NSWNSWSC

Western Land Developments Pty Limited v Maganic Brothers and Sister Pty Limited

[2016] NSWSC 598

Supreme Court of NSW|2014-12-12|Before: Slattery J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2014-12-12

Before

Slattery J

Source

Original judgment source is linked above.

Judgment (17 paragraphs)

[1]

Judgment

This is my second judgment in these proceedings. The Court's principal judgment on 29 October 2013 made orders on a motion for specific performance of the terms of a February 2011 settlement of the proceedings: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor [2013] NSWSC 1574. The Court also made orders on 29 October 2013 to facilitate the resolution of the remaining questions arising out of the February 2011 settlement. The present judgment deals with those remaining questions, which include claims for damages for the alleged breach of the February 2011 settlement.
This judgment should be read with the principal judgment. Events, persons and things are generally referred to in this judgment in the same way that they are in the principal judgment. For convenience in these reasons the two plaintiffs are generally referred to as "Western" and the three defendants are generally referred to as "Maganic". Where the context requires, Mr Maganic and Mr Kelly are referred to by those names, so as to distinguish them from their respective companies.
Four questions were originally presented for the Court's decision in this second judgment. But the first two of these issues resolved in the course of the hearing. Those four issues were: 1. Whether there is an implied term in the February 2011 settlement for each party to do all things reasonably necessary to ensure that the other party received the benefit of that agreement. The alleged breach of this implied term is the subject of issues 3 and 4. 2. What rental monies were received by each of the parties after the February 2011 settlement for which they must now account, and in consequence what adjustments should be made between them on account of such rent received. 3. What costs were associated with effecting the subdivision in accordance with the February 2011 settlement and to what extent have those costs been incurred only because of the conduct of one or other of the parties. 4. What expenses were incurred solely on account of Maganic improving its own lot in the subdivision, Lot 1, and should Western be liable to bear any part of such improvement expenses.

[2]

Overview of the Issues

The wider background to these proceedings is set out in the Court's principal judgment. In issues (3) and (4) the parties contest the interpretation and operation of clauses 5(e), (i) and (iv) and 5(j), (v) and (vi) of the February 2011 settlement. For convenience these clauses relevantly provide: "5(e) WLD and MB&S shall each pay and contribute to one-half of the costs associated with the subdivision or boundary adjustment, and Kelly agrees to be jointly and severally liable with WLD for its one-half share of such costs, and Maganic agrees to be jointly and severally liable with MB&S for its one-half share of such costs. … 5(i) The transfers of the interests of MB&S and WLD respectively in the Land, referred to in sub-paragraphs (f) and (g) above ('the time of settlement'), shall be effected within 21 days of registration of the Plan of the Subdivision or finalisation of the boundary adjustment described above, at which time:- … (iv) MB&S shall pay to WLD the sum of $400,000 in recognition of the fact that proposed Lot 1 contains improvements which result in Lot 1 having a value greater than that of Lot 2 of approximately $800,000. … 5(j) MB&S and WLD agree that up to the time of settlement they will: (i) each pay and continue to pay one-half of all rates, taxes, outgoing and expenses due or falling due with respect to the Land; (ii) each continue to receive rental from the tenants of premises on the land in accordance with the arrangements currently in place."
These four issues arise out of the parties' contentions as to the alleged non-performance of these terms in the February 2011 settlement, as the following overview shows.
Issue One - Implied Term. The first issue originally involved a contest as to the precise content of the implied terms in the February 2011 settlement. The parties ultimately agreed on the content of the implied terms, as is described in the next paragraph. But they continued to contest, in issues (3) and (4), whether these implied terms had been breached.
Western sought damages from the Maganic parties for breach of the February 2011 settlement. For example, in issue (3) Western alleged that Maganic was in breach of the agreed implied term of the February 2011 settlement to do all things reasonably necessary to ensure that Western received the benefit of the agreement ("the benefit of the agreement implied term"): Mackay v Dick (1881) 6 App Cas 251, at 263; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Limited (1979) 144 CLR 596, at 607; and, TFML Ltd v MacarthurCook Fund Management Ltd [2013] NSWCA 291 at [50].
But in issue (3) Maganic alleged in response that Western could not take advantage of a contractual entitlement to damages for such alleged breach, because any loss or damage that Western claimed had been brought about by its own wrongful conduct. The parties both accepted the principle that a party cannot take advantage of that party's own wrong and that a party's contractual entitlement that arises upon a particular event will not be enlivened if the event came about through that party's wrongful conduct: TCN Channel 9 Pty Ltd v Hayden Enterprises (1989) 16 NSWLR 130, at 147 and Sydney Attractions Group Pty Limited v Schulman [2013] NSWSC 858, at [188] - [191].
Issue Two - Rental Monies Received and Adjustments. It was agreed that clause 5(j)(v) of the February 2011 settlement meant that each party was entitled to half of all monies received from tenants on the St Marys property from February 2011 until completion of the subdivision. The Court gave directions to assist the parties to agree upon what monies Maganic and Western had received each on account of rent from the St Marys property. The parties' respective entitlements to rent are merely a matter of accounting. All the rent receipts were ultimately agreed.
Western initially claimed that Mr Maganic should have received some rent but did not, because he had leased what became Lot 1 of the St Marys property to tenants at an alleged undervalue. This raised a question of the construction of the February 2011 settlement, clause 5(j)(ii): whether it imposed a requirement for each party to account for rents not received but which would have been received had the part of the property under the control of that party been marketed properly to take full advantage of rental opportunities. But Western abandoned its claim for an account of rents not received during the hearing. So the Court did not have to determine this issue. Directions are made at the end of this judgment for the parties to bring to account in their final accounting the rents that are now agreed to have been received. The actual arithmetical calculation of rental sums can be undertaken between the parties, who indicated they would take that course once the Court had decided the issues of principle.
Issue Three - Costs and Expenses of Subdivision. Clause 5(j)(i) of the February 2011 settlement requires each party to "pay and continue to pay one half of all rates, taxes, outgoings and expenses due or falling due with respect to the land…" The costs and outgoings with respect to the St Marys land up to the date of subdivision were agreed at $1,067,882.46. Maganic contended that all these identified expenses should be borne as to one half each, as clause 5(j)(i) requires and that only minor financial adjustments were necessary between the parties to achieve this result.
But Western countered that various components of this $1,067,882.46 in costs and expenses had been occasioned by Maganic's breach of the benefit of the agreement implied term in the February 2011 settlement. Western contended that it should not have to bear any costs occasioned by Maganic's breach of this implied term. Maganic's breaches were said principally to have been failing to co-operate with the drawing up of the agreed subdivision and the introduction of fill onto the St Marys property in contravention of an existing DA applicable to the property, thereby delaying the progress and approval of the subdivision.
Maganic's rejoinder to this was that subdivision completion was delayed by Mr Kelly corresponding with Council with the effect of disrupting the orderly consideration, and ultimate approval of the subdivision. Maganic also alleges that Western failed in a timely way to sign the documents necessary to register the subdivision.
Issue Four - Improvements to Lot 1. The parties accepted that within clause 5(e) of the February 2011 settlement they must each "pay and contribute to one half of the costs associated with the subdivision". Western alleged that many of the costs and expenses Maganic incurred had the sole effect of improving Lot 1 and were not necessary for effecting the subdivision and therefore were not costs "associated with the subdivision".
In response Maganic contended that the costs incurred were all either subdivision-related costs, or were costs that it was otherwise necessary for Maganic to incur to permit the property to be rented pending completion of the subdivision. Maganic said that if the benefit of the rent was to be split between the parties under clause 5(j)(ii) that the burden of making either lot fit for such rental should also be shared.
Issues three and four are dealt with in more detail below after these reasons make some observations about the credibility of Mr Kelly and Mr Maganic, and set out some supplementary chronology relevant to the remaining issues to be determined.

