Construction of the Heads of Agreement
48The parties in the present case entered into Heads of Agreement at the conclusion of a mediation at which they were endeavouring to settle the dispute between them. That dispute had been initiated by Ms Yule seeking orders for an adjustment of property rights pursuant to the PR Act. Given that the Heads of Agreement is a relatively brief document which appears to have been drafted under time pressures, it is perhaps not surprising that the language is in some respects ambiguous and that, on one view, the document is incomplete.
49The (understandable) signs of haste are evident in the erroneous reference in cl 2.2 to the "DA" still being current, when what was clearly meant (as the parties to the appeal accept) was the development consent granted in 1991. Similarly, cl 2.3 refers to practical/physical commencement without identifying expressly why such commencement was important or relating it to the terms of s 99(4) (now s 95(4)) of the EPA Act.
50The most obvious apparent omission is that, although the Heads of Agreement contains mutual releases, it does not state explicitly that Ms Yule releases Mr Smith from the claims made by her for property adjustment. Nor does the Agreement specifically state that if Mr Smith complies with the obligations in cll 1 and 2, orders will be made dismissing the proceedings instituted by Ms Yule.
51Be that as it may, it is clear from the document itself that the Heads of Agreement was intended to resolve the ongoing dispute between the parties. In return for releases, Ms Yule was to receive a transfer of the Property and a sum of money. Both parties and their advisors were aware (as can be inferred from the terms of the Heads of Agreement) that a development consent had been granted in respect of the Property. Similarly, both parties were aware (and in any event it was notorious) that in order for the consent not to have lapsed, it was necessary for work on the Property to have physically commenced before the date the consent otherwise would have lapsed.
52Furthermore, both parties knew that the Property consisted of vacant land and that the development consent provided for the erection of a large number of units on the land. The Heads of Agreement was clearly drafted on the basis that the existence of a current development consent could have a material effect on the value of the Property.
53It will be recalled that cl 2 required Mr Smith to provide to Ms Yule:
"2.2 a letter from Gosford Local Council certifying that the DA [sic] for the [Property] is still current within 21 days, and
2.3 a letter from Gosford Local Council certifying that there had been practical/physical commencement of the [Property] within 21 days."
54On the appeal, the parties were at issue over whether these provisions created two distinct obligations or, as Mr Smith submitted, only a single obligation. It is difficult to resist the conclusion that, as a matter of form and language, cll 2.2 and 2.3 create separate and distinct obligations with which Mr Smith was required to comply. In form each sub-clause is directed to a requirement to produce a certificate from the Council dealing with a separate issue. Clause 2.2 requires Mr Smith to provide a letter from the Council certifying that the development consent issued some 19 years earlier remained current at the date of the certificate. Clause 2.3 requires Mr Smith to provide a letter certifying that work had been physically commenced on the Property.
55There is nothing in the language of the Heads of Agreement to suggest that the sub-clauses deal with one and the same matter or, to use Mr Muston's expression, that they are simply examples of "linguistic overkill". In particular, there is nothing to suggest that compliance with cl 2.3 (that is, certification that there has been practical/physical commencement) constitutes compliance with cl 2.2 (that is, certification that development consent is still current). On the contrary, if this is what was intended, one of the two sub-clauses in the Heads of Agreement would be entirely redundant.
56This conclusion is strongly reinforced by the legislative framework governing development of the Property. The provisions of the EPA Act formed part of the commercial context in which the parties negotiated the terms of the Heads of Agreement. If it matters, the relevant provisions of the legislation must have been known to the parties. Mr Smith was an extremely experienced property developer with decades of experience in dealing with local authorities. Ms Yule was not a developer, but was represented at the mediation by senior counsel and thus had the benefit of skilled advice.
57Under the legislation in force in February 1996, a development consent would not lapse by effluxion of time if work on the land had physically commenced before the date on which the consent would otherwise lapse: EPA Act s 99(4) (now s 95(4)). However, physical commencement of the work was a necessary but not sufficient condition for the continued operation of the development consent after the date the consent would otherwise have lapsed.
