152 CLR 406
Leybourne v Permanent Custodians Ltd [2010] NSWCA 78
Low v Bouverie [1891] 3 Ch 82
Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72
Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148
New Zealand in First City Corporation v Downsview Nominees Ltd) [1989] 3 NZLR 710
Petersen v Moloney (1951) 84 CLR 91; [1951] HCA 57
Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep)
Pole v Leask (1863) 8 LT 645
Re Daley; Ex parte National Australia Bank (1992) 37 FCR 390; 8 ACSR 395
Re Timothy's Pty Ltd and the Companies Act [1981] 2 NSWLR 706
Repatriation Commission v Tsourounakis [2004] FCAFC 332
Rodda v Ian Rodda Pty Ltd (No 2) [2015] SASC 128
Rodda v Ian Rodda Pty Ltd [2015] SASC 95
Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274
Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19
Sullivan v Sullivan [2006] NSWCA 312
Thorner v Major [2009] 3 All ER 945; [2009] 1 WLR 776
Tonna v Mendonca [2019] NSWSC 1849
Trendtex Trading Corp v Credit Suisse [1982] AC 679; [1981] 3 All ER 520
United Equipment Pty Ltd v Australian Portable Buildings Pty Ltd (No 2) [2017] WADC 73
Van Dyke v Sidhu [2013] NSWCA 198
Vesuvius Australia Pty Ltd v V&M Davidovic Pty Ltd [2011] NSWSC 539
Vukmirica v Betyounan [2008] NSWCA 16
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Whitlock v Brew (1968) 118 CLR 445
Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907
Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265
Zugic v Vesuvius Australia Pty Ltd [2017] NSWSC 1185Walsh v Lonsdale (1882) 21 Ch D 9; [1881] 51 All ER Rep Ext 1690
Zugic v Vesuvius Australia Pty Ltd [2018] NSWSC 1544
Texts Cited: Bradbook, Croft and Hay, Commercial Tenancy Law (3rd ed, 2008, LexisNexis Butterworths)
G E Dal Pont (ed), Law of Agency (3rd ed, 2014, LexisNexis Butterworths)
J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis)
K R Handley, 'The Three High Court Decisions on Estoppel 1988-1990' (2006) 80 Australian Law Journal 724
K R Handley, Estoppel by Conduct & Election, (2nd ed, 2016, Thomson Reuters)
Category: Principal judgment
Parties: Damjan Zugic (Plaintiff)
Vesuvius Australia Pty Ltd (First Defendant)
Verekers Lawyers (Second Defendant)
Representation: Counsel:
JR Young (Plaintiff)
B Coles QC with PT Russell (Defendants)
HER HONOUR: In these proceedings, by amended statement of claim filed 11 September 2017, the plaintiff, Damjan Zugic, seeks equitable compensation from the defendant, Vesuvius Australia Pty Ltd (Vesuvius) (formerly known as Cookson Plibrico Pty Ltd).
The claim is based on a promissory estoppel said to arise out of dealings that took place in the period from 2006 to 2010 between V & M Davidovic Pty Ltd (V&M) and Vesuvius in relation to two parcels of land then owned by V&M in Unanderra, New South Wales. V&M was then a company owned by Mr Zugic's grandfather (Velibor Davidovic, to whom I will refer to as Boris) and Mr Zugic's uncle (Miroslav Davidovic, known as Mick, to whom I will refer to as Mr Davidovic). I will refer to the two parcels of land as the Doyle Avenue Land and the Sylvester Avenue Land, respectively. At the relevant time, on the Doyle Avenue Land (which was a parcel of land constituted by two adjacent titles) there was a factory, whereas the Sylvester Avenue Land was undeveloped (and is referred to in submissions as a "greenfield" site).
Before turning to the events giving rise to these proceedings, it is relevant to note that there is an issue as to Mr Zugic's standing to bring the claims he has made in these proceedings since the relevant dealings involved the company, V&M, in which he has no interest. Mr Zugic relies in this regard on a series of assignments (to which I will refer in due course) pursuant to which he claims to be in a position to maintain the causes of action brought in these proceedings. In particular, Mr Zugic alleges that he is the ultimate assignee of the "interests and legal rights" of V&M in earlier proceedings commenced in this Court against Vesuvius in 2010 (2010/84991), to which I refer in more detail below.
[4]
Initial proposal to lease Sylvester Avenue Land
In mid-2006, there was discussion as to a potential long term lease by Vesuvius of the Sylvester Avenue Land (see the affidavit sworn 11 February 2018 by Mr Davidovic at [14]ff; and the affidavit sworn 9 February 2018 by Mr Shaun Prince, a commercial property agent/development manager/property consultant, at [8]ff). Mr Prince's status in the relevant dealings between the parties is a matter in dispute in these proceedings.
According to Mr Prince, although he did not have "any detailed/written commercial arrangement with [Vesuvius] at that stage", he investigated the Sylvester Avenue Land site following a conversation with Vesuvius' then general manager (Mr David Evans) regarding that company's then need to find alternative premises to relocate its factory from Bulli. Vesuvius had previously owned the site at Bulli but had sold it and was occupying it under a lease from the new owner (the trustees of an Anglican Retirement Village trust) (ARV).
Mr Davidovic has deposed to an initial meeting with Mr Prince, in which he says that Mr Prince told him that he represented a tenant who "may be interested" in a long term lease of the land. Evidence of that conversation was admitted provisionally (pending the determination of Mr Prince's agency status, and subject to relevance) as evidence going to Mr Davidovic's state of mind and not for the truth of what was said by Mr Prince to him.
V&M retained solicitors to act for it in relation to the proposed lease (Verekers Lawyers) on 18 June 2006. A proposal for the lease of the Sylvester Avenue Land was prepared by Mr Davidovic in late July 2006 and forwarded to Mr Prince by email on 27 July 2006; draft lease conditions were forwarded by Mr Prince to Mr Evans on 3 August 2006; and a further amended draft lease was sent to Mr Evans on 5 September 2006. That proposal did not ultimately proceed (and no issue is here raised in relation to this) but it sets the scene for what later followed, namely that consideration was then given by the parties to a lease by Vesuvius of the Doyle Avenue Land (on which there was already a factory built) instead of the "greenfield" Sylvester Avenue Land.
As at around 2007 to 2008, Obnova Concrete Pty Ltd (Obnova) another company owned by the Davidovic family, was in occupation of the Doyle Avenue Land; and the Sylvester Avenue Land was vacant.
[5]
Steps taken in relation to a proposed lease of the Doyle Avenue Land
Mr Davidovic has deposed in his affidavit of 11 February 2018 to various discussions from September 2006 with Mr Prince in relation to the proposed lease by Vesuvius of the Doyle Avenue Land and to steps taken by V&M to purchase part of an adjoining lot (which he says was to provide the "requested access to the Princes Highway") (which purchase was completed on 11 April 2007); as well as to steps taken for the preparation of lease and other documents. Mr Prince subsequently and sent a fee proposal to V&M and invoiced V&M for his services relating to the Doyle Avenue Land in March 2007 (see Mr Davidovic's affidavit at [48]).
Among other things, a firm of traffic engineers (ML Traffic Engineers) was retained to prepare a functional layout plan of intersection treatment for a proposed access point on the Princes Highway and to prepare a traffic report for submission to the Roads and Traffic Authority (see Mr Davidovic's affidavit at [82]; and ML Traffic Engineers' report dated 23 May 2007). Relevantly, in light of later communications from V&M's subsequent lawyers (Rosier Lawyers) suggesting that there had not been articulation at an earlier stage of the need for access to the site by "B-doubles" (i.e., articulated vehicles with two pivot points - see Mr Atkins' at T 187.2), this report makes reference to the assessment task being that of assessing "vehicular access (to/from Princes Highway via the proposed road opening) and internal turning movements associated with semi-trailers and B-doubles (if achievable for this site) using AutoTURN". It also appears that as early as at late June 2007, it was perceived that there would or could be a problem about the new right of way by reference to the location of gas mains on the site; and that it was understood that the road opening treatment was to accommodate "semis and B-doubles".
[6]
Deed of Options for Lease
On 8 October 2007, at a time when Mr Evans was still the general manager of Vesuvius, V&M and Vesuvius (then still known by its former name) entered into a document entitled Deed of Options for Lease, pursuant to which V&M agreed to grant to Vesuvius an option for lease over the Doyle Avenue Land, that option being exercisable during the period from the date of the deed up to 11 January 2008, by written notice to V&M (cl 2.1); and Vesuvius granted to V&M an option to grant the said lease to Vesuvius exercisable during the period on and from 12 January 2008 up to 18 January 2008, by written notice to Vesuvius (cl 2.2). In other words, the Deed of Options for Lease provided for put and call options in relation to the Lease.
The Lease was defined in cl 1 (the definitions section of the Deed) as meaning "the Lease of the Property Leased for the term, at the rental and upon and subject to the covenants, terms and conditions contained in the Lease annexed to this Deed and marked with the letter "A"" (emphasis in original).
Clause 2.3 of the Deed of Options for Lease provided that "[a]n Agreement for Lease comes into effect on exercise of either of the options in clauses 2.1 and/or 2.2 above".
The terms of the Agreement for Lease which was to come into effect on the exercise of either of the said options were as set out in the Deed of Options for Lease (see cl 3). Provision was there made for certain works to be effected in respect of the Doyle Avenue Land (see Recital B and cll 4-7 of the Deed of Options for Lease). In essence, V&M was to undertake the Works specified in Item 3 of the Reference Schedule (the construction of particular capital improvements in accordance with a Plan and Schedule of Finishes and the provision of certain separately metered facilities) within 12 months from the date of the Deed of Options for Lease (Item 4 of the Reference Schedule) and Vesuvius was to have access to the property to undertake and complete its Fitout (as defined) of the property by 31 May 2008. There was provision in the Deed of Option for Lease for liquidated damages in the event that V&M failed to complete the Works within 12 months (cl 8); and cl 9 (headed 'Landlord's Default') made provision for the consequences of what were there specified to be events of default on the part of V&M.
Subject to the terms of the Deed of Options for Lease, the commencement date of the Lease was to be the date of the deemed completion of the Works (see cl 10).
Pursuant to cl 13, a security deposit of $560,000.04 plus GST was required to be deposited by Vesuvius with its solicitors upon the signing of the Deed of Options for Lease and there was provision for how that deposit was to be treated in various events. The security deposit was paid, and a controlled moneys trust account was opened by Vesuvius' solicitors, on 15 November 2007.
The form of lease annexed to the Deed of Options for Lease provided for a term of 20 years with an option to renew for a further period of 20 years, at a rent of $560,000.04 per annum by equal calendar payments of $46,666.67 with the first payment due on the Commencing Date. It included, by way of amendment to the registered memorandum to be incorporated into the lease, among other things, the addition of the following covenant as an essential term of the lease: a covenant whereby V&M agreed "to provide vehicular access to the Princes Highway as contained in Condition 30 of Annexure A to the Lease" (see cl 27.10, amending cl 16.09(b) by the addition of an extra sub-clause to that effect). Condition 30 provided:
30. ACCESS TO PRINCES HIGHWAY
The Landlord agrees that at all times during the term of this Lease or any extension or renewal thereof, the Landlord will ensure the provision to the Tenant of vehicular access for the Tenant, its employees, agents and invitees directly to and from the Property Leased to and from the Princes Highway to be secured by a right of carriageway over any intervening lands which comprise the whole or part of any separate allotment from the demised premises and shall be registered on the title thereof. The right of vehicular access shall be a minimum of 20m wide, shall permit heavy vehicular access and shall be maintained by the Landlord at all times with an appropriate level of finish. [emphasis added]
In terms, Condition 30 did not expressly refer to "B-doubles" although there appears to be no dispute that B-doubles would fall within the notion of heavy vehicles.
Mr Davidovic has deposed that at around this time, i.e., around October 2007, there were discussions as to an expanded factory on the Doyle Avenue Land; and he has also deposed to the steps taken in relation thereto (see his affidavit at [93]ff).
[7]
Exercise by Vesuvius of option for lease of the Doyle Avenue Land
It is not disputed that, on 8 January 2008, Vesuvius validly exercised the option contained in the Deed of Options for Lease. Nor is it disputed that this gave rise to a binding agreement for lease of the Doyle Avenue Land (amounting in equity to an equitable lease - see Walsh v Lonsdale (1882) 21 Ch D 9; [1881] 51 All ER Rep Ext 1690) on the terms of the lease annexed to the said deed. It was described colloquially, in submissions for Mr Zugic in these proceedings, as "money in the bank". It is, however, relevant here to note that commencement of the lease was not to occur until the deemed completion of the Works as provided for under the Deed of Options for Lease. Therefore, insofar as Mr Zugic emphasises the value to V&M of the rental stream provided for under that agreement for lease it was contingent on V&M duly completing the Works required in respect of the Doyle Avenue Land.
Mr Davidovic has deposed that on 30 January 2008 the agreement for lease in respect of the Doyle Avenue Land was signed by V&M (see Mr Davidovic's affidavit at [111]).
Following the exercise by Vesuvius of the option, Obnova vacated the Doyle Avenue Land (see Mr Davidovic's affidavit at [103]).
It would seem that, almost from the time that the agreement for lease in relation to the Doyle Avenue Land came into existence, there were delays experienced or expected to be experienced in relation to completion of the Works.
By letter dated 5 March 2008, V&M's solicitors wrote to Vesuvius' solicitors advising that, due to inclement weather, the completion of work would be delayed but that their client expected to have the works completed at least one year from the date of exercise of the option (i.e., one year from 8 January 2008 as opposed to one year from 8 January 2007, that being the date of the Deed of Options for Lease). The letter stated that development approvals for the works referred to in the lease were being lodged that week as well as the proposed development of the adjoining land "to which a further agreement has been reached between the parties" (and which it was said would be reflected in a document to be prepared shortly). The letter also advised that, given the delays as a result of inclement weather, it appeared that the access required for fitout purposes would be delayed (i.e., from 31 May 2008 as per the Deed of Options for Lease) to at least the middle of July 2008. The letter requested that Vesuvius' solicitors discuss those matters with their client "to review the proposed date for completion of the work as set out in the original deed of option for lease".
The response from Vesuvius' solicitors to the request for review of the proposed date for completion of the work required under the Deed of Options for Lease, by letter dated 2 April 2008, was to question the reasonableness of the extension of time sought by V&M and to request V&M to reconsider its position. The letter noted that the obligations in respect of completion of works contemplated under the "present arrangement" (i.e., under the agreement for lease that had come into existence on exercise of the option) were for Vesuvius to have access to the site to carry out fitout works by 31 May 2008 and for the building works to be completed by V&M by 8 October 2008.
By this time, (i.e., by April 2008) it seems that Mr Evans had left Vesuvius, apparently in acrimonious circumstances (see T 5.45-50).