[3]

Credit Issues of the Parties

Mr Kelly was an astute witness. But he was an obstinate, single-minded and argumentative witness. Often, somewhat as a politician might, he seemed to be answering a different question to the one that he had been asked. Sometimes he chose to make statements in the witness box about documents before him rather than attending to the questions he was being asked about the document. Mr Sneddon effectively cross-examined Mr Kelly and in my view his credit was severely damaged. The Court was ultimately prepared only to place very little weight on his evidence. But despite this, many of the issues in the case could be decided without relying upon Mr Kelly's credibility.
At times Mr Kelly was prepared to adhere to increasingly improbable versions of the facts under cross-examination, and to do so for far too long. For example he denied any knowledge prior to December 2013 of Maganic's May 2013 Development Application (DA 13/0397). But he had corresponded with Council in May 2013 in several emails about this very subject. When this was pointed out to him, he denied authorship of any of the May 2013 emails or that they had been sent with his or his company's authority. He added for good measure that he did not even have an email address. But much of the relevant correspondence had been sent from the email address from which he had sought to distance himself: (Westernlanddevelopmentsptyltd@hotmail.com). His denial of responsibility for that email address could not possibly be correct. Even after his counsel, then Mr Rundle, very properly conceded that the email address in question was indeed that of Western, Mr Kelly surprisingly persisted in his unreal denials.
Some allowance must be made for Mr Kelly's age. He was 78 years old and was hard of hearing. A few of his errors in evidence are explicable on account of his poor hearing. He was deeply suspicious of cross-examining counsel, Mr Sneddon. At times he unjustly accused counsel for Maganic of "trying to trick me". He was inclined to see all Mr Maganic's conduct as part of a conspiracy against him. But he was nevertheless acutely conscious of his own self-interest and was very astute in marshalling evidence to answer questions to show his case in its best light. Surprisingly though, the frailties of his age did not stop him at times either from firmly answering any questions with which he disagreed or obfuscating with answers that were intentionally uninformative.
Mr Kelly was prepared to make allegations to the Penrith City Council against Mr Maganic that he must have appreciated were false at the time he made them. For example, on 7 June 2013 he wrote to the Penrith City Council alleging that the Council's actions had "allowed [Maganic] to use the above land as a dumping for financial gain". In order to justify this statement, the letter to Council, that Mr Kelly signed, went on to say that "[Maganic's] bank statements which [Western] holds, shows …[certain persons]….depositing large sums as loan repayments…" But surprisingly Mr Kelly shortly after admitted in cross-examination that neither he nor Western held any of Maganic's bank statements. Mr Kelly was prepared to blame those who had sent this letter for the apparent misrepresentation to the Council. But in my view he was well aware of the false statement that was made in the letter he had signed.
Mr Maganic was a forceful, articulate and quick-speaking witness. He was less inclined than Mr Kelly to exaggerate in his evidence. But his testimony too was not free from defects. His strong dislike of Mr Kelly was clear in the manner of his giving evidence. He explained that they had been partners for a long time, but had hardly spoken since February 2011. His evidence was coloured by his dislike for Mr Kelly. As a result the Court also approached it cautiously. He was particularly bitter about statements that he claims Mr Kelly made to him on a number of occasions after February 2011, when he, Mr Maganic, sought Mr Kelly's approval for works to be done on site. He says that all Mr Kelly would say back to him on the occasions of such requests was "I'll make you penniless".
In my view, Mr Maganic's account of what Mr Kelly had said on these occasions was quite correct. Mr Maganic still keenly felt the sting of such statements and of what he saw as Mr Kelly's betrayal of their former long friendship. Mr Kelly seemed just the kind of person who would have said such things: he demonstrated in the witness box an obvious animus directed at Mr Maganic. It is unlikely that Mr Maganic was just making up these statements he attributed to Mr Kelly. But his evident distaste for Mr Kelly coloured all his evidence.
Like Mr Kelly, Mr Maganic was an intelligent man with a good grasp of what was put to him. He was well able to make distinctions of meaning in the words of questions and to argue back his own different version of events to his questioner, Mr Rundle.
The hostility between Mr Kelly and Mr Maganic evident in Court, and recorded in these reasons, placed a special burden on the lawyers in this case. The Court wishes to record that it was greatly assisted in resolving the issues in such an atmosphere by the co-operation between all the lawyers on both sides of this litigation. It is now necessary to examine issues three and four in more detail.

