima.
Mr Mastronardo, as the plaintiff's director, was in a position to give evidence to shed light on the state of the company's financial affairs and the particular entries on the statements of Balanced Securities and Optima. Where a witness does not give evidence in chief on a material topic, it can be inferred that his or her evidence would not have assisted the case of the party with whom the witness is associated: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-19 (Handley JA); see also Stambolziovski v Nestorovic and Camanaro Prestige Properties Pty Ltd t/as Sydneyhome Real Estate [2015] NSWCA 332 at [51] (Ward JA, Beazley P and Emmett AJA agreeing).

[33]

Conclusion on quantum of damages

The developer's loss (and therefore the plaintiff's damages) are to be assessed by a comparison between the developer's position but for the breach and the developer's position because of the breach.
But for the breach, the contracts for Lots 50 and 52 would have been completed by about early 2017 (the date on which the Strata Plan was registered was 24 October 2016). Because of the breach, the developer received $125,000 less for Lot 52 and is taken to have received $202,500 less for Lot 50 (having regard to the agreement as to its value as at 1 January 2017) than the contract price with the original purchasers. I am not persuaded that these damages ought be reduced to take account of the prospect that the sales to the original purchasers would not have proceeded, since I regard that prospect as being so slim as to be immaterial. For the reasons given above, I am not persuaded that there was any real prospect that the purchasers would have challenged the notice of extension of time, had it been given in time, or that they would have jeopardised their deposits by terminating on any other basis.
The plaintiff has failed to prove that it suffered any other consequential loss arising from the need to re-sell Lots 50 and 52, such as marketing, advertising or legal costs, or through its continued ownership of those lots. Accordingly, although these matters form part of the particulars of damage, no award for these items has been made out. The plaintiff is not entitled to interest on the deposit for any period prior to its return to the original purchasers since that which was earned ought to have been paid to the developer pursuant to cl 35.1(e)(i) of the sale contracts since its entitlement arose whether the contracts were completed (as would have occurred but for the defendants' breach) or rescinded (as occurred as a consequence of the defendants' breach).
The plaintiff is otherwise entitled to interest at Court pre-judgment interest rates (its claim for interest at commercial rates having failed) under s 100 of the Civil Procedure Act 2005 (NSW) in accordance with Practice Note SC Gen 16. The parties have agreed to perform the calculations and provide short minutes of order to reflect the agreed calculations.

Shoal Bay Beach Constructions No. 1 Pty Ltd v Mark Hickey and the persons listed in Schedule A to this Statement of Claim trading as at all material times Sparke Helmore

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