Mr Paul Armitage became the general manager of Vesuvius at that time. According to Mr Armitage, there was no effective hand-over at the time (see his "note to self" - referred to at [73]ff below).
Mr Davidovic has deposed to a meeting on 8 April 2008 with various persons (including Mr Armitage and Mr Prince) at his office at the Doyle Avenue Land site at which he says there was a discussion as to the proposed expansion of the factory and Mr Prince raised the possibility of the Sylvester Avenue Land site again. Mr Davidovic says that following this conversation, he was advised by Mr Prince on 22 April 2008, that Vesuvius had agreed to extend the date for completion of the building works on the Doyle Avenue Land to 8 March 2009 (see Mr Davidovic's affidavit at [130]-[132]).
[8]
Negotiations in relation to the Sylvester Avenue Land
By letter dated 29 April 2008, V&M's solicitors noted that a new end date for completion "within the context of the current arrangement" had been agreed between Mr Prince (who was described in their letter as their client's consultant i.e., V & M's "consultant") and Mr David Cox of Vesuvius for the purpose of granting Vesuvius occupation on 8 March 2009 and sought confirmation "in due course". That letter referred to instructions from V&M "that the consultant has been in discussions with your client's new management for the past four weeks over the possibility of either expanding the current site to incorporate an adjoining site, owned by our client, or relocating your client's [sic] to another potentially more suitable site also owned by our client". (For V&M, it is said that "relocating" in this context meant "substitution" of the premises the subject of the existing agreement (i.e., substitution of other premises for the Doyle Avenue Land - see T 78, although this begs the question as to how the substitution was to be effected).
By email on 14 May 2008 to Mr Prince, Mr Armitage referred to "our discussion on the telephone" the previous day and confirmed "our [i.e., Vesuvius'] position" as follows:
1. If the greenfield site option [i.e., a lease of the Sylvester Avenue Land] is cost effective for us we prefer to go this route.
2. We would like to have rental proposals for a 7500m2 and 8500m2 on the greenfield site.
3. We would like the proposals to include a 10 Tonne crane with a span of 20m. This would run on track 40m long.
4. We will be moving the Ball Mill and Crusher to the new site and will require the necessary foundations to accommodate them.
5. We would need to be in a position to move our plant from Bulli to the new site in April next year.
6. At the end of the 20 year lease we would like to have an option to but [sic; buy] the site or continue with the rental.
Mr Prince's response, by email the same day, was to the effect that he would discuss Mr Armitage's proposal with the directors further and come back to him in the next day or so but in the interim he asked that Mr Armitage consider "the following based on my present understandings", there setting out various matters in relation to the proposal, and stating that Mr Armitage's proposed April commencement date was in line with Obnova's current expectations for "project delivery".
On 5 June 2008, Mr Prince sent a further response to the above 14 May 2008 email to Mr Armitage, advising inter alia that April 2009 "is considered a reasonable time frame - given near normal circumstances re the approval process, weather and etc".
On 5 June 2008, Vesuvius' lawyers responded to V&M's lawyers' letter of 29 April 2008 (see [29] above), advising that Vesuvius would accept a new commencement date of 8 March 2009 but stating that:
What remains unclear, however, is whether the premises the subject of the lease is to be:
as presently described;
expanded to incorporate an adjoining site; or
an alternative mutually acceptable site.
Please let us know what your client's position is in that regard so that we can obtain instructions. It appears likely that both the agreement for lease and lease will require amendment.
We assume that such matters have to be determined expeditiously to enable a development application to be lodged and works to commence and we would be pleased to hear from you at an early date.
Pausing here, it is apparent from the above correspondence that Vesuvius' solicitors were foreshadowing, at the very least, the need for amendment of the existing agreement for lease/lease documents to reflect the discussions to which reference was made in the 29 April 2008 letter and required their client's instructions in that regard. There was no suggestion that some immediately binding arrangement to "substitute" one property for another under the Lease arrangements without some formal documentation had been reached. That is reinforced by Mr Prince issuing new lease terms and conditions in relation to the Sylvester Avenue Land (see below).
On 17 June 2008, Mr Prince forwarded to Mr Armitage a document headed "Re; Agreement to lease certain land and buildings at Unaderra" containing "Principal Terms and Conditions" in respect of a lease of land and buildings at the Sylvester Avenue Land. Those included a lease term of 40 years (being 20 years plus a 20 year option), with a commencement date of April 2009, and a rental of $744,000 per year paid monthly. For a number of the terms and conditions, the letter stated "[a]s per current agreement" (which can sensibly only mean the then existing agreement for lease in relation to the Doyle Avenue Land). The letter bore the signature block "Shaun PRINCE For Obnova Pty Ltd" (my emphasis).
From internal Vesuvius emails around 20 - 24 June 2008 between Mr Armitage and an overseas executive (Mr Bikard), it appears that Mr Armitage did not have on file a copy of the "current agreement" to which Mr Prince had referred. Obnova sent an email on 24 June 2008 to its solicitors asking them to "forward a copy of the lease … The new Manager would like to have a copy on file". (Although some scepticism was expressed in the course of his cross-examination as to this request, as adverted to earlier Mr Armitage's evidence was, in effect, that there was no "hand-over" from Mr Evans; and it is therefore not implausible that Mr Armitage may not have had on file (or may have wanted to confirm) the documentation to which Mr Prince had been referring in his 17 June 2008 document.)
After communications with others at Vesuvius, Mr Armitage then emailed Mr Prince on 30 June 2008 (an email on which Mr Zugic here places considerable weight):
I have approval for the new site now.
I will speak to our solicitors this morning so that we can get the lease sorted out. [Emphasis added]
It would appear that Mr Armitage did indeed speak to his solicitors, as he had said he would, because, by letter dated 3 July 2008, V&M's solicitors then wrote to Vesuvius' solicitors acknowledging receipt of a letter of 1 July 2008 enclosing a "basic agreement for lease" and referring to their understanding that the respective clients had reached a "new agreement" in relation to the Sylvester Avenue Land. The letter sought confirmation as to whether Vesuvius' solicitors wished to attend to the preparation of the agreement for lease and new lease similar to the one relating to the Deed of Options for Lease. (Pausing here, clearly what was there contemplated was that there would be new documentation entered into in respect of the different premises now proposed to be leased (i.e., the Sylvester Avenue Land rather than the Doyle Avenue Land); which is consistent with an understanding between the parties that the new arrangements were to be formally documented.)
By email on 28 July 2008, Vesuvius' solicitors sent to V&M's solicitors (at the same time as submitting the draft documents to their client) the following draft documents: a deed of surrender of current lease (noting that the "current lease" had been signed by the parties but not registered); an agreement for lease to replace the Deed of Options for Lease previously signed by the parties; and the lease with annexure A thereto and registered memorandum E485492. The letter noted that there were a number of clauses in the agreement for lease that required further information to be provided by the parties. The email stated that "[w]e are, of course, subject to further instructions from our client and submission of these documents is not intended to create a binding agreement between the parties". (Pausing here, this is inconsistent with any understanding or earlier intention that there was already a binding agreement in place for the new site.)
On 29 July 2008, V&M's solicitors responded by facsimile transmission with some suggested amendments to the agreement for lease, including as to the time for completion of the works and the date for provision of access for fitout works.
Over the period from 30 July 2008 through to August 2008, it appears that steps continued to be taken with a view to progressing the proposed lease by Vesuvius of the Sylvester Avenue Land.
At the same time, it seems that there were discussions between Vesuvius (Mr Armitage and Mr Cox) and representatives from ARV, as to an extension of the lease then held by Vesuvius over the Bulli site (where Vesuvius was then operating its factory). Mr Prince is recorded as having been in attendance at a meeting at which ARV indicated it would consider the request for an extension of the lease term "in light of the obligations of ARV to Stockland whereby [Vesuvius] must cease operation of certain plant and equipment by April 2009 (if ARV and [Vesuvius] are to benefit from an incentive payment by Stockland), and relocate from the site by August 2009" [emphasis in the original].
By letter dated 12 August 2008, Vesuvius' solicitors responded to the letter dated 29 July 2008 from V&M's solicitors, seeking advice as to whether V&M would be agreeable to a 1 June 2009 date (for completion of the works) and noting that Vesuvius "must vacate its current premises on 31 July 2009".
By letter dated 14 August 2008, V&M's lawyers stated, among other things, that:
It appears we can now proceed to finalisation of the Agreement however, the day of completion can only be brought forward to the 30 June 2009. As you can appreciate our client will have limited time to complete this project and at this point in time would be stretch [sic] to even complete the building by the 30 June 2009.
[9]
Position as at late 2008/early 2009
It is clear from the contemporaneous documents that, in the period from late 2008 to early 2009, steps were being taken with a view to the project (i.e., the construction of a building on the land for the purposes of the proposed lease by Vesuvius) proceeding at the Sylvester Avenue Land. However, it is also clear that the parties' lawyers contemplated that the agreement for lease of the Sylvester Avenue Land would be the subject of written documentation.
On 5 January 2009 there was a meeting between Mr Prince and Mr Armitage (at which Vesuvius' then financial controller, Ian Heggie, also attended (see the email of that date from Mr Prince to Rosier's solicitors - [216] below). At that meeting, according to Mr Prince's email of 5 January 2009, a suitable occupation date of March 2010 was agreed and it was agreed that the lease would be signed by the end of January 2009. (This forms the basis of the alleged Second Sylvester Representation - see further below.)
In mid-February 2009, Mr Swinbanks commenced with Vesuvius as its plant relocation project manager. In the "note to self" later prepared by Mr Armitage (see below at [73]ff), Mr Armitage's recollection (as at March 2010) is recorded as being that Mr Swinbanks visited the site in February 2009 and that it was not to his (Mr Swinbank's) liking. Although Mr Davidovic's affidavit suggests that this visit did not happen until July 2009, the February 2009 date is consistent with the overall chronology of events.
[10]
Documentation of surrender
Meanwhile, different solicitors had become involved in the matter for V&M. By letter dated 20 February 2009, Rosier Partners wrote to Vesuvius' solicitors in relation to the "Proposed Surrender of Lease and Termination of Agreement for Lease" and "Proposed Agreement to Lease and Lease", advising among other things that:
We note that some efforts have previously been made to document these transactions but they have not so far been formalised. Our client wishes to take the matter forward as soon as possible and we understand that your client takes the same position.
The letter went on to make comments as to the proposed lease for the Sylvester Avenue Land, attaching a draft of the lease; advised that the solicitors had no comments in relation to the surrender of lease; and attached a redrawn agreement to lease. As to the agreement to lease, the letter stated that the advice given by the "development manager" (Mr Prince) was that the realistic date for completion should be fixed at 31 March 2010, though stating that their client would endeavour to complete before that date. (That date was later changed to 1 July 2010 - see email of 5 May 2009 from Mr Prince to Mr Armitage and Mr Swinbanks.) The letter referred to a delay in progressing the matter which it was said "is not wholly due to the fault of either party: both have contributed".
A further letter dated 29 April 2009 was sent by Rosier Partners, enclosing an amended form of the agreement to lease and of the annexure to the lease, but noting that, as some of the changes had been made without their client's instructions confirming the changes, they reserved their client's rights in respect of the form of the agreement. The letter stated the solicitors' understanding that Vesuvius had agreed to the commercial terms contained in the documents and was "now very keen to proceed". The letter also said that "[i]t has been suggested to us that the exchange may take place directly between the parties as soon as 1 May 2009". The letter concluded that the surrender previously prepared by Vesuvius' solicitors would need to be executed by the parties when they entered into these documents.
Vesuvius' solicitors responded on 4 May 2009 that they now had instructions urgently to review the documents.
Then, by email dated 11 May 2009, Mr Prince asked Mr Armitage to consider certain matters and to advise of his agreement (or not) to the proposed changes. Relevantly, what was there set out was a new timetable, with the commencement date in the agreement to be "pushed out from the now July 1st 2010 to say October 1st 2010". The change to the key dates in the agreement was put forward by reference to the likely dates for relevant Ministerial consent to the development.
By late May 2009 there was still no answer from ARV on the requested lease extension of the Bulli site, although Mr Armitage received an email on 28 May 2009 from Trevor Ratcliff of ARV setting out key issues on which it was said ARV would want agreement. The then proposed extension was to 2 August 2010.
[11]
Evaluation of other (Port Kembla) site
In June 2009, Mr Robert Donsante was appointed the financial controller of Vesuvius. Mr Donsante agreed that he inspected the Sylvester Avenue Land site shortly after he became financial controller (see T 167-168). Mr Armitage seemed to suggest that the visit did not occur until 2010 (see T 93) but nothing here turns on this. According to Mr Armitage, Mr Donsante was "very negative" about the site (see [78] below). (Mr Donsante himself did not accept that characterisation of his views - see T 167-168. He initially said he did not consider it was a matter of like or dislike, but of operational considerations; and then later, in response to a question as to whether he had a negative view of the site, said he did not recall - see T 167-168).
By email dated 1 July 2009, Mr Ratcliff of ARV set out varied proposed key terms of the new ARV lease, including a proposed term through to 2 February 2011 but with a lessee "break clause" allowing termination of the lease after 12 months on the giving of notice not later than 3 May 2010. Vesuvius entered into a new lease with ARV in relation to the Bulli site commencing on 3 August 2009 for an 18 month term.
By this stage, it seems that the RTA had been unwilling to allow Vesuvius' "use of the crucial Princess [sic] Hwy access" (see Mr Prince's email to Mr Armitage of 7 July 2009) and Mr Prince had advised Vesuvius that the date in the agreement for planning consent would need to be changed to at least 30 October 2009, with a consequential change to the commencement date in the agreement to "about" 1 November 2010. By 1 September 2009, Mr Prince was advising that the planning consent could be issued by, say, the of November 2009.
In mid-October 2009 (it seems on 11 October 2009), Mr Donsante suggested to Mr Armitage that they look at another site at Port Kembla (see T 167-168; T 94) and on 12 October 2009, various of the Vesuvius personnel (but not Mr Armitage) visited that other site (see T 95-97), this being the site to which Vesuvius ultimately relocated its factory business.
At this point in the chronology, it is relevant to note that Mr Davidovic accepts that by this time (mid-October 2009), V&M's bank had called up a loan to V&M (asserting that there had been events of default) (T 64 8-15), which Mr Davidovic says then led to V&M obtaining private financing from another financier (Windlock) in the order of $6.5 million, all of which (with the exception of $100,000) was used to repay V&M's initial bank facility by around late November 2009 (see T 66 1-45). (It is noted by Vesuvius and seems to have been accepted by Mr Davidovic in cross-examination that, less than a year later, V&M was in default under its new finance arrangements - see T 67.38. Mr Davidovic said in the witness box that this was because by then Vesuvius had taken proceedings against it in 2010 - T 66.49 (see below)).