[4]

Expenses of the Subdivision and Improvement to Lot 1

Maganic prepared a tabular summary (see below) of the expenses that it alleges it had incurred: (1) in the subdivision of the St Marys property; (2), (3) and (4) in holding costs pending subdivision; (5) in maintenance costs to allow the property to be rented; and (6) in Land and Environment Court legal expenses that are said to have arisen from Mr Kelly's conduct. It was accepted that Western had not paid any of these expenses. Maganic was seeking reimbursement from Western. The table of expenses is below: Summary of Defendant's Schedule of Expenses Money expended by the Defendant from 22 February 2011 Paid by Defendant Amount Claimed from Plaintiff (1) Subdivision of the lands (Items 5-71) $164,382.16 $54,403.03 (2) Holding Costs - Council Rates (Items 72 & 73) $135,515.39 $2,042.20 (payable to Council) $115,461.65 (3) Holding Costs - Water Rates (Items 74 -76) $24,093.58 $12,046.79 (4) Holding Costs - Land Tax (Item 82) $596,782.64 $244,833.34 (5) Other Costs or Expenses concerning the Subject Lands (Items 83-112) $61,297.37 $26,755.98 (6) Legal and Other Expenses incurred by the Defendant relating to Land & Environment Court & Penrith Council proceedings (Items 113-122) $85,811.32 $80,708.04 TOTALS $1,067,882.46 $536,251.03

[5]

These items need further comment. As to table item (1) in the sum of $164,382.16, some $101,000 of this sum was incurred in respect of the cost of depositing concrete chip on the land that was later to become Lot 1. Maganic conceded that not all of this could be justified as being necessary to allow the proposed Lot 1 to be rented pending subdivision. As the cost of the concrete chip was in excess of what was needed to facilitate rental, the question was whether it was an expense justifiable as ancillary to the subdivision, or whether it merely effected an improvement to proposed Lot 1.
As to table items (2), (3) and (4), the holding costs, being Council rates, water rates and land tax totalling $756,391.61, Western initially faced the issue as to whether any delay to the registration of the subdivision had really occasioned any loss to Western. Even if there were no delay in registering the subdivision, each of Western and Maganic would have been liable for about 50 per cent of at least part of these holding costs, as an owner of Lot 1 or Lot 2 upon registration of the subdivision. But Western claimed it should be free of most of these holding costs on the basis that had the subdivision of the properly gone through earlier, it would have sold Lot 2 to a third party and would not have had to incur any of these holding costs.
As to table item (5), the question was whether or not costs expended in maintaining the buildings on proposed Lot 1, in order for them to be fit for rental pending subdivision, should be borne equally. The equal bearing of such expenses can be justified by: (1) construing "rental" in clause 5(j)(ii) as the net rental after deduction of rental expenses; or (2) treating such outgoings as an "expense" within clause 5(j)(i) to be borne as to one half each.
As to table item (6), the core issue on this item is whether Mr Kelly on behalf of Western allegedly engaged in conduct so as to deny Maganic the benefit of the agreement, by provoking the Council into bringing proceedings in the Land and Environment Court, thereby occasioning additional legal expense to Maganic. Maganic contends that this intentional conduct on Mr Kelly's part was a breach of the benefit of the agreement implied term. If the breach were established, then Maganic contends that it can now recover from Western any expense thereby occasioned.
Neither party called any Council officers to give evidence as to Council's decision-making processes about initiating the Land and Environment Court proceedings. So the Court was left to draw such inferences as were available from the documents emanating from the Council.

[6]