58For example, at all material times, the EPA Act contained provisions empowering a consent authority, in certain circumstances, to revoke a development consent: EPA Act, s 99(5) (as at 1996); see now s 96A(1); Environmental Planning and Assessment (Savings and Transitional) Regulation 1998, reg 23. (Where consent was revoked, the developer had rights of appeal and might be entitled to compensation, but nothing presently turns on this.) Thus even if work on the Property had been physically commenced before February 1996, the 1991 development consent might have ceased to operate at some time before 2010 because the Council had exercised its power to revoke the consent.
59There were other circumstances in which the development consent might have lapsed. The Council's letter of 6 February 1996 stated that the development had achieved physical commencement and was therefore ongoing "unless Council has issued a notice to complete under [s] 99[(5)] of the EPA Act". The statutory mechanisms for enforcement of a notice to complete work within a specified time did not include revocation of a development consent: see Hilltop Planners Pty Ltd v Great Lakes Council [2003] NSWLEC 214; 127 LGERA 333, at 343-344 [48]-[49], per Talbot J; EPA Act, ss 123-125. However, dealings between a developer and a consent authority relating to a notice to complete in certain circumstances could result in the developer being estopped from denying that the development consent had lapsed: Hilltop Planners, at 344-346 [52]-[60]. (Notices to complete are now dealt with in s 121B of the EPA Act, Item 16.)
60Since 1998, the EPA Act has empowered a consent authority to impose a condition of development consent that requires the surrender of a consent or the cessation of development (including the removal of works used in connection with the development) or that limits the period during which development may be carried out: see s 80A(1)(b), (c), (d); Kendall Street Developments Pty Ltd v Byron Shire Council (No 2) [2004] NSWLEC 530; 138 LGERA 360. The 1991 development consent predated the enactment of these provisions. Nonetheless, a prospective purchaser of the Property might want assurance from the Council that the development consent is not subject to a condition that renders it effectively inoperative.
61In my opinion, cll 2.2 and 2.3 of the Heads of Agreement clearly required Mr Smith to produce letters from the Council certifying two separate, albeit related matters:
- first, that the development consent for the Property was still current; and
- secondly, that work on the Property had physically commenced.
62I accept that, in order to comply with cll 2.2 and 2.3, Mr Smith would not necessarily have had to produce two separate letters from the Council, provided that a single letter certified the two separate matters identified in the sub-clauses. The question of compliance with cll 2.2 and 2.3 of the Heads of Agreement is to be determined as a matter of substance, not merely by the form of any letters from the Council.
63I am also prepared to accept that Mr Smith could have complied with cl 2.3 by providing a letter from the Council stating that, in the Council's view, work had been physically commenced in the Property for the purposes of s 99(4) of the EPA Act (as it stood in 1996) such as to prevent the 1991 development consent lapsing by effluxion of time. It is true that Council's opinion that work had physically commenced could not be decisive as to whether the statutory criterion was satisfied. The question posed by the old s 99(4) (now s 95(4)) was whether in fact work of the requisite kind had physically commenced and had been lawfully undertaken before the development consent lapsed: Coalcliff Community Association Inc v Minister for Urban Affairs and Planning (1999) 106 LGERA 243. But the Council could do no more than express its opinion that work had (lawfully) physically commenced before the consent lapsed. The better view is that such an expression of view by the Council would constitute certification "that there has been practical/physical commencement of the [Property]" for the purposes of cl 2.3 of the Heads of Agreement. It would constitute an assurance, so far as the Council was able to give it, that work had physically commenced by a particular date.
64If this is correct, the Council's letters of 6 February 1996 and of 31 May 2010, both of which were provided by Mr Smith to Ms Yule's solicitors, constituted certification that satisfied the requirements of cl 2.3. The earlier letter stated, on the basis of an inspection of the Property, that work had commenced in accordance with approved engineering Plans and that the development had achieved "physical commencement within the meaning of the EPA Act". The letter was plainly intended to convey the Council's view that relevant work on the Property had physically commenced for the purposes of s 99(4) of the EPA Act and that, accordingly, the 1991 development consent would not lapse on 28 February 1996 as otherwise would be the case.