Mr Armitage's recollection (in his March 2010 "note to self") was that on 20 October 2009, there was a conversation with Vesuvius' solicitor about the rescission of the Doyle Avenue Land lease (in which there was reference to an intention to commence looking at alternative sites if not satisfied in 14 days).
There was further internal communication within Vesuvius as to alternative sites on 28 October 2009 and Mr Armitage's March 2010 "note to self" records that on 2 November 2009, Mr Donsante received a tentative proposal from another entity in relation to a site at Port Kembla (which Mr Armitage's "note to self" records he considered to be too expensive a proposal and decided not to pursue).
[12]
Termination of lease arrangements in relation to Doyle Avenue Land
By letter dated 22 October 2009, consistent with Mr Armitage's recollection of a conversation to that effect with the solicitor on 20 October 2009, Vesuvius' solicitors wrote to Rosier Partners, stating that:
We note that although our clients have not yet entered into a legally binding agreement they have been working together for some time with a common interest of finalising a lease arrangement for the property [that properly being defined in the header of the letter as the Sylvester Avenue Land - Lot 2, Sturdee Avenue, Unanderra].
Entry into the arrangement is dependant [sic] upon obtaining a planning approval for the use of the property on terms satisfactory to our client.
At this stage, the consent authority appears disinclined to provide an approval in terms acceptable to our client. In particular, there are issues with heavy vehicle access to and from the property and access to the Princes Highway.
An overarching concern is that of time constraints. It is uncertain how much longer it will be before the consent authority determines the matter. Our client has to vacate the existing site before 2 February 2011 and to achieve this goal requires a lead time of 5 months to relocate plant and equipment.
In the circumstances, if our client cannot be satisfied within the next 14 days that:
• a planning approval will be forthcoming shortly on terms acceptable to it; and
• proposed legal arrangements between the parties are satisfactory to it
it will, with regret, commence looking at alternative arrangements and sites with other landlords.
On the same day, Vesuvius' solicitors issued a default notice pursuant to cl 9.1 of the Deed of Options for Lease in relation to the Doyle Avenue Land under cover of a letter dated 22 October 2009 to Verekers Lawyers (the former solicitors for V&M but whose details were included in the Deed in respect of the service of notices). The default notice specified, as the relevant default, the failure to complete works within 12 months of the date of the Deed as required by cl 9.1(b). The covering letter stated that:
We understand the parties are currently negotiating an arrangement in respect of another property in Unanderra. We have however been instructed to, as a procedural matter, finalise the arrangement between the parties in relation to the Doyle Avenue property to which the Deed relates.
A copy of the default notice was also forwarded to the solicitors who were by then acting for V&M (Rosier Partners), who responded on 22 October 2009 that:
It may be the fact that our client has not performed the obligations set out in the Agreement for Lease, but it seems clear on any reading of the facts that your client has at the very least waived any rights it may have had as a result of the alleged default. Accordingly, our client entirely reserves its position in relation to the notice.
Obviously, notwithstanding this, it is our client's hope that this issue never falls for determination and that, with goodwill on both parts, your client's need for premises can be satisfied on the Sylvester Avenue site in a timely way.
That provoked the response from Vesuvius' solicitors, by letter dated 26 October 2009, that:
We would have thought it common ground that both parties have long since abandoned the agreement for lease of this site. One of the benefits of our client's notice is to provide certainty to both parties in that regard.
While our client's goodwill is assured your client will appreciate that the time constraints contemplated by the parties have long since been exceeded. Our client is now compelled to protect its ongoing business.
Meanwhile, by email on 27 October 2009, Mr Prince advised Vesuvius that, at a Department of Planning meeting that day, it was agreed that Vesuvius could use the Princes Highway exit "as we had proposed (ie one way, with left turn only)"; and that there was discussion as to what heavy vehicle types could be utilised on site. Mr Prince sought advice as to what "HV" at a minimum Vesuvius would require and what would be ideally preferred "apart from B-double". Mr Prince raised as an issue that B-doubles could be employed only if approved and gazetted for use from Orange Grove Road to Sylvester and that the maximum size for a Heavy Vehicle would be 12.5m. The response (from Mr Clint Atkins at Vesuvius) on 4 November 2009 was to advise that the minimum truck movements based on using a 12.5m rigid truck would be 8 per day but that realistically it would be more likely 10 to 12 a day. (I note that the project approval ultimately obtained on 15 August 2010 was for heavy vehicle access restricted to vehicles up to 12.5m in length unless otherwise agreed to by the Director-General in consultation with the RTA and the Council; truck ingress was restricted to Sylvester Avenue via Orange Grove Avenue and truck egress was restricted to left out onto the Pacific Highway.)
By letter dated 29 October 2009, Rosier Partners advised Vesuvius' solicitors that:
We are advised by Mr Prince, the property consultant to our client, that at an on-site meeting last Tuesday 27 October 2009, the Roads and Traffic Authority withdrew its objection to the use of access to and egress from the site by way of the Princes Highway. [emphasis added]
By letter dated 18 November 2009, expressed to be without prejudice to their client's default notice, Vesuvius' solicitors enclosed revised drafts of the agreement to lease and annexure thereto in relation to the Sylvester Avenue Land.
By letter dated 19 November 2009, Vesuvius' solicitors issued a Termination Notice in respect of the Doyle Avenue Land.
Relevantly, by letter dated 20 November 2009, referring to a meeting with the solicitors and with their client on 18 November 2009, V&M's solicitors stated, among other things:
Default notice
We note that your client has terminated the agreement for lease. We acknowledge that there has been default under the terms of the agreement for lease and accept that it is terminated. However, this acceptance is entirely without prejudice to our client's position that the default has been contributed to, waived and/or encouraged by your client and that the parties therefore have no continuing rights under the notice. Our client will vigorously oppose any proceedings which your client may commence pursuant to the default and termination.
Milestones for performance of the proposed Agreement to Lease
Before turning in any detail to all of the amendments which you propose to our draft Agreement to Lease, we feel that we should deal with what seems to be a threshold issue, namely the proposed new timelines for approval and construction.
In our letter to you of 19 December 2008, we said, amongst other things:
The Commencing date needs to be agreed. It is the unfortunate fact that the delays in finalising the arrangements force the Commencing date out. If the matter can be formalised before Christmas, our client could commit to a 31 March 2010 Completion date. Further delays beyond this will have the unfortunate effect of pushing the date further out.
…
… our client's consistent position as to the likely timing of completion from the date of approval would be more than 12 months. Nothing has really changed to alter that, except your client now wants additional works (kerb and guttering to enable semi-trailers and B-doubles to exit the site to the Highway and a second storey on the office) which will extend rather than contract the time to be taken, and perhaps the fact that your client has only recently calculated the time which is required to effect its own fit-out works. However, it has never been suggested to your client that these time frames were elastic.
Given the consequences which your client seeks should flow from a breach, our client cannot agree to an unrealistic commencement date. It does this not only for its own protection, but also for your clients. It does not want your client to be lead to believe, by the fact of a legal commitment to particular dates, that milestones and completion can be achieved by those dates.
As to the milestones suggested by you, these are not consistent with our client's intended method of construction. Our client is not inherently opposed to some form of measurement of timely performance by reference to specific milestones, but cannot accommodate those proposed by you client.
…
Rent
…
The rent will also need to increase to reflect the commercial cost of the provision of the additional office space, and of the provision of any additional facilities to accommodate B-Doubles onto and off the site as well as anything else which you client now seeks but which has not been the subject to previous agreement. We note that the need for assured B-Double access was not articulated to our client until quite recently and it was our client's understanding that only semi-trailers would be needed to deliver to and from the site.
…
Conclusion
…
Our client … cannot, in its own interest as well as that of your client, commit to a completion date that is wholly unrealistic (which, with respect, your client's proposal is).
Our client acknowledges that this may mean that your client seeks to be accommodated elsewhere and if that be the case, it does so with our client's best wishes.
If, nonetheless, your client wishes to proceed, it will necessarily need to be on terms which allow for a timetable such as that above. The fact that our client is contractually bound to complete by particular dates will not in any way prevent it from using its best endeavours to complete earlier and if your client manages to find ways by which that may be achieved then our client will welcome the assistance.
…
[emboldening added; underlining as per original]
The response to this, by letter dated 23 November 2009 from Vesuvius' solicitors, after noting the inability of V&M to build a facility within the time required by Vesuvius, was to the effect that Vesuvius would commence searching for another location to which to relocate. (It is clear that this is what then occurred, leaving aside the fact that some steps to locate alternate sites had already taken place by then, since Mr Swinbanks forwarded to Mr Armitage and Mr Donsante a resumé of potential options on 1 December 2009, commenting that it was to be read with a previous email of 27 November.)
Following that 23 November 2009 communication, it appears that there was a meeting between Mr Prince and Mr Armitage (after which Mr Prince prepared some draft meeting notes which he emailed to Mr Armitage on 26 November 2009 seeking the latter's comments). When Mr Armitage responded with comments to those draft meeting notes, Mr Prince's response was a somewhat curt:
I have not read the below and will delete it. I have no further interest in this project.
I would infer from this that, by then, Mr Prince at least regarded his arrangements as a consultant with V&M as being at an end (certainly there was nothing in writing suggesting that Vesuvius had taken any step to terminate, or considered itself in a position to terminate, Mr Prince's involvement in the "project").
[13]
Mr Armitage's March 2010 "note to self"
Before leaving the chronology of events, it is convenient here to refer in more detail to the note that Mr Armitage prepared (the "note to self" to which I have already adverted above). Mr Armitage says that he prepared this note in March 2010, over the course of about a month, after he appreciated that there was likely to be a dispute as to the matter.
The note records (among other things) that: Mr Armitage returned from working in North Asia to become the general manager of Vesuvius' Oceanic operations on 24 March 2008; his predecessor (Mr Evans) was involved in a court case against the company and not available to assist with a hand-over; one of his projects was to relocate the Bulli site to a site in Doyle Avenue by 2 February 2009; in mid-April he visited the site with Mr Prince and was "under impressed" with what he saw (noting that the plant was cramped, road access was difficult, and he envisaged that operating on the site "would be an OHSE nightmare"); and; on 11 May 2008, Mr Bikard (Vesuvius' President of Manufacturing) and Mr Armitage visited the Doyle Avenue and Sylvester Avenue sites with Mr Prince.
The note recorded that, on 14 May 2008, Mr Armitage and Mr Bikard agreed that the greenfield site was the "preferred option"; and that, on the same day, Mr Armitage informed Mr Prince by email of this and that he (Mr Armitage) wanted to be able to move into the new site by April 2009. The note further recorded that on 30 June 2008 he (Mr Armitage) emailed Mr Prince to tell him that he had now received approval for the new site and would contact the solicitors to let them know.
Mr Armitage's note then sets out various entries in relation to the process for development approval, request to extend the Bulli lease, and records that on 18 December 2008 Mr Prince asked to meet "over some final issues so the preparation of the lease documents could take place". The note records that on 5 January 2009 Mr Armitage met Mr Prince and that:
The topic was who should pay for the consultants' fees. It was agreed in general that Obnova would pay for the general reports and that [Vesuvius] would pay for the more specific reports.
Mr Prince was to get prices for various reports.
The planning application was to go in that week.
The pre-assessment, lodgment, NSW requirements and approval was to take about 3 months.
The completion date for the project was to be 1st April 2010.
The note next records (as adverted to earlier) that on 16 February 2009 Mr Swinbanks started his role as the plant relocation project manager; that Mr Swinbanks visited the site in February 2009 and expressed his opinion that the site was not to his liking (he felt that it was too small, he did not like that there was no mains sewerage and he had concerns about the ability to have trucks depart via Princes Highway).
In June 2009, Mr Donsante was appointed Financial Controller for Vesuvius. Mr Armitage's note records that Mr Donsante was "very negative" about the Sylvester site from first seeing it that month.
Mr Armitage's note records a meeting on 2 July 2009 in Bulli (with himself, Mr Prince, Mr Donsante, Mr Cox and Mr Fox) and that:
Mr Prince presented us with drawing [sic] of the Sylvester Ave site with various turning circles illustrating that it was possible to turn trucks round on the site with a view to exiting the site via Sylvester Ave. He was having problems with the RTA allowing us to exit the site directly onto Princes Hwy. He was told that one of the attractions of the site was that we had been told that direct access with B Doubles to Princes Hwy was possible. That if it was not now possible then it was a deal breaker. From an OHSE perspective we were not prepared to consider turning trucks around on site. …
The note records that: on 11 October 2009, Mr Donsante emailed Mr Armitage proposing that they look at another site in Port Kembla; that on 12 October 2009 Mr Swinbanks, Mr Cox, Mr Fox and Mr Donsante visited that site and had a quick look at it; and that Mr Swinbanks emailed suggesting that they should be interested in taking a closer look at the site. Mr Armitage's position at that stage (as recorded in the note), which he relayed to Mr Swinbanks, was that the first priority was to get planning approval for the Unanderra site (Sylvester Avenue) and that "when it goes through this is where we were moving too [sic]". The note records that on 20 October 2009 Mr Armitage again told Mr Swinbanks that the focus was "with Unanderra".
Mr Armitage's note then records that, on 28 October 2009, Mr Donsante asked Mr Swinbanks for building requirements to provide to Port Kembla owners to explore alternatives; and that on 2 November 2009, Mr Donsante received a tentative proposal from the owner of a site at Port Kembla but it was decided not to pursue it at that time, as the proposal was expensive and required the planning process to be undertaken again.
The note then goes on to record various meetings in relation to the respective sites. First, a meeting on 18 November 2009 (at Doyle Avenue) with Mr Davidovic, Mr Armitage, Mr Donsante and the solicitors the purpose of which was said to be, inter alia, to terminate the Doyle Avenue lease, to highlight Vesuvius' concerns about progress on the project, and "to present a new lease document that better reflected our needs and deleted items that were by now historical". Second, a meeting on 19 November 2009 with Mr Davidovic, Mr Prince and others at Doyle Avenue at which it is said that Mr Prince "announced that certain essential pieces of equipment used in the Vesuvius process may be precluded from the EA approval". The note records that following this meeting, Mr Armitage and Mr Davidovic had discussions in which Mr Armitage says that each expressed frustration with Mr Prince.
The note records various steps being taken in relation to both the process for approval of the Sylvester site and assessment of other sites; a meeting between Mr Armitage and Mr Davidovic at Bulli on 30 November 2009 (in which Mr Armitage says he gave Mr Davidovic a list of items he needed confirming "for us to move forward" and says he told him that he still preferred to move to Sylvester Avenue); and further steps taken during the period through to March 2010.
The note records that, on 25 February 2010, Mr Armitage instructed Mr Swinbanks to find suitable sites, go out to tender and come back to him with a recommendation as to which site to move to. Mr Armitage was cross-examined as to this so-called "tender" process (to which I refer in due course).