After the February 2011 Settlement

After the February 2011 settlement Maganic brought further fill onto the land. The February 2011 settlement said nothing about the addition of fill to Lot 1, despite its detailed terms providing for the progress of the subdivision described in the Court's first judgment: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor [2013] NSWSC 1574 at [5] - [10].
The Court mostly accepts Mr Maganic's evidence as to when the fill was brought onto the area of the St Marys property that was to become Lot 1 in the agreed subdivision. Mr Maganic explains, and I accept, that Nepean Landscape Supplies placed concrete chip on the property on 22 December 2011. Mr Maganic also explains, and I accept, that this was done so as to provide a firm surface for the existing tenants to the area of Lot 1 to be able to drive in, park upon and store goods on the property. Although the subdivision was not complete at this time it is convenient in these reasons to simply refer to the part of the property that Maganic would ultimately receive under the proposed subdivision as "Lot 1".
Mr Maganic concedes that the chip concrete increased the level of Lot 1 by about 50 mm. The existing problem Mr Maganic was trying to address by the deposition of this chip concrete was that without it the muddy surface of Lot 1 in wet weather meant that large trucks driving on and off Lot 1 were depositing clods of earth on the street outside the St Marys property, evoking complaints from other residents and from the Council. I accept that the deposition of this concrete chip, including its landscaping and compaction, did solve this problem. I accept Mr Maganic's evidence that before this was done there was in effect a local hazard emanating from the property by reason of its unsealed surface before December 2011, which was cured by the importation of this material. The matter had come to the attention of Council before that date and it can be assumed that it would have been followed up in some way further by Council had the importation not occurred.
But I do not accept all of Mr Maganic's evidence about the importation of fill in December 2011. I do not accept that this was done with the approval of Western. Mr Kelly's reaction to the importation of this fill, in hostile conversations with Mr Maganic and in voluminous correspondence with Council, indicates that he was deeply opposed to the importation of fill occurring. He is quite unlikely in my view to have agreed with its importation in the first place. Moreover, Mr Maganic's oral evidence further supported Western's case on this issue. Mr Maganic said that when he spoke to Mr Kelly, Mr Kelly "didn't agree" and instead said to Mr Maganic "I'll make [you] penniless". I accept Mr Maganic's evidence that this is exactly what Mr Kelly said to Mr Maganic on this occasion. By then Mr Kelly was set against Mr Maganic and seemed to be focused on destroying him financially.
But this evidence is revealing in another way. Later on in these reasons the Court explains why this subdivision probably would not have been completed before the end of 2012, even if the concrete chip fill had not been imported onto Lot 1. There was ample scope for delay apart from the fill. When Mr Maganic broached the subject of the concrete chip with Mr Kelly he received an overtly hostile and unco-operative response. It can be readily anticipated that if he had not chosen to put the concrete chip in, that any other solution which he proffered to the problem of trucks dropping dirt on the street outside the St Marys property would have received the same unco-operative response from Mr Kelly.
This event is an important counterfactual in these proceedings. The overt hostility that Mr Kelly displayed towards Mr Maganic in the witness box made it perfectly clear to the Court that Mr Kelly was motivated to take every point he possibly could to make life difficult for Mr Maganic in the unfolding of this subdivision.
And there were ample grounds for Mr Kelly to take issue with Mr Maganic. This is because of the structure of Lot 1 and Lot 2. Lot 1, the Maganic land, is the only developed part of the site. It has tenants including a social club and industrial activity. In contrast, Western's land, Lot 2 is overgrown with weeds and grass and is fenced with no commercial activity upon it. All the problems associated with the use of the site between the February 2011 settlement and its ultimate implementation by subdivision will arise from Maganic's occupation of Lot 1. It is difficult to see that similar problems would ever have arisen out of Western's occupation of Lot 2 between the February 2011 settlement and implementation of the subdivision. For this reason Western was always vulnerable to attacks from Mr Kelly. And in my view, those attacks would have come from Mr Kelly, whatever Mr Maganic did.
Maganic always considered the labour and materials associated with the crushed concrete as expenses that were recoverable under the February 2011 settlement. Maganic's solicitors, Messrs McLaughlin & Riordan set out a detailed list of these expenses, together with a number of others, in a letter of 15 June 2012 to Western seeking contribution. In response to this letter Western neither paid nor offered to pay for this material.
The McLaughlin & Riordan letter of 15 June 2012 indicates that the concrete chip material was not put in on one day, on 22 December 2011, but on a number of days leading up to that time and after it into early 2012. But the approximate time of laying this material is not in dispute.

[7]

Council Reacts to the Fill - October 2012 to March 2013

The fill introduced onto Lot 1 caused disquiet to Penrith City Council. On 3 October 2012 the Council wrote to Maganic reporting that the Council officers had established that "crushed concrete and brick material of unknown source and quantity has been imported onto the premises". The Council referred in this letter to the undivided whole St Marys property. The Council complained that this importation of material had been continuing. The Council asked Maganic to show cause in writing within 14 days why action should not be taken against it to require removal of this material.
Maganic did not satisfy the Council. On 26 October 2012 the Penrith City Council issued a notice under section 121B of the Environmental Planning and Assessment Act 1979 ("the EPA Act"). This gave notice of the Council's intention to serve an order to reinstate the premises to their state before the alleged unauthorised fill was deposited. The Council declared in the 26 October 2012 notice on that it had conducted investigations into the unauthorized fill material deposited and spread onto the premises and declared that the work had been done without Council approval. The Council's concern was that the fill material might impact on the natural and built environment by dust, erosion, sedimentation, damage to vegetation, water pollution, diversion of drainage and contamination of land. The Council reminded Maganic of its responsibility to ensure that such impacts did not occur.
The Council followed up on 13 November 2012 with a further notice to similar effect, but foreshadowing this time, that a slightly different kind of order would be issued.
After these notices were served the Council was receiving representations from Maganic and inspecting the St Marys property. A Council file note of the Council's "Development Advisory Panel Meeting", meeting on 20 December 2012, recorded the importation of crushed concrete onto the site and made observations about trucks coming to and leaving from the site. But it is relatively clear from this file note that the Council was given information from Maganic to allay some of its fears. The file note records a proposal from Maganic: "Fill is from a known source" and "Enough permeability" [to avoid excessive run-off]. And then Maganic apparently foreshadowed what was ultimately to come to pass in May the following year "Would like to apply for lease areas subdivision, to authorise fill and the leaseholders" in the context that the February 2011 subdivision development application was already in Council. Not much should be drawn from these minutes except perhaps the absence of any Council outright rejection of the Maganic proposal to authorise the fill at the site by putting in a DA.

[8]

A Counterfactual - Finishing the Subdivision in 2012

Mr Kelly says that but for the importation of the unauthorised fill the subdivision should have been completed in 2011 or at the latest in mid-2012 and that Western should not have incurred the expenses of any costs or further outgoings after that date. His case is that from mid-2012 through to 2013 and 2014 the cost and outgoings are solely attributable to the unauthorised fill placed on the land by a Maganic.
Despite the Court's lack of confidence in Mr Kelly's evidence, one part of what Mr Kelly says on this subject the Court substantially, though not completely, accepts. But for the importation of fill, in my view, Mr Kelly is correct at least insofar as he says that the subdivision would have been finished, he says, in 2012. But in my view, his evidence fails to take into account a number of features of this case and of his own conduct. The Court's conclusion is that it is probable but for the importation of fill that the subdivision would have been completed not in mid-2012 but by the end of 2012.
Mr Kelly's estimate of mid-2012 does not really take account of a number of factors which the conduct of these proceedings has revealed. The requirements of the subdivision were detailed apart from the issue of the introduction of the fill. The capacity for spontaneous and combustive disagreement between Mr Kelly and Mr Maganic after February 2011 about every aspect of the subdivision apart from the uncontaminated fill cannot be overestimated. Mr Kelly was prepared to write over a hundred letters to the Penrith Council about the issue of the allegedly contaminated fill and to urge it to take action against Mr Maganic. He is very likely, in my view, to have found some other issue to press upon Mr Maganic if the issue of the fill were not at the forefront. His capacity to create and engage in dispute with Mr Maganic cannot be doubted. He refused to help solve the issue of the fill. For these reasons, in my view, a reasonable estimate is that but for the unauthorised fill on Lot 1 the subdivision contemplated by the February 2011 settlement would have been completed by 31 December 2012.