65The Council's letter of 31 May 2010 was expressed somewhat cryptically. It did not, for example, explain why and for what purpose the statement in the 1996 letter that "physical commencement of the above development is ongoing" was still "relevant". However, read in context, particularly by reference to the legislation, the letter conveyed that from the Council's perspective nothing had changed since 1996 as to whether work on the Property had physically commenced for the purposes of s 99(4) (now s 95(4)) of the EPA Act. Council's view was still that work physically commenced no later than February 1996.
66Thus, if the only question was whether Mr Smith had satisfied cl 2.3 of the Heads of Agreement, I would have concluded that he had done so. But that is not the only question. Mr Smith was also obliged to satisfy cl 2.2.
67The difficulty facing Mr Smith in this respect is that the Council's letter of 31 May 2010 simply did not address the currency of the 1991 development consent. It confirmed the relevance of the earlier statement that physical commencement of the work was "ongoing", but that confirmation dealt only with the Council's view that physical commencement of the work had taken place. The letter reaffirmed the Council's view that (lawful) physical commencement of work on the Property had occurred such as to prevent the consent lapsing by effluxion of time. But it said nothing about whether the consent was actually in force at the date of the letter. The letter made no reference to whether any action had been taken between 1996 and 2010 that might have caused the consent to be revoked or otherwise to have lapsed.
68Mr Muston accepted that the Council's letter of 31 May 2010 did not expressly state that the 1991 development consent was in force at that date. However, he submitted that the letter implied that the consent was still in force. He contended that there would have been no point in the Council confirming that work had physically commenced on the Property if the consent, for one reason or another, was no longer in force.
69In my opinion, the Council's letter of 31 May 3010 did not necessarily imply that the development consent in respect of the Property was still in force on that date. The letter, in terms, was directed to one issue only, namely whether work had physically commenced on the Property. A reader of the letter without particular knowledge of the Property or its planning history, would not necessarily assume that the Council's view was that the original consent was still in force. The reader might infer, for example, that the Council had not been asked to address the currency of the development consent or that, if it had, the Council wished to avoid expressing an opinion on that question. Accordingly, I do not accept that the letter should be read as Mr Muston submitted it should.
70In any event, even if the letter of 31 May 2010 can be read as implying that the Council believed the 1991 development consent to be current, it still fell short of "certifying" that this was the case. The primary dictionary definition of "certification" is "Sure information; assurance" (Shorter Oxford English Dictionary). The concept of certification, for the purposes of cl 2.2 of the Heads of Agreement, contemplated an express assurance by the Council that it considered the development consent to be in force. While a particular form of words might not have been necessary, something more was required than an implication in a letter dealing with a separate topic. The mere fact (if it be a fact) that a reader of the 31 May 2010 letter might have inferred that the Council believed the development consent to be current does not convert the letter into the kind of assurance contemplated by cl 2.2.
71The obvious commercial purpose of the certification required by cl 2.2 was to provide Ms Yule with a letter from the Council that would satisfy a prospective purchaser of the Property that the development consent (evidence of which was to be provided to Ms Yule pursuant to cl 2.1 of the Heads of Agreement) was still in force. No doubt, as was pointed out in argument, a prospective purchaser would undertake further inquiries before entering into a binding contract of sale. Such a purchaser could have inspected the register maintained by the Council to determine whether the development consent was in force and, if so, the conditions of development consent. But a letter from the Council certifying that the consent was in force might have been very important in inducing a prospective purchaser to expend the time and resources required to investigate the merits of purchasing the Property or of meeting the asking price.
72For these reasons, I consider that Mr Smith did not comply with cl 2.2 of the Heads of Agreement within the time specified or, indeed, at all.
73Mr Muston expressly acknowledged in his written submissions in this Court that Mr Smith had not submitted to the primary Judge that orders should be made under s 73 of the CP Act even if Mr Smith had failed to comply with his obligations in cl 2 of the Heads of Agreement. No submission was made on the appeal that the orders made by the primary Judge should stand if this Court concluded that Mr Smith had not complied with cl 2.2 of the Heads of Agreement. It follows that the orders made by the primary Judge must be set aside.
74It is therefore not necessary to consider whether compliance with cl 2.2 of the Heads of Agreement was a condition precedent to performance of Ms Yule's obligations as to the operation of the releases incorporated in the Agreement. That issue may arise at a later stage of these proceedings. It should be determined if and when it becomes necessary to do so.