The note records that on 2 March 2010 there was a meeting in Mr Armitage's office with Mr Swinbanks and Mr Donsante that Mr Swinbanks presented the results of the tender; that Mr Swinbanks had looked at four sites "and invited four companies to tender including Mr Davidovic"; that the Port Kembla site was Mr Swinbanks' recommended site and that Mr Armitage and Mr Donsante accepted that recommendation. The note goes on to record that:
Sylvester Ave was the second preferred site. It achieved this only by being the cheapest site.
It was agreed that our preferred location was Port Kembla and we would seek to agree a lease for this site.
The third and fourth place tenderers were to be informed by myself. [the note records that Mr Armitage did this by letters on 3 March 2010]
It was decided to keep Sylvester as a back up unless the preferred Port Kembla site fell through
The note also records a meeting on 30 March 2010 at Bulli (the site of the land the subject of the ARV lease) between Mr Armitage and Mr Davidovic (with a third party, Mr Di Donato, "as a witness"); at which it is said that Mr Davidovic wanted Mr Armitage to sign a letter to the Department of Planning "telling them that Prince consulting acted on behalf of ourselves plus Davidovic and that we were committed to the completion of the assessment process". (Corroboration of this is available in the form of a letter signed by Mr Davidovic to that effect, with space for a signature by Vesuvius left incomplete.) Mr Armitage's account is that he would not sign the letter until the solicitors looked at it. Mr Armitage's note then records, among other things, that he told Mr Davidovic if he did not get the deposit back for Doyle Avenue "we would be taking legal action to recover it" and that "we were heading to court and should not be talking". The note records a subsequent telephone conversation on 20 April 2010 with Mr Davidovic, in which Mr Armitage asserts that Mr Davidovic threatened him. The note records that it was agreed by he and Mr Donsante after that incident that "under no circumstances were we prepared to consider any of Mr Davidovic's properties as an option".
For Mr Zugic, it seems to be suggested that this was a self-serving note (it being pointed out that some aspects of the note were not included in the affidavits sworn by Mr Armitage and Mr Donsante in the proceedings - namely, those relating to the tender process).
Pausing here, much of the content of Mr Armitage's note (which Mr Armitage readily accepted was prepared in contemplation or anticipation of a dispute between the parties), is consistent with contemporaneous documents (which will speak for themselves and to which I have already referred). I accept that there is a risk that the interpretation placed by Mr Armitage on the events recorded in the note might be self-serving, consciously or otherwise, since the note was prepared at a time when Mr Armitage considered that there would be litigation, and when (on Mr Armitage's account, though this is disputed by Mr Davidovic) he considered that he had been subjected to an unacceptable threat from Mr Davidovic. Nevertheless, I consider that the note is useful as a relatively contemporaneous record of Mr Armitage's recollection of events (though I treat it with a degree of caution, as indeed I do all of the respective witnesses' oral accounts of events wherever that account is not corroborated by contemporaneous documents).
[14]
2010 Proceedings
In 2010, Vesuvius commenced proceedings against V&M (2010/84991). In those proceedings, Vesuvius obtained summary judgment on its claim to be entitled to be repaid the security deposit of $560,000 paid pursuant to the Deed of Options for Lease in respect of the Doyle Avenue Land (see Vesuvius Australia Pty Ltd v V&M Davidovic Pty Ltd [2011] NSWSC 539 at [28]-[47] per Biscoe AJ).
Boris had filed a cross-claim in those proceedings on behalf of V&M. In 2012, orders were made dismissing that cross-claim (by then this was a further amended cross-claim). Leave was not granted for the filing of a proposed second further amended cross-claim. Hence, as subsequently noted by Darke J in Davidovic v Vesuvius [2014] NSWSC 1066, there was no determination on the merits of V&M's cross-claim in those 2010 proceedings (see at [8]).
[15]
Deeds of Assignment
V&M was placed into administration in February 2012 and a liquidator was apparently appointed to the company in December 2012 (see Darke J's judgment at [10]). Subsequently, Mr Davidovic went into bankruptcy.
Three deeds of assignment were later executed.
First, a Deed of Assignment apparently dated 3 August 2012 between V&M, its liquidator, Mr Steve Nicholls, Velibor (Boris) Davidovic and Mr Davidovic (the directors and shareholders of V&M in 2012). At the time of the First Deed of Assignment (in 2012), the 2010 proceeding was still on foot.
What was assigned in 2012 (in terms) (see below) were V&M's rights and interests in what was on foot in the 2010 proceeding (including, it is here contended, the right to continue the causes of action). (Reference is made by Mr Zugic to the fact that Parker J (in Zugic v Vesuvius Australia Pty Ltd [2017] NSWSC 1185) (Zugic v Vesuvius) subsequently considered that the assignment was not necessarily limited to the causes of action which had been propounded in the 2010 cross-claim (see at [19]) and that it might be that the reference to "Proceedings" in the Deed of Assignment should be understood as including the assignment not just of the causes of action then being expressly propounded but also of causes of action that might properly be propounded by way of amendment (see at [19]-[20]).
Pursuant to cl 2.1 of the First Deed of Assignment, V&M assigned to Boris and Mr Davidovic "all of its rights title and interest in the Proceedings". Pursuant to cl 1.1, "the Proceedings" was defined as meaning "matter no. 2010/84991" in this Court (i.e., the 2010 proceedings) and expressly included all rights and entitlements to the verdict or settlement moneys (if any) and costs orders (if any). (Vesuvius maintains that there is an issue as to what, if anything, was assigned (pursuant to this and the subsequent assignments) with respect to the causes of action now sought to be pursued; and as to the assignability of the estoppel claims in the absence of a commercial interest in the relevant causes of action. I will address those arguments in due course.)
Second, after Mr Davidovic went into bankruptcy, a Deed of Assignment was made on 8 May 2015 between the official trustee in bankruptcy for Mr Davidovic, as assignor, and Mr Zugic, as assignee.
Third, a Deed of Assignment was made on 19 May 2015 between Boris, as assignor, and Mr Zugic, as assignee, which assigned to Mr Zugic all the property assigned to Boris under the Deed of 3 August 2012. (Boris left Australia permanently in about September 2014 to live in his former home country of Serbia being at that time, I am told, in severe ill health.)
[16]
Present proceeding
Boris was the original plaintiff in the present proceeding, filing a statement of claim on 24 December 2013 against Vesuvius and also against Verekers Lawyers (as second defendant). It appears that the statement of claim was never served on Verekers Lawyers (see [2] of Darke J's 2014 judgment).
On 31 January 2014, Vesuvius filed a notice of motion seeking summary dismissal of the proceeding or, alternatively, the striking out of the statement of claim. That motion came before Kunc J for hearing in March 2014. His Honour struck out parts of the statement of claim but with liberty to replead.
In August 2014, Darke J (subject to the condition his Honour there ordered) granted leave to Boris to file an amended statement of claim in the form of that which Boris had sought leave to file, save for the deletion of the second defendant (Verekers Lawyers) as party and the deletion of paragraphs [55] and [56] (see [50] of Darke J's 2014 judgment). His Honour stayed the proceeding pending payment to Vesuvius of certain costs that were the subject of certificates of determination in respect of the 2010 Proceedings (see [50] of Darke J's 2014 judgment).
It appears that nothing further relevantly occurred in the proceedings for some time, until late August 2016 when Vesuvius filed a notice of motion seeking an order for the dismissal of the proceedings against it pursuant to r 2.1 and/or 12.7 of the Uniform Civil Procedure Rules 2005 (NSW). Perhaps not surprisingly, that seems to have precipitated some action in the proceedings (as noted by Parker J in his Honour's 2017 judgment at [6]).
On 27 September 2016, Mr Zugic filed a notice of motion seeking an order that he be substituted as plaintiff in the proceedings and seeking leave to file an amended notice of motion. That notice of motion was struck out by Darke J on 11 October 2016 (and his Honour ordered that it be removed from the Court file). However, his Honour gave leave for the filing of a notice of motion by Mr Zugic for the lifting of the stay ordered on 7 August 2014 (which notice of motion was filed on 25 October 2016). On 25 November 2016, Stevenson J dismissed Mr Zugic's motion (Davidovic v Vesuvius Australia Pty Ltd (No 2) [2016] NSWSC 1679) and stood over Vesuvius' 26 August 2016 motion.
Stevenson J subsequently made directions on 2 December 2016 for, inter alia, the filing by Mr Zugic of any notice of motion to be substituted as plaintiff in the proceedings. Such a notice of motion was filed by Mr Zugic on 5 December 2016. After two further interlocutory judgments by Stevenson J (Davidovic v Vesuvius Australia Pty Ltd (No 3) [2017] NSWSC 76 handed down on 15 February 2017 and Davidovic v Vesuvius Australia Pty Ltd (No 4) (Supreme Court of New South Wales, Stevenson J, 31 March 2017, unrep) handed down on 31 March 2017, in relation to security for costs); and after the provision by Mr Zugic of security for the defendants' costs, an order was made on 13 June 2017 for Mr Zugic to be substituted as plaintiff in the proceeding (on condition that he pay Vesuvius' costs to date; and ordered that security for future costs in the sum of $275,000 be paid).
On 4 September 2017, after a hearing as to Mr Zugic's application for leave to amend the statement of claim, Parker J gave leave for the filing of the amended statement of claim dated 20 July 2017, subject to further amendments that had been conceded at the hearing on 29 August 2017 and without any order that the amendments take effect after the commencement of the proceeding (Zugic v Vesuvius). His Honour at that time dismissed Vesuvius' extant application for dismissal for want of prosecution. The matter then proceeded (with directions made as to the filing of a defence and evidence in the proceedings; it not being necessary here to go further into the procedural history to the proceeding).
[17]
Pleaded claims
Both parties were furiously in agreement that the present proceeding is to be determined by the issues as framed on the pleadings (see Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206 (Ingot) as to the rule that, in general, relief is confined to that available on the pleadings). In Ingot, Ipp JA (with Giles and Hodgson JJA generally agreeing) noted that this is a rule that secures a party's right to a basic requirement (of procedural fairness); and that, apart from cases where the parties "choose to disregard the pleadings and to fight the case on additional issues chosen at the trial, the relief that may be granted to a party must be founded on the pleadings" (at [424]). In the present case, each party made clear that he or it did not consent or acquiesce to any expansion of or departure from the pleaded case (see Vesuvius' position at T 11.39, for example); and each took what may fairly be described as pleading points in relation to his or its opponents' submissions.
Vesuvius maintains, in this regard, that the so-called "subterfuge" allegations (see [254]-[255] below) were not pleaded; and Vesuvius made clear that it objects to any expansion of the pleaded case in that regard (and to Mr Zugic raising any matter or claim that has not been precisely and clearly pleaded in the amended statement of claim). Mr Zugic, for his part, argues that, insofar as Vesuvius here defends the claim based on an argument that, as a matter of law (as opposed to as a matter of discretion), the cause of action based on estoppel was unassignable (see T 37.13), then this was required to be pleaded under r 14.14 of the Uniform Civil Procedure Rules 2005 (NSW). Further, complaint is made by Mr Zugic as to any reliance being placed by Vesuvius on the statement contained in the letter dated 20 November 2009 from V&M's then solicitors, Rosier Partners, as to Vesuvius' ability to relocate elsewhere with their client's "best wishes" (see [69] above), if that be put as giving rise to some form of estoppel against V&M (having regard to the fact that there was no pleading to that effect).
Hence it is necessary to consider in some detail the pleaded claims, to which I now turn.
[18]
Amended statement of claim
On 11 September 2017, Mr Zugic filed an amended statement of claim (pursuant to leave granted by Parker J on 4 September 2017). Vesuvius filed its defence on 10 October 2017. On 6 February 2019, pursuant to directions made by me, Mr Zugic filed an amended statement of particulars of damage.
What is alleged in the amended statement of claim is acknowledged by Mr Zugic to be a promissory estoppel claim, namely, that: Vesuvius is estopped from denying that it was obliged to enter into a lease of the Sylvester Avenue Land on the terms of "the Sylvester Proposal" (as defined) (see [47(g)] and [48]-[53] of the amended statement of claim); and Vesuvius is estopped from denying that it was obliged to inform V&M prior to its undertaking the work or incurring expenses that Vesuvius might not enter into a lease of the Sylvester Avenue Land on the terms of the Sylvester Proposal ([54(e)] of the amended statement of claim).
Relevantly the Sylvester Proposal is pleaded as follows:
Sylvester Proposal
27. On or about 18 June 2008 V&M sent to the defendant the principal terms pursuant to which V&M proposed it would lease the Sylvester land to the defendant (the 'Sylvester Proposal').
Particulars
Document headed up RE: AGREEMENT TO LEASE CERTAIN LAND AND BUILDINGS AT UNADERRA (sic) dated 17 June 2008, email from Prince to Armitage dated 18 June 2008 attaching the Sylvester Proposal
28. The Sylvester Proposal included terms that:
(a) the defendant would lease the Sylvester land for 20 years with an option to renew for 20 years;
(b) the annual rent would be $744,000 with annual increase of 3% and an Increase [sic] by 13% at the commencement of the eleventh year;
(c) an Industrial factory of 8000m2, [sic] an administration building of 900m2 [sic] and car parking for approximately 150 cars would be constructed by V&M;
(d) the date of occupation by the defendant was to be fixed; and
(e) the defendant was to lodge a sum equal to 1 year's rent on signing the lease and prior to commencement of works being an additional $184,000, that being the difference between $560,000 paid pursuant to the Deed and the $744,000, year's rent under the Sylvester Proposal.
The alleged estoppels are expressly based upon the First Sylvester Representation (defined at [30] of the amended statement of claim) (which is founded on the 30 June 2008 email from Mr Armitage - see [37] above) and the Second Sylvester Representation (defined at [35] in the amended statement of claim) (which is relevantly founded on what was said in a meeting between Mr Armitage and Mr Prince on 5 January 2009 and Mr Prince's email of that date to Mr Davidovic conveying information from that meeting to him - see [46] above). It is convenient here to set out the pleaded representations in full:
First Sylvester Representation
29. On or about 30 June 2008 the defendant represented that it would lease the Sylvester land on the terms of the Sylvester Proposal.
Particulars
Emails dated 30 June 2008 from Armitage to Prince.
30 By representing that it would lease the Sylvester land on the terms of the Sylvester proposal the defendant also represented to V&M that:
(a) the defendant would not be leasing the Doyle land in accordance with the Deed;
(b) V&M would cease to be bound by the terms of the Deed in so far as they related to the Doyle land, including its obligation to carry out the Works by the amended date of 8 March 2009; and
(c) V&M would undertake the capital improvements on the Sylvester land in consideration of the defendant entering into a lease of the land in leu [sic] of the lease in respect of the Doyle land (the 'First Sylvester Representation').