[9]

Was the Council's Survey Evidence Wrong?

Apart from the issue of the unauthorised fill, in 2011 and 2012 there were many other detailed aspects of the subdivision which the parties needed to work through. For this purpose they had retained Mr John Howie. Mr Howie was acquainted with both Mr Kelly and Mr Maganic. Throughout 2011 and 2012 he prepared the survey and supporting documents to lodge with Council for the development application to approve the February 2011 settlement subdivision.
He lodged the documents with Council in May 2011 and was involved in discussing with Council their progress and dealing with ancillary issues such as water and sewage and electricity connection and the like.
He was incidentally able to witness the contact between Mr Kelly and the Council and Mr Maganic and the Council. Mr Howie gave evidence and was cross-examined. He was an excellent witness. I accept his evidence about Mr Kelly's communications with the Council. He says he received a number of complaints from Council staff about Mr Kelly abusing them. This material was not admitted into evidence as proof of its truth but only as evidence that the communications occurred. Similar communications came from the staff of utilities, complaining about Mr Kelly. I do not infer directly from any of this material that Mr Kelly had been abusing staff. However, the Court does infer from the volume and tone of his correspondence with Council about his disputes with Mr Kelly that he was likely to have been abusive with staff. Mr Kelly wrote well over a hundred letters to Council about his disputes with Mr Kelly and at times copying in members of the New South Wales Government. I infer from this correspondence alone that he is also likely to have made persistent and repeated telephone calls to Council.
This conduct, in my view, is a reason to believe that the subdivision would have proceeded relatively slowly. This Subdivision was always going to be treated, whatever Mr Maganic did, to be contentious to the Council officers dealing with it. That being said, it is not possible from this material to infer that Mr Kelly on his own actually slowed the application down by his conduct.
Mr Howe's oral evidence generally supported Mr Maganic's case. He claimed that the Council's survey of the area of imported fill on Lot 1 was incorrect and that a subsequent survey had accorded with his survey. His theory was that the Council's survey results were higher than had been allowed in the original development application only as a result of limited regrading of the land and from the movement of vehicles and that the extra height was only in one location on Lot 1.
Despite the Court's general respect for Mr Howie's evidence the Court is not prepared to accept that the Council survey was wrong. There was no proper opportunity before the Court for the Council survey and Mr Howie survey to be compared and one preferred over the other. The Court has no reason to believe that the Council surveyors did not do an adequate job. But even Mr Howie's evidence concedes that in places that Lot 1 was at levels in excess of those permitted by the original development application. This alone would justify the correctness of the Council's position.
Western submits with some force that Mr Howie's evidence should be discounted to the extent that he says that he spoke to Council officers at a meeting in about December 2012 and "they all understood that we didn't have a problem" with the levels after that time. This may have been Mr Howe's interpretation of the meeting.
But Western's submission is well supported by the Council's conduct thereafter. The Council continued to pursue this issue even to the point of commencing Land and Environment Court proceedings. The Court cannot accept in the face of such conduct that the Council "didn't have a problem" with the land.
There is no doubt that Council gave active consideration to proposals put to it on behalf of Maganic by December 2012. But after then the Council: issued an order to remove the fill. On 12 February 2013 an Order 12 issued under the EPA Act, s 121B to cease the importation of unauthorised fill material onto the St Marys property and to remove all unauthorised fill material on the premises to waste facilities that can lawfully accept the material. The notice indicated that development consent had not been obtained before the fill was imported.
On 12 February 2013 Council informed Western of this action.
Shortly after this Mr Maganic or one of his tenants then imported tyres onto the land. The Council alleged that since the previous inspections, an inspection on 11 March 2013 that Council officers had established that a large number of tyres had been brought onto the land and were being stored without Council approval. The Council's letter of 18 May 2013 warned Mr Maganic that EPA Act action may follow if something was not done about the tyres.
Mr Maganic attempted to head off the threat of Land and Environment Court action by attempting to put in a development application. The subsequent events show this was a rational thing to do. But as will be explained in the next section Mr Kelly would not consent as co-owner to that development application.

[10]

The 2 May Development Application

On 2 May 2013 Maganic lodged a development application to seek Penrith Council's approval for the addition of fill to the surface of Lot 1. This was Mr Maganic's solution to the alleged breach of the development consent resulting from the fill added to Lot 1. The Council was not prepared to allow the subdivision to proceed until the breach of the existing development application was rectified. Western's case was that the fill should be removed. Maganic's case was that Western should sign the 2 May Development Application.
The 2 May Development Application (DA 13/0397) with the Penrith City Council was received by Council on that date. It proposes the expenditure of $120,000 for the cost of materials and labour to carry out the proposed works, and described the work proposed as follows: "-Partial Filling of Land with Trafficcable fill -Fill to keep dust levels minimised -Driveway crossover for heavy vehicles -hardship/open storage overfill, various tenancies $120,000"
Because the subdivision of the St Marys land was not complete at the time that the 2 May 2013 Development Application was filed, the consent of both owners was required. Mr Maganic had signed the Development Application under the heading "Owner's Consent" by 2 May 2013. But Mr Kelly refused to sign the application.
He did not sign the application at any stage between 2 May 2013 and the time when the Court eventually ordered him to sign it on 20 December 2013. His refusal during that period is strong evidence that at any time when he was asked by Mr Maganic to sign the document that he would have refused to do so. Indeed he affirmed his refusal in evidence. And in submissions it was said on his behalf that it was not necessary for Western to solve Lot 1 problems that had been created by Maganic.
Mr Maganic was keen to solve the problems that he had with Council about the fill. The idea of the Development Application had been suggested to him as a way around the problem. He took it up with alacrity. In my view, Mr Maganic was the kind of man who when offered a solution like this would have taken all necessary steps to see if he could work the solution through. The correspondence shows that he was someone who was prepared to take advice and he had access to lawyers all the way through this period.
I accept Mr Maganic's evidence that he asked Mr Kelly early for his consent to the development proposed within the 2 May 2013 Development Application. The precise date he made this request is difficult to ascertain. But I infer it would have been no later than 2 May 2013. Well advised as he was, I find that Mr Maganic would have taken the earliest opportunity to try and get Mr Kelly to sign the 2 May 2013 Development Application and that he did and Mr Kelly refused immediately. Mr Kelly's conduct in refusing to sign the application has important consequences in these proceedings.
Western submits that it had no obligation to sign this document to "rectify the other party's unauthorised conduct on the land". I disagree. It has not been suggested on Western's part, nor could it be, that the 2 May 2013 Development Application signing would have cost Western anything other than the time to sign. There was no financial or other risk to it in signing this document. Western's simple failure, through Mr Kelly, to append his signature to this document was a decision taken very deliberately to cause as much inconvenience to Mr Maganic as possible. Elementary contractual co-operation in accordance with the principles agreed in Issue One meant that the 2 May 2013 Development Application should have been signed as soon as it was presented to Mr Kelly on the first occasion it was presented.
Mr Kelly gave some extraordinary evidence to try and avoid the inference against him that he had knowingly continued to refuse to sign the 2 May 2013 Development Application. Mr Kelly sought to suggest that he was not aware of the 2 May 2013 Development Application (which was actually an application to modify the designated development under EPA Act, s 96) until December 2013. Mr Sneddon then confronted him with an email that had been written on behalf of Western on 9 May 2013. In this email Western wrote to Penrith City Council about the 2 May 2013 Development Application and says "as Council is aware the DA13/397 is lodged without Western Land Development's consent and knowledge and Western Land Developments Proprietary Ltd will not consent to Council to accept, process or consent to the DA13/397. The conditions of DA11/1321 require all unauthorized fills removed and levels brought back to Mr Shannon's levels of 2006. Accordingly Council is under duty of care to Western Land Developments Proprietary Limited to adhere to the conditions of the DA11/1321".
There could be no doubt the author of this letter was familiar with the 2 May 2013 Development Application. Mr Kelly's attempts to avoid the consequences of knowing about DA13/397 led to some of the most discreditable passages of his cross-examination. He said he had "no knowledge" of this Development Application until December 2013. In my view that was a deliberate falsehood. The email of 9 May 2013 came from Western's email address. When the Court asked him whether he denied writing the email he simply said "I'm not sure, your Honour". In my view he well knew that he had written it.
This issue in turn led to his denial of responsibility for the email address from which this email was sent, a matter considered earlier in these reasons. Mr Kelly was instinctively aware by the time he gave evidence that by refusing to sign the 2 May 2013 Development Application he looked unreasonably and unfairly unco-operative. In my view, that is why he denied knowledge of it before December. His instincts were correct. His refusal to sign was unreasonably and unfairly unco-operative. It denied Maganic the benefit of their agreement.

[11]

Council Commences EPA Act Proceedings - 13 May 2013

On 13 May 2013 Penrith City Council filed Class 4 proceedings under the EPA Act in the Land and Environment Court against Maganic seeking orders including that Maganic remove any unauthorised fill material from the subject land. The timing of the issue of these proceedings is of considerable importance. They were issued 11 days after Mr Maganic tried to file his Development Application signed only by himself and not by Mr Kelly. An issue in these proceedings is whether the costs of the Land and Environment Court proceedings were occasioned by Western's conduct or by Maganic's conduct. These proceedings had been coming over the horizon for a long time. The Council had been foreshadowing them since October 2012. Mr Maganic had made genuine attempts to try and head them off. But he had failed.
I accept Western's case that the situation which had led to these proceedings being initiated was brought about solely by Mr Maganic's failure to seek proper approval for the concrete chip fill being imported before he began its importation. Western's case is that everything which then followed should be the financial responsibility of Maganic.
But Western's case omits an important causative factor. The Land and Environment Court proceedings were avoidable. And in my view, given what happened in December 2013 and January 2014 there is reason to believe they would have been avoided if Mr Kelly had co-signed the Development Application on 2 May 2013. The sequence of events below shows that once the Court made orders on 20 December for Mr Kelly to sign the 2 May 2013 Development Application and it was signed in January 2014 the Council quickly dropped the Land and Environment Court proceedings. I infer from the Council's rapid response to the signed 2 May 2013 Development Application 7 to 8 months later, that if Mr Kelly had signed by 2 May 2013 the proceedings would never have been commenced.
The Council's minutes of 20 December 2012 show that Maganic was already floating the proposal of a Development Application to cure the problem of lack of prior development consent to the importation of the fill. If Mr Kelly had even been mildly co-operative in my view, it is likely that such discussions with Council would have evolved more quickly into a development proposal to cure the problem.
But Maganic put its case too highly in seeking to demonstrate that Mr Kelly had applied so much pressure to the Council that it had simply caved in and launched the Land and Environment Court proceedings. Maganic points to the more than 100 letters that Mr Kelly had sent to Council before and during the Land Environment Court proceedings. Maganic's case is that the Council just surrendered to this avalanche of material and commenced proceedings. Much of Mr Kelly's correspondence did request the commencement or continuation of proceedings against Maganic. But Maganic did not call anyone from the Council to justify this inference. Moreover, the material before the Council on its own well justified the commencement of the proceedings, based on the lack of prior consent to the importation of the fill and its presence being a breach of existing development consents. Furthermore, such material as is available from the Council's files and correspondence shows a public authority acting in accordance with accepted legal principle and in the public interest. There is no basis, in my view, for inferring that the Council initiated the proceedings for any reason other than acting on the evidence before it of breaches of its development consents. But as these reasons indicate that finding does not absolve Western from financial responsibility for the Land and Environment Court proceedings. They were occasioned in my view by his failure to consent to the 2 May 2013 Development Application.