Second Sylvester Representation
35 On or about 5 January 2009 the defendant represented to V&M that a suitable occupation date for it pursuant to the lease would be 30 March 2010 and that the lease with respect to the Sylvester land would be signed in about the week ending 26 January 2009 (the 'Second Sylvester Representation').
Particulars
• Meeting between Armitage, Ian Heggie (the defendant's financial controller) and Prince;
• Email dated 5 January 2009 from Prince to the Miroslav Davidovic.
Pausing there, it is submitted for Mr Zugic that what the First Sylvester Representation would have conveyed to a reasonable person was that "[y]ou can get, you will get from us a lease in relation to the Sylvester site, and that you ought to start readying that site for our movement into that site" (see T 210), which it, is said, is precisely what V&M did over the ensuing year and a half until October 2009.
At [31]-[33] and [37], the alleged reliance on the respective representations is pleaded.
At [31], it is alleged that, in reliance on the First Sylvester Representation, "and on the express understanding that V&M would forego their rights to enter into a 20 year lease of the Doyle land to the defendant", V&M ceased to carry out its obligations under the Deed (of Options for Lease), including the completion of the Works.
At [32], it is alleged that, but for the First Sylvester Representation, V&M would have complied with its obligations under the Deed, including carrying out the necessary steps to complete the Works.
At [33], it is alleged that, in further reliance on the First Sylvester Representation, V&M carried out work in connection with the proposed development of the Sylvester Avenue Land and the defendant's proposed lease. Particulars of that work are there set out, including steps taken in preparation for a development application and factory construction. (Although the particulars to [33] include the statement that "[f]urther particulars may be provided In [sic] due course" and similar statements appear elsewhere in the amended statement of claim or that particulars are "to be provided".) The only further particulars provided were of the damages claimed to have been suffered (see below).
At [37], it is alleged that, from about 20 January 2009 to 15 October 2009, V&M relied on the Second Sylvester Representation to carry out work in relation to the development of the Sylvester Land in preparation for its lease to the defendant. Particulars of that work are there set out and include the statement that "[f]urther particulars may be provided in due course", though again it is accepted that no further particulars of this allegation were ever provided.
At [44C], it is alleged that, by its conduct, Vesuvius continued to cause the plaintiff (presumably this is to be understood as a reference to V&M, not to Mr Zugic) to rely upon the Sylvester Representations until May 2013 "when the defendants [sic] made performance of the obligations under the Sylvester representation impossible by entering into a lease of different premises …"
At [45], it is alleged that V&M suffered damages as a consequence of Vesuvius' conduct. Those damages were particularised as being:
V&M's lost profit on the rent it would have earned on the lease of the Sylvester land, less the expenses it would have incurred in constructing the factory building, administration building and car park and all other associated costs In [sic] developing the Sylvester land to enable it to be leased to the defendant.
Further particulars may be provided in due course.
In other words, the damages there particularised relate to the loss of rent on the lease of the Sylvester Avenue Land, less the costs of developing that land for the purpose of the Lease; not any damages referrable to the loss of rent or expenses relating to the Doyle Avenue Land.
It is further alleged (at [46]) that, by virtue of the conduct referred to in [24]-[31], [33]-[39] and [41], V&M adopted the assumption that it and Vesuvius would enter into a lease of the Sylvester Land on the terms of the Sylvester Proposal.
At [47], it is alleged that:
(a) it [V&M] was Induced [sic] by the conduct of [Vesuvius] in making the First and Second Sylvester Representations to carry out the work that it did, including the costs incurred In [sic] the retention of third parties to do work;
(b) it was induced by [Vesuvius] to believe that by carrying out the work that it did pursuant to the First and Second Sylvester Representations that [Vesuvius] would enter into a lease of the Sylvester land on the terms of the Sylvester Proposal;
(c) it acted in reliance on the assumption referred to in paragraph 46 above;
(d) [Vesuvius] knew that V&M was acting in reliance on the assumption referred to in paragraph 46 above;
(e) it has suffered detriment by carrying out the work and incurring the expenses in the expectation that it and [Vesuvius] would enter into a lease of the Sylvester land on the terms of the Sylvester Proposal in circumstances where no such lease has been entered into;
(f) [Vesuvius'] conduct in not entering Into [sic] a lease of the Sylvester land on the terms of the Sylvester Proposal was unconscionable and it will occasion detriment to V&M if the assumption is not fulfilled.
(g) In the premises, [Vesuvius] is estopped from asserting that it was not obliged to enter into a lease of the Sylvester land on the terms of the Sylvester Proposal; and
(h) V&M is entitled to be compensated by [Vesuvius] for the loss it has suffered by not having entered into a lease of the Sylvester land on the terms of the Sylvester Proposal.
Particulars
V&M's lost profit on the rent it would have earned on the lease of the Sylvester land, less the expenses it would have incurred in constructing the factory building, administration building and car park and all other associated costs in developing the Sylvester land to enable it to be leased to the defendant.
Further particulars may be provided in due course.
Again the pleaded damage on this alternative claim (premised on a joint assumption as to the Sylvester Proposal) is referable to the rent that would have been payable under the Sylvester Avenue Land Lease, less the expense of constructing the building on that land.
Pausing here, there does not appear to be an allegation in the pleading that the conduct of V&M in agreeing to (or accepting) the later surrender or termination of the Deed of Options to Lease for the Doyle Avenue Land was an element of the alleged detrimental reliance in respect of the Second Sylvester Representation, though it is of course part of the alleged First Sylvester Representation. There is, however, as already noted, an allegation at [32], that, but for the First Sylvester Representation, V&M would have complied with its obligations under the Deed of Options to Lease including carrying out the necessary steps to complete the Works.
At [48], there is an allegation (pleaded as being in the alternative to [45]-[47] but in fact in the same terms) that, by virtue of the conduct referred to in [24]-[31], [33]-[39] and [41], V&M adopted the assumption that it and Vesuvius would enter into a lease of the Sylvester Land on the terms of the Sylvester Proposal. At [49] it is alleged that, by virtue of that same conduct, Vesuvius adopted the assumption that it and V&M would enter into a lease of the Sylvester Land on the terms of the Sylvester Proposal. At [50], it is alleged that, by virtue of that same conduct, V&M and Vesuvius "conducted their relationship on the basis of that mutual assumption". It is then alleged that both V&M and Vesuvius knew or intended that the other party act on the basis referred to at [50] (see at [51]), and that in the premises, departure from the assumption occasioned detriment to V&M ([52]). At [53], it is alleged that V&M was entitled to be compensated by Vesuvius for the loss it has suffered by not having entered into a lease of the Sylvester land on the terms of the Sylvester Proposal (that loss particularised in the same terms as set out in the particulars to [45] and [47]).
In the alternative to [45]-[53], the estoppel claim is put in the following way:
… V&M:
(a) repeats the allegations in paragraphs 44A, 44B, 44C and 47 above;
(b) says that at no time did the defendant inform V&M that V&M was carrying out work and incurring expenses in circumstances where the defendant might not enter into a lease of the Sylvester land on the terms of the Sylvester Proposal;
(c) has suffered detriment by carrying out the work and incurring the expenses in circumstances where the defendant did not Inform [sic] V&M that the defendant might not enter into a lease of the Sylvester land on the terms of the Sylvester Proposal and no such lease has been entered into;
(d) the defendant's conduct in not informing V&M that it was carrying out work and incurring expenses in circumstances where the defendant might not enter into a lease of the Sylvester land on the terms of the Sylvester Proposal was unconscionable;
(e) in the premises the defendant is estopped from denying that it was obliged to inform V&M prior to it undertaking the work and incurring the expenses that the defendant might not enter into a lease of the Sylvester land on the terms of the Sylvester Proposal; and
(f) V&M was entitled to be compensated by the defendant for the loss it has suffered by carrying out the work and incurring the expenses it did.
Particulars
Particulars to be provided in due course.
The relief claimed by Mr Zugic in the amended statement of claim in substance is:
1. Equitable compensation for the loss and damage suffered by the plaintiff not proceeding on the Sylvester Proposal …
2. Alternatively to prayer 1 above, equitable compensation for the loss and damage suffered by the plaintiff not entering into a lease of the Sylvester Avenue land …
3. In the alternative to prayers 1 to 2 above, equitable compensation, in respect of the costs and expenses incurred by the plaintiff with respect to the proposed lease of the Sylvester Avenue land … to the defendant.
…
Vesuvius notes that what is not here sought (or has otherwise been abandoned) are all claims for: damages or any other relief for breach of the Deed of Options to Lease or any agreement for lease of the Doyle Avenue Land; and damages or any other relief for breach of any agreement for lease of the Sylvester Avenue Land (and, indeed, Vesuvius points out that there is no allegation that there was any contract or agreement for lease of the Sylvester Avenue Land).
The amended statement of claim thus asserts an entitlement to compensation for the loss suffered by V&M as a result of not having entered into a lease of the Sylvester Avenue Land (seemingly a claim for compensation for loss of profit on the Sylvester Avenue lease - i.e., the rent that would have been payable, less expenses and the like - see the particulars of damage below).
The amended particulars of damage filed on 6 February 2019 particularised the claimed "damages for equitable compensation" as follows:
1. As pleaded in prayers 1 and 2 and paragraphs 45, 47(h) and 53 of the Amended Statement of Claim (ASC), V&M's lost profit on the rent it would have earned on the Lease of the Sylvester land in the terms set out in paragraph 28 of the Amended Statement of Claim, less:
a. expenses V&M would have incurred in constructing the factory building, administration building and car park and all other associated costs in developing the Sylvester land to enable it to be leased to Vesuvius; and
b. running costs, if any, V&M would have incurred under the Lease as landlord with a commencement date on 31 July 2010 (scenario 1a) and on 1 February 2011 (scenario 1b).
2. As pleaded in prayer 3 and paragraph 54(c) and 54(f) of the ASOC, V&M's loss suffered by carrying out the works and incurring expenses in relation to the Sylvester proposal as set out in paragraph 28 of the ASOC that includes:
a. V&M costs and expenses in relation to the proposed lease of the Sylvester land;
b. V&M costs and expenses incurred in relation to Vesuvius proposed lease of the Doyle land; and
c. V&M's loss of rent it would have received from Obnova had it not been for the proposed Vesuvius lease.
For the first time, this seems to have introduced a claim for the expenses incurred in relation to the Doyle Avenue Land (including a loss of rent claim in respect of the loss of rent from Obnova).
Following a request for further particulars in relation to the amended particulars of damage, filed 6 February 2019, Mr Zugic's lawyers advised that scenario 1a (in [1]) should be deleted and that the date of 1 February 2011 (in scenario 1b) was calculated by reference to the date that Vesuvius' lease with the ARV had been extended "and takes into consideration time to complete the works following the meeting of the Development Application on 15 August 2010". As to [2] of the amended particulars of damage, it was said (by reference to [18]-[19], [21]-[24] of Zugic v Vesuvius Australia Pty Ltd [2018] NSWSC 1544 per Rees J) that the claim for equitable compensation "extends to not only the cost and expenses incurred in relation to the Doyle land, but also V&M's loss of the rent from Obnova Pty Ltd as a result of the Agreement to Lease with Vesuvius".
In oral submissions, at the hearing it was initially put that the expenses incurred by V&M were in the order of just under $1.5 million (see T 232.44). A schedule of the expenses that it was said had been incurred in relation to work done for the Doyle Avenue Land and in relation to work done for the Sylvester Avenue Land was handed up during the course of the hearing (which schedule included an item for loss of rent from January to October 2008 - presumably being the "lost" Obnova rent). That, however, seemed ultimately to be put as a summary of the expenses incurred in reliance on the alleged representations (not necessarily as the amount claimed as equitable compensation).
The position taken for Mr Zugic in closing submissions as to the claim for equitable compensation was that it was available to V&M to argue that what it "lost" was the contract in relation to the Doyle Avenue Land (see at T 234.1), accepting that V&M would have had to incur expenses in relation to the proposed lease premises had a lease of those premises proceeded. It was submitted that this was fair to Vesuvius because otherwise (invoking Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 (Walton Stores)) Vesuvius would be held to the rent for the Sylvester Avenue Land (because it would be estopped from denying a binding agreement for that land) (see T 234.50). (I pause here to note that estoppel in those terms has not been pleaded and I did not understand the plaintiff's case as pleaded to be put this high. Rather, what was pleaded, relevantly, was that Vesuvius was estopped from asserting that it was not obliged to enter into a lease of the Sylvester Avenue Land on the terms of the Sylvester Proposal (see 47); and the alternative version of the estoppel as pleaded at 54.)
After some debate, ultimately what was said to be the real measure of damage claimed by Mr Zugic was the loss of the Doyle Avenue lease (i.e., the loss of the profit component of the rent that would have been payable under that lease) plus expenses related only to Sylvester Avenue Land (T 235.33; T 237.48, T 240.9), totalling $561,612.68.
[19]
Defence
In broad terms, Vesuvius: denies that there has been a valid assignment of any cause of action to Mr Zugic that would enable him to bring these proceedings; denies that V&M had any relevant cause of action available to it any event; and denies that Mr Zugic is entitled to any of his claimed relief (see its submissions at [16]). Vesuvius' pleading in this regard commences with a non-admission as to the various Deeds of Assignment pleaded by Mr Zugic (at 1 of the defence). Vesuvius maintains that they effectively pleaded the issue of the assignment's efficacy by a combination of the denial at 1 of the defence (which it is said encompasses a consideration of what was the subject of the 2010 proceeding) and at 1(ii) of the defence.
Relevantly, in those paragraphs of its defence Vesuvius pleads that:
1. …
(d) Vesuvius says that on its proper construction, the Deed of Assignment pleaded on paragraph 1 did not assign any of the alleged choses in action pleaded in the Amended SOC;
(e) Vesuvius says that in relation to each of the various Deeds of Assignment pleaded in paragraph 1, 3 and 4:
(i) contrary to section 12 of the Conveyancing Act 1919 (NSW) Vesuvius was not given any express notice in writing of any assignment under the various Deeds of Assignment and thus were not effectual in law to pass and transfer the legal right to the alleged choses in action the subject of those Deeds to the assignees named in those Deeds; and
(ii) as each Deed purports to assign bare rights of action, they are not enforceable or effective at law or in equity;
(f) Vesuvius otherwise denies the allegations in those paragraphs [1 to 4A of the amended statement of claim].
As to reliance on the 20 November 2009 letter, it is said by Vesuvius that there was no need to plead this specifically as an admission (see T 250.13ff), it simply being "one piece of evidence" on which Vesuvius relies as pointing to the recognition that each of the parties had the right to withdraw from the negotiations (and noting at T 251.7 that it is for Mr Zugic to establish that Vesuvius is estopped and is not at liberty to withdraw from the lease negotiations).
Vesuvius denies that Mr Prince is, or was, during the period of the allegations or any other time, the agent of or otherwise acting on behalf of it, and says that Mr Prince was the agent of or otherwise acting for or on behalf of V&M, Obnova, and Mr Davidovic (see at 3 of the defence).
Vesuvius' position, broadly, is that in their dealings with each other, each of V&M and Vesuvius was represented by experienced lawyers in relation to a possible agreement for lease of the Sylvester Avenue Land; and that the objective intention of the parties was that any prospective legal relations between them would not arise until they had finally settled the terms of any agreement and executed a legal instrument which reflected those settled terms.
It is said that the parties clearly had in mind and understood that they were negotiating the prospect of significant long term relations that would be subject to imperatives as to suitability, timing, regulatory, and planning and environmental constraints. The parties objectively had no common understanding or contemplation that either would be bound to the other for the incidents attending to their dealings in relation to the Sylvester Avenue Land pending the settling of final documentation and execution of formal instruments, duly registered, governing the entirety of their prospective relationship (apart from certain explicit items of expenditure which Vesuvius agreed with V&M to pay, and which were paid).
It is submitted that Mr Zugic has given no substantial or credible commercial consideration for what was purportedly assigned to him (and does not assert such matters) (referring to Trendtex Trading Corp v Credit Suisse [1982] AC 679; [1981] 3 All ER 520 (Trendtex) and Monk v Australian and New Zealand Banking Group (1994) 34 NSWLR 148 (Monk)); and that his assertions and claims of unconscionability must be viewed in that light. The defendant noted that estoppel is a personal remedy depending on an exacting analysis of the relationship contended for and injustice to the parties that may arise from one of them disavowing that relationship. It is submitted that Mr Zugic and Vesuvius have no such relationship and that there is no detriment suffered by Mr Zugic of any kind, "let alone an unconscionable one", in consequence of a recognition of the actual legal relations between them.
Vesuvius says that no case has been identified where it has been held that a party could assign an estoppel by itself. Vesuvius further submits that in the present case, Mr Zugic has no interest, whether by assignment or otherwise, in the Sylvester Avenue Land.
Further, Vesuvius pleads in its defence that, as at 19 November 2009, V&M "was not and would never have been able to perform its obligations under the Deed within the times required by the Deed or otherwise" (see [42] of the defence). Nor was V&M ready willing or able to perform its obligations under the Deed as at 19 November 2009 or otherwise (see [43]). In this regard, Vesuvius pleads that the Project Approval did not and would not allow Vesuvius to conduct its factory operations at the Sylvester Avenue site in the manner or method set out at [29] of the defence (the alleged common understanding of the parties) in that it did not: permit all heavy vehicles (including B-doubles trucks and semi-trailers) to access the Sylvester Avenue site but restricted heavy vehicles accessing the site to vehicles up to 12.5 metres in length unless otherwise agreed by the Director-General in consultation with the RTA and Council; or, permit Vesuvius to operate its factory at the site on two ten hour shifts, five days a week, with capacity to operate 24 hours a day, seven days a week, if required (see [44] of the defence).
[20]
Issues
Vesuvius identified the following issues as arising for determination on the pleadings (and in broad terms, other than the pleading point taken in relation to the first of these, Mr Zugic does not appear to cavil with this formulation of the issues):
1. whether there has been a valid assignment to Mr Zugic of any choses in action that would enable him to bring and prosecute these proceedings (to which I will refer as Issue 1);
2. whether Vesuvius is estopped from denying that it was obliged to enter into a lease of the Sylvester Avenue Land on the terms of the Sylvester Proposal (to which I will refer as Issue 2);
3. whether Vesuvius is estopped from denying that it was obliged to inform V&M prior to its undertaking the work or incurring expenses that Vesuvius might not enter into a lease of the Sylvester Avenue Land on terms of the Sylvester Proposal (to which I will refer as Issue 3); and
4. whether, assuming one or both of the estoppel claims is made good, Mr Zugic is entitled to any of the relief claimed in these proceedings and, if so, the nature or amount of that relief (to which I will refer as Issue 4).
There was also a preliminary issue as to the status or role of Mr Prince in relation to the proposed leasing transactions. This was raised at the stage of evidentiary objections to the affidavit evidence read in Mr Zugic's case, which included various conversations to which Mr Prince was a party with Mr Davidovic, in respect of which a hearsay objection was taken. As adverted to above, I provisionally admitted that evidence, subject to relevance, on the basis that it was evidence of what was said and not the truth of the communications, subject to a later ruling as to whether Mr Prince was acting as an agent of Vesuvius (the provisional qualification to be removed, if it were to be established that Mr Prince was Vesuvius' agent (the Prince conversations ruling) (see T 14)). The relevance of the evidence, in the event that Mr Prince were found not to be an agent of Vesuvius, was put on the basis that it would go to the state of mind of Mr Davidovic (that being said to be relevant as to why Mr Davidovic did certain things in terms of Vesuvius - i.e., on a mistaken assumption that Mr Prince was able to speak on behalf of Vesuvius) (see T 15). I will return in due course to the status of that evidence.
[21]
Evidence of the witnesses
For Mr Zugic, evidence was adduced from Mr Davidovic, Mr Prince and Mr Evans. Both Mr Davidovic and Mr Prince were cross-examined. Mr Evans (who is now based in Whyalla) was not required for cross-examination (and hence, as Mr Zugic emphasises, his evidence was not the subject of challenge).
For Vesuvius, affidavits were read from Mr Armitage, Mr Donsante, Mr Clint Atkins (the sales manager of Vesuvius, his evidence going to the operational activities of Vesuvius at the relevant time) and Mr Stephen Thompson (Vesuvius' accountant, who deposed as to the attempts to locate Mr Swinbanks and who was not required for cross-examination). No evidence was called from Mr Swinbanks, but (quite fairly) no Jones v Dunkel issue was taken by Mr Zugic in circumstances where the evidence disclosed that efforts had unsuccessfully been made to locate Mr Swinbanks (who at least as at around 2014 apparently worked in Malaysia but who as at May 2018 was no longer employed by the entity for whom he had formerly worked in Malaysia) (Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8).
Before turning to the determination of the substantive issues in the proceedings I make the following observations as to the respective witnesses.
Mr Davidovic
Mr Davidovic was adamant that he understood that there was a deal and that he was doing all he could to fulfil V&M's obligations under the deed (T 59.13); and that it was Mr Armitage who was responsible for all the delays (T 59.19; T 62.18). It was also Dr Davidovic's belief that it was Mr Armitage who had delayed the important relevant documents that were necessary to complete (T 59.37); and who had never provided the correct information (T 63.27). (I accept that this is his belief as to Mr Armitage's responsibility for the delay but I do not accept that it is established by the evidence.)
Mr Davidovic's frustration with the project was evident - he said that the goalposts kept changing (T 61.49) and he clearly took umbrage with the suggestion that a timeframe put to him by Mr Armitage in 2009 (of three months to complete the building) was a realistic timeframe ("That was the three months building in China. We don't work in China, or live in China") (T 61.38). That, however, does not take into account that there had been a significant delay from the outset of the project - and that V&M's own lawyers accepted that both sides had contributed to the delay.
Mr Davidovic did not accept that the statement in the letter from V&M's lawyers (to the effect that if Vesuvius sought to be accommodated elsewhere it would do so "with our client's best wishes" conveyed his thoughts), insisting that his position was that if Mr Armitage wanted to be relocated "they can pay the damages" (though there was nothing in the letter to that effect) (T 62.33). The significance of this is dealt with in due course.
When cross-examined as to V&M's ability financially to complete the construction works, Mr Davidovic was adamant that he was in a position to obtain funding, though it seems that he would have been reliant on private financing for that purpose (T 68.1-25).
As a witness, Mr Davidovic came across as forthright and down to earth. He obviously holds strong (and negative) views as to the conduct of Vesuvius (and in particular Mr Armitage) and he was quick to enter into confrontation with the cross-examiner (on issues relating to the proceedings in which Vesuvius had recovered its security deposit) (see T 67.14ff). I accept that he genuinely holds the opinions he has expressed. However, it is clear that he did not focus on the precise way in which the arrangements were to be documented or the steps taken in relation thereto, and his perception of events insofar as he now seeks to attribute blame or sinister motivations to Vesuvius (the "subterfuge" issues) is not supported by the contemporaneous documents.
Mr Prince
As to Mr Prince, he accepted that he had worked closely with V&M and as a "go between" between V&M and Vesuvius (T 135.24). He accepted that as he understood the Deed of Options to Lease, the arrangements were that V&M was at its own expense to make an application of the Council for the development and use of the property leased as an industrial site in accordance with the deed annexed (T 137.8-13).
His evidence as to the requirement for heavy vehicle access (and whether by at least May 2007 it was contemplated that this would involve semitrailers and B-doubles) was to some extent speculation (see T 139.30-140.1), albeit that he asserted he was "speculating on the basis of the information provided". He appeared keen to distance himself from the issue as to heavy vehicle access (see T 140-143). He emphasised that the only thing he ever focussed on was "what was needed to get in and out of the site and they were heavy vehicles", at first seemingly resisting the proposition that B-doubles were heavy vehicles ("If they're a heavy vehicle") (T 142.48-143.10) but then saying that "in the nature of a broad terminology" then accepting that he would call B-doubles "semitrailers and, you know, heavy vehicles 'heavy vehicles'") (T 143.17).
Mr Prince also cavilled at first at the suggestion that heavy vehicle access was something that was "crucial" (T 153.27) but taken to his use of the word in his affidavit (at [117]) he said "Yeah, well that's - I'm supposing that's what they think. It's not crucial to me, it's crucial to them". Mr Prince maintained that there had been an approval obtained for heavy vehicle access; but accepted that there was a restriction to vehicles 12.5m in length and that that issue was "never resolved", then said that the approval was "executionary" by which he seemed to mean that there had not been a complete prohibition on heavy vehicle access beyond that restriction, just that it would require a process to determine that approval - see T 153-155. (For Mr Zugic, it is noted that Mr Prince's description of the approval process was confirmed by Mr Atkins, who considered it to be standard practice for this process - see T 196.36-40.)
It seemed to me that Mr Prince was somewhat defensive of his own position in the course of cross-examination and was keen to explain at some length the property aspects of the transaction (see T 148 for example; and his stated nervousness at T 152.27 before giving the lengthy answer he there gave). He may have been nervous but he was certainly not lacking in confidence in his own expertise in property matters.
Taken to his affidavit at [63]-[66], he volunteered that the reference to the arrangements that he considered had been reached as at 30 June 2008 was all subject to documentation (at T 151.24-32):
Yes, but this is all subject to documentation, of course. So, from my point of view, it was not speculation, but it was, it was subject to the arrangement being documented which at that time, it hadn't.
…
Well I mean the solicitors agreeing the fine print and providing an agreement to lease, or a deed, or a document that covered what the exact arrangements would be. [emphasis added]
Mr Armitage
As to the witnesses called by Vesuvius, the first was Mr Armitage.
He accepted that Mr Evans had left in somewhat acrimonious circumstances (T 74.40); that he (Mr Armitage) had had to acquaint himself with the legal position of Vesuvius in relation to a number of matters when he became the general manager (T 74.45); and accepted that it was "abundantly clear" to him in all his dealings that there were binding legal relations in relation to the Doyle Avenue Land between Vesuvius and V&M (T 76.42).
The first time he saw the Sylvester Avenue Land was on 16 April 2008 (T 77.28; 35). He accepted that he was "unhappy" with the Doyle Avenue Land (T 77.39; T 80.1) but was aware that the company was going to have a lease of that site, though he had not seen the lease at that time (T 77.11).
When he met Boris and Mr Davidovic he realised they were a small family operation (T 78.6). Mr Armitage readily accepted that in any discussions involving a small family operation for Vesuvius relocating the site he would expect it to be an important matter for V&M that it did not simply give up a legal relationship with Vesuvius; and that, if there was going to be a change of site by Vesuvius, that would mean substituting one site for another in terms of a lease (T 78).
Mr Armitage said that his discussions were not generally with V&M, they were with Mr Prince (T 78.33). He said that he first met Mr Prince on 4 April 2008 and that when he met him Mr Prince said that he was working for both parties in relation to the move of the factory to Doyle Avenue (T 78.48). Relevantly, there was the following exchange:
Q. Now by "both parties", he was saying to you, "I work for V & M Davidovic," correct?
A. Yes.
Q. "And I'm working for you"?
A. That was my understanding of what he was telling us.
Q. Nobody ever said to him, "No, you're not working for us."
A. None of us knew who the hell he was.
Q. But if someone says, "I'm working for you and I'm working for them," and they're not working for you, you say, "Hey, hang on a second, you're not working for me."
A. On 24 March, the manager left, the national operations manager left. The national contractor managers left. On 28 March, the financial controller left. Everybody who'd been dealing with this project had left the organisation. There was nobody to say this was correct or not.
Q. All right, but-
A. If someone tells me it - you - "I'm working for you," I'm prepared to take on value that you're working for me.
Q. But you never, neither you nor anybody else to your knowledge, ever said to Mr Prince, "You're not working for us."
A. Not at that time.
Q. Well, at any time?
A. I, I don't think I ever said, "No, you're not working for us," no. But he was - clearly wasn't.
[emphasis added]
Mr Armitage accepted that, in the period late 2008 to early 2009, things were happening mainly between Mr Prince and himself. He spoke in what seemed to me to be a resigned fashion when he said Mr Prince clearly could not achieve the first timeline and he was adamant that he (Mr Armitage) had pressed for a completion date (T 91.5).
Mr Donsante
As to Mr Donsante, he was with Vesuvius from June 2009 to 1 March 2013 as its financial controller. He had no property expertise but said he gave commercial advice as part of his role. His understanding when he started with the company was that there was an agreement to go to the Doyle Avenue Land and that, for whatever reasons, it was not suitable and they (i.e., the company) were considering moving to another property (the Sylvester Avenue Land) (T 160). His understanding was that there were negotiations happening in relation to the Sylvester Avenue Land.
Mr Donsante gave cogent evidence as to the reason it was important for Vesuvius to have the ability to operate for up to 24 hours a day seven days a week (see at T 162) and as to the reason for the site to be serviced by heavy vehicles including "B doubles" (see at T 163).
As to the role of Mr Prince, he accepted that Mr Prince was part of the project group putting forward the DA approval (for the development of the Sylvester Avenue Land) but he did not accept that Mr Prince was in the Vesuvius "team". Taken to his email to Mr Armitage in October 2009, in which he said that Mr Prince "should be acting in our best interests", he agreed that Mr Prince should have been acting in their best interests but said that he did not believe that Mr Prince in fact was (see T 165-166).