[12]

The First Hearing - October 2013 to December 2013

With this background the matter came before the Court for the first hearing of Western's Notice of Motion. That Motion, on which the Court is indeed still embarked, sought orders for partition of the St Marys property under Conveyancing Act 1919, s 66G and ancillary orders: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor [2013] NSWSC 1574 at [15] . The Court identified as a live issue at that stage the outstanding s 121B notices from the Penrith City Council as an impediment to completion of the subdivision. There were also issues about who would bear financial responsibility for complying with those notices.
On this first occasion the Court did not order Mr Kelly to sign the Development Application. The solution then in contemplation was that the parties would have to share the cost of removing the fill in the short term. The Court observed at the time that paying for the removal of landfill was the single largest anticipated expense in complying with the Council's requirements. To achieve progress the Court ordered that in the short term Maganic pay 65 per cent of ongoing costs on an interim basis and Western 35 per cent: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor [2013] NSWSC 1574 (at [31]). This was done so that the parties could get on with the removal of the fill.
But removal did not occur. The proceedings came back to Court in December 2013. The parties could not even agree upon an excavator to undertake the removal of the fill. The Court made directions about how the excavator would be chosen. The Court told the parties that if they could not agree on an excavator that the Registrar in Equity would choose one for them.
The matter was becoming very urgent. The development consent for the subdivision was to expire on 14 March 2014 but they still continued to wrangle about the identity of the excavator. They brought the matter back to Court on 6 December 2013 and 10 December 2013, first to stay and then to rework the orders about the chosen excavator to complete the excavation works. But it became increasingly likely in view of the parties' disagreements that the excavation works would not be finished before Christmas 2013. That in turn would put in jeopardy the parties' compliance with the development consent before its expiry on 14 March.
The parties came back again to Court on 20 December when the Court varied the orders in relation to the chosen excavator and stayed them for the period. On this occasion, and in light of the recent history of wrangling between the parties Maganic proposed that the Court order Mr Kelly to sign the 2 May 2013 Development Application. Over opposition the Court made that order in the following terms: "1. By 5.00pm on 6 January 2014 the first plaintiff shall sign the s 96 application to the Penrith Council dated 12 December 2013 already signed by the first defendant; 2. And the Court notes the plaintiff does sign in accordance with order 1 a without admission's basis and such signing does not in any way affect or prejudice any legal or equitable right of the plaintiffs, and cannot be used by the defendants to base any argument that the plaintiffs are not entitled to relief to remove fill or other material from the defendant's land. 3. Due to the vacation period, in the event that the first plaintiff does not comply with order 1 the Registrar in Equity is authorised to sign the said application for and on behalf of the first plaintiff, as if the plaintiff had signed it. 4. Stand these proceedings over for mention in the Equity Registrar's list on Tuesday, 11 February 2014. 5. The existing liberty to apply continues."
In the result Mr Kelly did sign the 2 May 2013 Development Application before 6 January 2014. The Registrar in Equity did not have to sign it for him.
Mr Kelly signed the 2 May 2013 Development Application on 20 December 2013. It was forwarded to Council by the solicitor for Mr Maganic on 24 December 2013. Within 18 working days of receiving that application the solicitors for the Council wrote to Mr Maganic's solicitors, on 20 January 2014, acknowledging receipt of the signed application and informing the solicitor for Mr Maganic, Mr McLaughlin, that Council would discontinue the Land and Environment Court proceedings upon the payment by Maganic of the Council's costs then incurred in the sum of $29,534.22. Maganic paid those costs and the proceedings were discontinued. The decision by Maganic to pay those costs and ensure that the proceedings did not continue and incur further costs was the reasonable and appropriate course in the circumstances.
This paved the way for the remaining steps to be taken to complete the subdivision.

[13]

Completion of the Subdivision, the Hearing and Post-Hearing

The parties agree that the subdivision was finally perfected on 14 November 2014, approximately a month before the final hearing of these proceedings.
The final hearing took place on 9, 10, 11 and 12 December 2014. On the first day of the hearing the parties invited the Court to have a view of the St Marys property. The Court and counsel and solicitors from both sides attended the view. The Court found the view of considerable assistance in understanding the issues being debated in the proceedings.
The Court was only able to complete the evidence in the four days, 9, 10, 11 and 12 December 2014. The Court listed the proceedings on 5 March 2015 for final submissions and made directions for the exchange of submissions during February 2015. When the matter adjourned on 12 December 2014 part-heard to 5 March 2015 Mr Rundle of counsel was appearing for Western and Mr Kelly, instructed by Savio Solicitors and then Benjamin Khoury Solicitors & Associates.
But Mr Kelly decided for a period to act for himself. The matter was relisted on 25 February 2015. Mr Kelly appeared on that occasion and sought a variation to the orders for the exchange of written submissions to March 2015 and for the listing of the matter for final argument on 9 April 2015. But a series of delays then resulted that lie at the feet of Mr Kelly. What consequences, if any, these have in relation to costs or interest may need to be the subject of argument at a later time.
On the date for submissions on 9 April 2015, no-one appeared on behalf Western. In the absence of any appearance the Court asked for a further aide memoire from Maganic about aspects of the evidence and indicated the Court would reserve judgment on 1 May 2015. Judgment was so reserved.
But further contact was made with the Court on behalf of Western during July 2015. Mr M. Auld of counsel instructed by Knight Lawyers indicated that they now appeared for Western and Mr Kelly. Further directions were made on 31 July 2015 in relation to interlocutory issues and for further submissions to be filed by Western by 28 August 2015 and by Maganic by 11 September 2015. These orders were extended at the request of the parties on 28 August 2015.
Western finally filed its written submissions on 18 September 2015, when the matter came once more before the Court. The Court directed Maganic to file further written submissions by 2 October. Maganic filed submissions by 6 October and the Court then reserved judgment.
Had Western complied with the Court's original timetable the matter would have been argued on 5 March 2015 and judgment reserved. Instead judgment was ultimately reserved on 6 October 2015. It can be assumed by all parties that if a judgment had been reserved on 5 March that it would have taken the same time that it has taken to deliver judgment. But nevertheless there may be costs and interest consequences to the parties because of the delay of 7 months between early March and early October 2015 in the progress of this matter induced solely, in my view, by Western. This is not a criticism of Mr Auld or Knight Lawyers who dealt with the matter with efficiency upon their retainer in the proceedings.

[14]

Issue 3- Accounting For Unpaid Costs and Expenses

The parties invited the Court to make findings on the issues of principle and if necessary further argument should then take place about particular expenses. This can be done and the expenses put in general categories. The Court indicated to the parties it would not deal with individual expenses in this judgment, but rather categories of expenses. In light of the Court's findings and the narrative above, this can now be done.
First, there are holding costs such as land tax and the like incurred in respect of the land whilst it awaited subdivision. The parties agreed under clause 5(j) of the February 2013 settlement to pay such costs "up to the time of settlement". In my view the parties would always have incurred all such costs that they did actually incur up to 31 December 2012. But the Court accepts that Mr Maganic's own decision to import concrete chip fill onto the land without seeking prior development consent caused delay to the subdivision. But that delay only occurred in my view for 4 months until 2 May 2013, when that problem could have been cured by Mr Kelly's co-operation. But he refused to provide that co-operation.
In my view any delays since then and until Mr Kelly was forced to sign the Development Application by the Court on 20 December 2013, were wholly caused by and are to the account of Mr Kelly. His conduct in my view was wrongful and a breach of his obligation to do all things reasonably necessary on his and Western's part to ensure that Maganic had the benefit of the agreement. But his breaches only had effect until 20 December 2013 when the Court forced him to sign the agreement. Thereafter in my view any delays are equally the responsibility of both parties as they were before 31 December 2012.
Mr Maganic is responsible for the delays that occurred for the first 4 months in 2013. He too, in my view, was in breach of his obligation to do all things reasonably necessary to ensure that Western had the benefit of the agreement for those five months. By placing fill on Lot 1 without seeking prior consent he risked the very reaction that Council predictably had to his conduct. That was a breach in my view to his obligations. But to his credit he tried to do something to fix the problem up. It was then that Mr Kelly thwarted him.
Secondly, the costs incurred of and in importing the concrete fill will be considered under Issue 4.
Thirdly, the costs incurred in defending the Council's proceedings in the Land and Environment Court directly follow in my view from Mr Kelly's breach of his obligations under the benefit of the agreement implied term. But for his refusal to sign the 2 May 2013 Development Application those costs would not have been incurred.
Fourthly, in my view, the costs that Maganic had to pay the Council by reason of those proceedings are also recoverable against Western in addition to the costs incurred in defending those legal proceedings.
Fifthly, the costs incurred in preparing the 2 May 2013 Development Application for submission to Council and the costs involved in attempting to persuade Council that it should be accepted by Council should be entirely to Western's account. Maganic was in breach of the benefit of the agreement implied term and needed to take action to prevent the consequences of that breach getting any worse. Most of the costs of the s 96 application would not have been necessary if Maganic had not breached its obligation in the first place.
The essence of that breach was failing to get consent before doing what it did to import the fill. This means that to the extent that there would have been some costs associated with getting consent to importing some of the fill in the first place some of these costs may be chargeable to both parties to the extent of the fill, or part of it, was a legitimate subdivision expense. This category of expense is dealt with under Issue 4.

[15]

Issue 4 - Western's Liability for Improving Lot 1

On Issue 4 Maganic says that the importation of the concrete chip onto Lot 1 was a cost "associated with the subdivision" within the February 2011 settlement clause 5 (e).
In my view that argument is a difficult one in circumstances where Maganic did not seek Council's consent in advance of the importation of the concrete chip. After all if Maganic regarded it as a legitimate expense associated with the subdivision there is no reason for it not to be more open with the Council and with Western.
That being said, the extensive nature of the concrete chip importation and the noticeable raising of the levels that the Council's documents show attracted the Council's attention to this issue. The Court had the advantage, on the view, of seeing how extensive the importation was. Western is right in my view that not all of the costs of the concrete chip should be treated as a subdivision expense. It improved the land beyond what was associated with the subdivision.
But what was associated with the subdivision? The parties were not able to give the Court very much assistance about this question. But the Court did have the advantage of having seen the property and can take what was seen on the view into account. And the Court does accept Mr Maganic's evidence that the concrete chip was laid in order to avoid a problem which was occurring with trucks taking clods of earth onto the nearby streets.
In my view it was quite legitimate for some concrete chip to be laid to avoid this hazard. The February 2011 settlement was signed with the land in the condition that it was. It was obvious that some time would be taken to complete the subdivision. Some expense foreseeably needed to be incurred to maintain the land and to prevent it attracting Council attention because of activity thereon. In my view, the proper approach is for the Court to allow as an expense of the subdivision such amount of concrete chip as would legitimately protect the land against becoming a local hazard due to truck activity. Doing the best the Court can on the available materials, in my view, that would represent 40 per cent of the costs of the concrete chip which was laid down. That then gives a figure for the parties to do their final calculations.
Another set of expenses within Issue 4 is for the improvements to buildings, which is said to have assisted in the renting of those buildings. This may be an expense that has to be considered further in a subsequent hearing. It is not presently clear to the Court to what extent it is said that the improvements to buildings resulted in an increase in rental in any particular case. It is difficult to see how this category of expense can be decided without such precise evidence being addressed which the parties' submissions have not as yet done.

Western Land Developments Pty Limited v Maganic Brothers and Sister Pty Limited - [2016] NSWSC 598 - NSWSC 2014 case summary — Zoe