Mr Donsante said that he "floated" the idea of the Port Kembla site to look at plan B if the Sylvester Avenue Land site "fell over" (T 167.22ff). He resisted the proposition that he did not like the Sylvester Avenue Land site, saying that it was an operational consideration (T 167.32). He could not recall if he was "very negative" about the site or if he had expressed a preference to go elsewhere (T 168).
At T 169, Mr Donsante said that there was only one "goal" on the table and that was to go to the Sylvester Avenue Land and that, if the restrictions placed the business in jeopardy they had no other options, so that the idea of going to another site was just good business sense. He did not recall looking at the other site (T 169.46). He did not recall giving the solicitors instructions, other than that he did recall sending an instruction as to the return of the deposit (at T 170):
Q. … Did you to the best of your recollection give instructions with anybody else around 20 October to send V & M Davidovic a notice firstly to rescind the Doyle Avenue lease and secondly to provide evidence that the Sylvester site was suitable?
A. I recall sending an instructions to our solicitors as the Doyle Avenue property was now no longer in consideration we needed to tidy up loose ends and the loose ends was that that lease, that agreement was gone, there was a deposit on that property, and that deposit then would need to be returned and put on the next agreement, whichever that could have been, which at that time I, the focus was Sylvester Avenue.
Asked about negotiations in relation to the Sylvester Avenue Land, he said (at T 171):
Q. There was nothing that suggested to you that negotiations in relation to Sylvester were not progressing satisfactorily?
A. No, that's not correct. Now, I just finished negotiating with the Anglican Retirement Village board to extend our lease and based on the information that was provided we, we extended it for an 18 month, or to, I think, of August 2011. By October, the management team were quite anxious because those dates were thrown out and we still did not have clear evidence or documented evidence to understand what our restrictions were, let alone our transport.
Mr Atkins
Mr Atkins was cross-examined as to the basis on which he had made certain assumptions or expressed opinions as to operational matters. He had a better understanding of the issues affecting the site, such as the need for access by B-doubles, than Mr Prince appeared to have (see T 187). There was some unfortunate confusion in the course of his cross-examination because Mr Atkins had apparently made an earlier affidavit (which had not been served on the plaintiff and was not read in the proceedings) which was superseded by the affidavit of 12 June 2018 (which was in the Court Book) but when he was cross-examined he was provided with a copy of the earlier affidavit. Relevantly, in the earlier unserved affidavit (MFI 2), Mr Atkins had deposed that Vesuvius relocated from the Bulli premises in 2013 whereas (inexplicably) there was a typographical error in the later affidavit in which the date was put at 2010 (T 188-189). Mr Atkins made clear in cross-examination that the date on which the company relocated to Port Kembla was indeed 2013 (V&M attaches significance to this as dispelling the suggestion that the "sense of urgency" in early 2009 was a real sense of urgency (as opposed to something manufactured as a reason for not proceeding with the Sylvester Avenue lease)) (T 192).
I considered Mr Atkins to be a credible witness.
[22]
Pleading issues
As to the pleading complaints made by Mr Zugic they are: first, that there is no pleading sufficient to raise the "assignability" issue and, second, that reliance cannot be placed on the 20 November 2009 letter as giving rise to any estoppel or as an admission. In my opinion the defence does adequately raise the assignability issue. As to the 20 November 2009 letter, this is not relied upon to ground an estoppel argument. Although perhaps it might be said to amount to an admission, it is not relied upon formally as such; and therefore need not be pleaded. It is not determinative in any event.
As to the pleading complaint by Vesuvius, this is as to the fact that it is said the suggestion that the raising of the "B-doubles" access and 24/7 hours of operation were simply a subterfuge (the "subterfuge" issue) is not pleaded. I agree that those matters are not pleaded but I do not see that the evidence supports a conclusion of subterfuge or recent invention in any event.
The respective pleading issues therefore go nowhere.
[23]
Mr Zugic's submissions
Mr Zugic maintains that, when Mr Evans was the general manager of Vesuvius, Vesuvius engaged Mr Prince and that, as a result of the arrangements between Mr Prince and Mr Evans, Mr Prince was the agent of Vesuvius. It is accepted that, by his actions, Mr Prince "probably also became the agent of V&M notwithstanding the likely issue of conflict of interest" but in essence it is said for Mr Zugic that Mr Prince was acting for both parties. (It is submitted that Mr Armitage himself appeared to agree with Mr Prince's description of himself as working for both parties.)
The following matters are relied upon as establishing the agency relationship: that Mr Evans was the person who originally "brought in" Mr Prince (noting that Mr Evans was not the subject of cross-examination and hence that his evidence that Mr Prince would actively seek a suitable alternative site, was happy to do so; and had no formal arrangement was not challenged- see at [9]-[11] of his affidavit); that Mr Armitage accepted that when Mr Prince first spoke to him Mr Prince said that he was working for both parties and Mr Armitage accepted that nothing was ever said to Mr Prince to the contrary (at T 79); and that Mr Donsante sent the email in October 2009 in which he stated that Mr Prince should be acting in "our best interests" (which it is submitted is indicative of the fact that there was a relationship between Vesuvius and Mr Prince).
It is submitted that Mr Prince had a duty to act in the interests of Vesuvius (reference in that context being made to the earlier statement that Vesuvius was relying on the advice provided by Mr Prince; and to Mr Atkins' evidence as to the basis on which he sent his 4 November 2009 email to Mr Prince). It was submitted that Mr Atkins' email amounted to evidence that he did so on the basis that Mr Prince was working for and acting on behalf of Vesuvius - see T 203.4, though I did not understand Mr Atkins' evidence to go that far.
[24]
Vesuvius' submissions
Vesuvius submits that the correspondence is replete with acknowledgements of the status of Mr Prince as the "engaged or retained operative" on behalf of V&M (T 242.48). Although Vesuvius accepts that it "may be supposed" that Vesuvius thought that Mr Prince was doing work (which might ultimately be to its benefit) on the potential project which might ultimately prove of advantage "insofar as he could translate or was willing to do so the objectives or aspirations of the potential lessee", it is submitted that there is no evidence that Vesuvius held Mr Prince out as having the quality of being its agent (T 242). It is noted that Mr Prince was not retained pursuant to any arrangement by Vesuvius; that he was not supplied with an office or facilities nor the usual types of indicia from which conclusions might be available that Vesuvius had held him out as having actual authority or clothed him with ostensible authority to make representations on its behalf or to conclude agreements on its behalf (T 243).
It is submitted by Vesuvius that receiving and passing on information in relation to the prospective suitability of a site for occupation as a lessee does not carry with it any inference of authority and, in relation to the evidence of Mr Evans, it is submitted that [11] of his affidavit made plain that, when the original association with Mr Prince commenced, there was nothing on Vesuvius' part that demonstrated any formal engagement or the like. Thus it is submitted that there is no basis for the proposition that Mr Prince had any authority from Vesuvius to make promises, statements, representations, agreements, or the like on its behalf.
[25]
Determination
Recently, in Tonna v Mendonca [2019] NSWSC 1849 (Tonna v Mendonca), albeit in a much different context, I had cause to consider the relevant principles as to agency and it is convenient here simply to summarise those as follows.
There are two essential elements of an agency relationship (see G E Dal Pont (ed), Law of Agency (3rd ed, 2014, LexisNexis Butterworths) (Law of Agency)). First, the consent (or assent) of both principal and agent is required; and, second, there must be authority given to the agent by the principal to act on the principal's behalf (see at [4.3]). (As I noted in Tonna v Mendonca, while it is arguable that there is a third element, being a principal's control over the agent's actions, it does not appear that in Australian law the alleged control element is crucial to the existence of an agency relationship, "nor is it independent of the authority element", there referring to Law of Agency at [4.3].)
The notion of consent (or assent) "requires some acceptance by the agent of a mandate, whether or not formal or contractual, from the principal" (see Law of Agency at [4.4]). The principal "must intend that the agent will act for him or her and the agent must intend to accept the authority and act on it" (at [4.4]). An intention to create an agency relationship "may be manifested simply by placing another in a situation in which, according to the ordinary rules of law, or according to the ordinary usages of mankind, that other is understood to represent and act for the person who has so placed him" (United Equipment Pty Ltd v Australian Portable Buildings Pty Ltd (No 2) [2017] WADC 73 at [18], citing Pole v Leask (1863) 8 LT 645 at 648) (see also Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep) (Pola) (at 12), where his Honour said that "the consent of the principal may be implied where he places another in such a situation that a reasonable man would understand the other to have the principal's authority to act on his behalf, or where the principal's words or conduct, coming to the knowledge of the agent, are such as to lead to the reasonable inference that he is authorising the agent to act for him").
As to the element of authority, there is no doubt that actual authority to act on a person's behalf as his or her agent can be express or implied. In Vukmirica v Betyounan [2008] NSWCA 16, the Court of Appeal explained that '[a]ctual authority may be found from the putative principal and agent so conducting themselves that it should be inferred' (at [50]) (see, for example, Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132 per Clarke and Cripps JJA). In Pola, Sundberg J said that authority for an agent to act on the behalf of a person can be inferred from "the words of the parties and the circumstances of the particular case, and may be implied from prior habits or from a course of dealing between the parties where the agent has repeatedly been permitted to perform similar acts in the past …" (at 12, citing Busby v Walker (1956) 84 So 2d 304).
In Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 (at 150) Jordan CJ said:
Evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him to act in the particular capacity. If there is evidence justifying such an inference, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity.
Ostensible authority can also be established in certain circumstances; see Law on Agency (at [20.2]):
The doctrine of ostensible authority dictates that a principal may be liable under a contract effected by a person who lacks actual authority from the principal to effect the contract, but on whom the principal has, by his or her words or actions, conferred 'apparent' or 'ostensible' authority to do so.
What is required to give rise to a situation of ostensible authority is a representation made by the principal, which is intended to be, and is in fact, acted upon by the third party, that the agent has authority to enter into a contract on behalf of the principal of a kind within the scope of the agent's apparent authority, so as to render the principal liable to perform any obligations imposed by such a contract (see Diplock LJ in Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503; [1964] 2 WLR 618 (Freeman & Lockyer v Buckhurst)). Diplock LJ said (at 503):
… To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.
It is clear that the relevant representation of authority must emanate from the principal - see Caxton Street Agencies Pty Ltd v Korkidas [2002] QSC 210 where Holmes J (as her Honour then was) said (at [27]):
It is trite law to say that it is not enough, in order to establish ostensible authority, that the agent makes a representation of authority. That representation, by words or conduct, must emanate from the principal. Clearly, the mere facts of the first defendant's being married to the second defendant, or registered as proprietor with her of the subject land, cannot amount to a representation of his having authority. The feature crucial to the pleading of ostensible authority is that the second defendant had "the apparent management, control and decision making in respect of the land". But that seems to me no better than a re-alleging of actual authority, with, tagged on, an assertion that if the first defendant had such authority, the second defendant must have known he would look to others as if he did. [emphasis added and references omitted]
The onus of establishing ostensible authority is on the party making the claim. As estoppel is the foundation for ostensible authority, the elements of estoppel must be established - i.e., a representation which he or she relied upon, to his or her detriment, such that it is unjust for the person making the representation to resile from it (see Law of Agency at [20.8]).
The relevant representation can arise from a course of dealing. Denning LJ in Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371 said (at 379-80):
… You start with an innocent person who has been led to believe in a state of affairs which he takes to be correct (in this case the purchaser has been led to believe that the rogue was the owner of the car) and has acted on it. Then you ask yourself how has this innocent person been led into this belief. If it has been brought about by the conduct of another (in this case by the conduct of the original owner), who, though not solely responsible, nevertheless has contributed so large a part to it that it would be unfair or unjust to allow him to depart from it, then he is not allowed to go back on it so as to prejudice the innocent person who has acted on it … [T]he basis of estoppel is that it would be unfair or unjust to allow a party to depart from a particular state of affairs which another has taken to be correct.
In the present case, it is clear from the documentary communications that what Mr Prince was doing during the course of the relevant negotiations or discussions was conveying instructions or information from time to time from Vesuvius, but that he was not making decisions on its behalf. Nor was he purporting to do so. Certainly, I accept that Mr Prince first knew Mr Evans before he met Mr Davidovic; and that Mr Prince, when he approached Mr Davidovic, did so on the basis that he was looking to locate a suitable property to which Vesuvius could relocate. However, it is significant that Mr Prince did not enter into any consulting agreement or retainer with Vesuvius at the time (or afterwards); nor did he appear to consider that (absent Vesuvius' consent to the 50/50 arrangement that he had himself proposed) he had any entitlement to a fee from Vesuvius for his services in dealing with Mr Davidovic in relation to the respective sites.
The fee arrangements were ones that were ultimately concluded with V&M, not Vesuvius. So, relevantly, there was a fee proposal dated 30 March 2007 from Mr Prince, on the letterhead of Prince Property Consulting, addressed to Mr Davidovic as the manager V&M, describing the brief as to "[s]ource and Secure a long term tenant for the 'Obnova Site' on Doyle Ave at Unanderra"; the fee for service being a specified percentage of the total rental fee (the fee amounted to $174,735).
Although there was an earlier email communication from Mr Prince to Mr Evans (then the general manager at Vesuvius) on 18 September 2006, in which he proposed that Vesuvius consider paying half the fee for the successful completion of the lease (for the Obnova site i.e., the Doyle Avenue Land) and stated the fee as based on a month's rental of $47,000, there is nothing to indicate that this was accepted by Vesuvius and it does not appear to be consistent with the above fee proposal; and Mr Prince issued a tax invoice on 30 March 2007 to V&M (not Vesuvius) as a progress payment, for $49,500 inclusive of GST.
In relation to the Sylvester Avenue Land, in the email dated 5 January 2009 from Mr Prince to Rosier Partners (V&M's solicitors) (advising, among other things, that he had met Mr Armitage and "Financial Controller Ian") Mr Prince records that it was agreed that consultant fees directly attributed to the DA assessment regarding "use" would be paid by Vesuvius and also a "[s]plit of Planning Consultant's fee 50/50". See also an email of 1 May 2009 from Mr Prince to Mr Armitage attaching an updated table of costs in relation to consultancies and how they were to be paid. Mr Prince issued a tax invoice for "all of the 50/50 items now coming due" and "an additional 100% item" to Mr Armitage by email on 15 May 2009 (that additional item being an Emissions Modelling Report payable to Envirodyne). It appears that Mr Armitage approved those costs. That, however, does not make clear any agency relationship.
By email dated 30 August 2010, advising as to the determination of the Sylvester Avenue project by the Department of Planning, Mr Prince advised that this completed his "tasks for [V&M and Vesuvius] in relation to managing and obtaining the desired and required statutory project approval". Relevantly, however, there does not appear to be any communication between Mr Prince and Vesuvius as to the termination of his services (just the curt email to which I have earlier referred).
I am not persuaded that Mr Prince was acting in the course of the negotiations as the agent of Vesuvius in the sense that he was in any position to make representations on behalf of or otherwise bind Vesuvius in relation to the leasing of the respective sites. In my opinion, the assertion that Mr Prince was acting as agent for Vesuvius in the negotiations leading to the leasing arrangements falls down, at the very least, on the second element (authority) even assuming for present purposes that consent could be implied from the course of dealing.
The communications between Mr Prince and the respective parties are consistent in my view with Mr Prince having pro-actively assumed a role in seeking to identify a property to which Vesuvius would be interested in relocating from its Bulli site (presumably in anticipation that Mr Prince might be able to secure an agency arrangement at some point down the track - and indeed he did secure a retainer with V&M - according to Mr Davidovic, it was "to close" the lease arrangements - see T 52.46, although in V&M's solicitor's correspondence and in the retainer agreement it was more generally expressed as a consultancy arrangement).
I accept that Mr Prince made reference to acting for both parties; and that there appeared to be an expectation within Vesuvius that Mr Prince was acting in its interests or for its potential benefit (see the October 2009 email from Mr Donsante in which there was such an expectation expressed). Mr Armitage himself appeared prepared to accept (initially at least on Mr Prince's own says-so) that Mr Prince was acting in both parties' interests. However, I consider that that falls short of establishing an agency arrangement as such. A real estate agent might be perceived as acting in the purchaser's interests when identifying potential properties of interest, for example, even though ultimately the agency relationship (otherwise than under a buyer's agency agreement) would ordinarily be with the vendor. Indeed, the subsequent arrangement in relation to the payment of costs associated with the obtaining of planning consent seems to me to be inconsistent with there being some form of subsisting consulting or agency arrangement at that stage between Mr Prince and Vesuvius.
I have concluded that Vesuvius, through its actions, did not impliedly or ostensibly (by making a representation through the course of dealing with Mr Davidovic or V&M) hold out that Mr Prince had authority to act as its agent or to bind it in the discussions with Mr Davidovic. (No question of ratification here arises - see Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907; Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265; Petersen v Moloney (1951) 84 CLR 91 at 101; [1951] HCA 57; and Leybourne v Permanent Custodians Ltd [2010] NSWCA 78.)
In any event, as I see it, notwithstanding the importance placed by Mr Zugic in oral submissions on this issue (see T 6.12), nothing ultimately turns on the capacity in which Mr Prince was acting in relation to the proposed leasing transactions, because I am not persuaded that a binding agreement for the lease of the Sylvester Avenue Land came into existence at any stage (nor was this contended by Mr Zugic), whatever Mr Prince's role in the negotiations might, properly understood, have been; and I am not persuaded as to the making of the alleged Representations, for the reasons I will come to in due course.
The relevance of the finding that there was no agency relationship between Vesuvius and Mr Prince is, however, relevant insofar as the provisional ruling in relation to the "Prince conversations" in the affidavit evidence is concerned. There is no need to remove the subject to relevance qualification on that evidence in circumstances where I do not accept that Mr Prince was authorised to do more than pass on or convey information from Vesuvius. He was not authorised (ostensibly or otherwise) to bind them to any particular leasing arrangements. I turn then to the principal issues in the proceedings.
[26]
Mr Zugic's submissions
Mr Zugic says that the only arguments which appear now to be advanced in relation to the assignments are that he has given no commercial consideration for what was assigned to him and that a cause of action based on promissory estoppel can never be assigned. (Insofar as Vesuvius argues both that there must be commercial consideration for what is assigned and that the "estoppel" must be suffered by the plaintiff personally, it is said that those two propositions cannot stand together.)
As to the former proposition (the lack of "commercial consideration"), Mr Zugic appears to accept that, if the assignment was purely a commercial transaction, then relief might be withheld notwithstanding the unconscionability at the time of the relevant dealings, but he argues that this would be as a matter of discretion and says that here there have been successive assignments from a company which went into administration and liquidation (V&M) to its only two directors and shareholders (and then, when one of them left Australia and the other became bankrupt, to the grandson and nephew of those two people). It is submitted that, in the circumstances, relief would not be withheld from a person in the position of Mr Zugic; and that it is not necessary to show that there has been commercial consideration for what was assigned.
Reference is made to the observation by Darke J (in the context of the pleading dispute then before his Honour, in his 2014 judgment, at [43]), that the assignees under the first Deed of Assignment were not merely directors of a company in liquidation but were its shareholders. It is submitted for Mr Zugic that it is hard to see that they are not persons with a commercial interest as well as an interest "in the wider sense" in the proceedings initiated by the company when they were its directors. Reference is also made to the summary by Parker J (in his Honour's reasons in 2017 at [15]-[21]) of the arguments then advanced as to the Deeds of Assignment. There, his Honour said:
15. The language of the Deed of Assignment was clumsy and elliptical. Proceedings are not property and cannot be assigned. What can be assigned are causes of action or choses of action, legal or equitable, litigated in proceedings, or debts such as judgments or costs resulting from proceedings. This means that it is necessary to identify the property in the form of causes of action or choses in action, which was comprehended by the description "the Proceedings". Clearly there must be some link between the cause of action in question and the Proceedings, but the nature of the link is not expressly stated and must be determined by a process of, or akin to, implication.
16. Counsel for Vesuvius accepted that the assignment covered causes of action then being propounded by the Davidovic Company in the Proceedings. Counsel submitted, however, that the equitable estoppel claim had not been propounded in the cross-claim and therefore, so it was submitted, it was not covered by the assignment.
17. In the 2010 cross-claim, the Davidovic Company pleaded the 2008 and 2009 negotiations concerning the Sylvester Land. The Company alleged that in the course of negotiations it had been led to believe that because Vesuvius was going to lease the Sylvester Land, the Company need not comply with its obligations under the lease of the Doyle Land, and claimed on that basis that it should be relieved, on the basis of misrepresentation, from its obligations under that lease. Claims were made under the Trade Practices Act 1974 (Cth), ss 80, 82 and 87. The Company expressly pleaded that it suffered loss from work done on the Sylvester Land.
18. I agree with counsel that the specific cause of action (equitable estoppel sounding in equitable compensation) was not identified in the cross-claim, but facts supporting that cause of action (representations, reliance and the resulting loss) were, and an award of damages was claimed for that loss.
19. In these circumstances, I think it is open to argue that as a matter of substance the cause of action now propounded was sufficiently articulated in the 2010 cross-claim to pass under the assignment. A party is only required to plead the facts which support its entitlement to relief. A party does not need to plead the legal characterisation of those facts.
20. Furthermore, I do not necessarily accept that the assignment was limited to causes of action which had then been propounded in terms in the 2010 cross-claim. The amendment of claims is a basic feature of litigation. It may be that the reference to "Proceedings" should be understood as including the assignment not just of causes of action then being expressly propounded, but also of causes of action that might properly be propounded by way of amendment.
21. As a result, I think there is clearly room for argument about whether the causes of action passed under the assignment. I do not think that the contentions put forward by Vesuvius are clearly enough correct to justify summary rejection of the plaintiff's claim. It is ultimately a question of interpretation, but it is not a pure question of law. The outcome may ultimately be effected by the factual matrix in the form of the surrounding circumstances known to the parties, and thus on the evidence led at trial.
As to the proposition that the cause of action based on unconscionability is unassignable, it is submitted that this is far too broad. It is accepted by Mr Zugic that promissory estoppel is based upon principles of unconscionability. However, he argues that this does not make it a personal remedy in the sense that it can never be assigned. It is submitted that, where and when unconscionability in the form giving rise to promissory estoppel occurs, it gives rise to a cause of action akin to a contractual right; and that what differentiates it from contractual rights based actions is that there is a discretionary element to relief.
Accepting that a court will have a discretion in any case which is based upon principles of unconscionability, it is nevertheless submitted that the proposition that the detriment and adverse consequences of such unconscionability must be suffered by the plaintiff personally is inconsistent with the nature of the remedy. It is further submitted that where the plaintiff is not the person who suffered the detriment, the court has a discretion as to whether to grant relief.
Mr Zugic says that no reason is advanced as to why relief ought to be refused to Mr Zugic as a close relative of the directors and shareholders of V&M (as opposed to the broader proposition put for Vesuvius that there are no circumstances in which a cause of action based upon promissory estoppel can be assigned). He submits that he is entitled to relief and to damages (and that, given that no expert evidence has been served by him, the damages must be based upon the evidence contained in the affidavit sworn 11 February 2018 of Miroslav Davidovic).
[27]
Vesuvius' submissions
As to the successive assignments, the arguments raised by Vesuvius include the argument that (in relation to the First Deed of Assignment) there is nothing before the court regarding the 2010 proceedings that would allow a finding that what was purportedly assigned under the First Deed of Assignment included the two promissory estoppels. Further, and in any event, it is submitted that it is clear from the provisions of the First Deed of Assignment (especially, cll 1.1,2, 3 and 4) that whatever was assigned was limited to the prosecution and resolution of the 2010 proceedings only. Vesuvius says that everything that was assigned and the consideration to be paid was confined and limited to the 2010 proceedings. Accordingly, it is submitted that Mr Zugic has not been assigned anything that would permit him to bring these proceedings.
As to the unassignability of the cause of action per se, Vesuvius notes that promissory estoppel is a mere equity (one which must be made good before an equitable interest can be held to exist, citing Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 277-279 per Kitto J); that it is binding in conscience on the party estopped; and that it is to be satisfied by that party doing or abstaining from doing something in order to prevent detriment to the party raising the estoppel which that party would otherwise suffer by having acted or abstained from acting in reliance on the assumption or expectation which he has been induced to adopt (citing Waltons Stores at 416, 417, 420 per Brennan J).
For the proposition that the promissory estoppels that have been pleaded are not assignable by themselves, Vesuvius cites the statement in K R Handley, Estoppel by Conduct & Election, (2nd ed, 2016, Thomson Reuters), at p 250, by the Hon KR Handley AO that:
… If the underlying chose in action is assigned the assignee will take subject to any equities, including a promissory estoppel, in favour of the obligor. The benefit of a promissory estoppel in respect of a personal obligation is not assignable apart from that obligation and is not assignable with it. The burden of that obligation, protected by the estoppel, is only assignable by operation of law. If the benefit and burden of the estoppel come into different hands, the estoppel, unless reaffirmed between the successors, will be destroyed. In practice the benefit of a promissory estoppel is only assignable by act of the parties if it relates to an interest in land.
It is submitted that, given that at the date of the First Deed of Assignment (August 2012) any or all agreements between V&M and Vesuvius had been terminated, whatever was purportedly assigned under the First Deed of Assignment was, at its highest, no more than bare rights of action. It is submitted that there has been no assignment of a property right to which the rights of action are ancillary, and that Boris and Mr Davidovic did not have a genuine commercial interest in taking the assignment and enforcing it for their own benefit (their "interest" as directors and shareholders being insufficient) thus the assignment was invalid (citing Monk).
[28]
Determination as to issue 1
Vesuvius' submission that there has not been a valid or effective assignment of anything that would permit the plaintiff to bring these proceedings, seems, in effect, to be along the lines that were put to Darke J in 2014. In his Honour's reasons, his Honour there noted (at [21]) that:
21. It was put that upon its proper construction, the Deed of Assignment does not assign any choses in action, but merely assigns the fruits of choses in action, and whatever was assigned was limited to something to be prosecuted within the framework of the 2010 proceedings. It was further submitted that if rights of action were assigned, the assignees, including the plaintiff, were not shown to have a "genuine commercial interest" in taking the assignment and pursuing those rights for their own benefit in the sense described in the authorities. Reference was made to Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 702F-703G; Monk v Australia and New Zealand Banking Group Limited (1994) 34 NSWLR 148 at 151E-G, 152F-153D; National Mutual Property Services (Australia) Pty Limited v Citibank Savings Limited (1995) 132 ALR 514 at 538-540 and Campbells Cash and Carry Pty Limited v Fostif Pty Limited; Australian Liquor Marketers Pty Limited v Berney [2006] HCA 41; (2006) 229 CLR 386 at [73].
As to the construction of the Deeds of Assignment, I do not accept that what was assigned was confined to the "proceedings" alone - it seems tolerably clear that what was intended to be assigned was the relevant cause (or causes) of action the subject of those proceedings and (insofar as the allegations made in the proceeding might give rise to a then unpleaded cause of action) I would accept that the assignment would extend to accommodate the assignor's "interest" in such a cause of action. The fact that the 2010 proceedings have now been disposed of (albeit without a determination on the merits) does not lead me to conclude that there was nothing capable of assignment or that nothing was in fact assigned.
The second issue is whether the cause of action in promissory estoppel is assignable at all (irrespective of whether there is a genuine commercial interest in the sense required in Trendtex and the later authorities or otherwise).
In Monk, Cohen J said, relevantly:
The general principle at common law has been that there can be no assignment of a mere cause of action in tort. This has also been held to apply in equity as well: Prosser v Edmond (1835) 1 Y & C Ex 481; 160 ER 196; Defries v Milne [1913] 1 Ch 98; Glegg v Bromley [1912] 3 KB 474. This did not prevent an assignment of a right to property which carried with it a right of action for damages: First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710 (there was an appeal on other grounds: Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295); Re Daley; Ex parte National Australia Bank Ltd (1992) 37 FCR 390. Nor did it restrict an assignment of the rights to the proceeds from a judgment in proceedings: see Glegg v Bromley.
As was there noted by Cohen J, whether there could be an assignment where the assignee had an interest in the proceedings was considered in Trendtex, where Lord Roskill said (at 703) that:
… it is today true to say that in English law an assignee who can show that he has a genuine commercial interest in the enforcement of a claim of another and to that extent takes an assignment of that claim to himself is entitled to enforce that assignment unless by the terms of that assignment he falls foul of our law of champerty, which, as has often been said, is a branch of our law of maintenance ….
If the assignment is of a property right or interest and the cause of action is ancillary to that right or interest, or if the assignee had a genuine commercial interest in taking the assignment and in enforcing it for his own benefit, I see no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance.
Those principles have been applied in Australia (see, for example, the reference in Monk to Re Timothy's Pty Ltd and the Companies Act [1981] 2 NSWLR 706 and Re Daley; Ex parte National Australia Bank (1992) 37 FCR 390; 8 ACSR 395; see also New Zealand in First City Corporation v Downsview Nominees Ltd) [1989] 3 NZLR 710, and the discussion of Trendtex in Equuscorp Pty Ltd v Haxton (2012) 246 CLR 49; [2012] HCA 7.
Cohen J went on to say in Monk (at 153):
Applying those tests in the present case it does not seem to me that there has been an assignment of any property right or interest. The deed assigned all choses in action which the assignor might have with respect to the cheques. All that was purportedly assigned were the choses in action and not any other interest in the cheques themselves. I cannot see in those circumstances that the first of the two exceptions has been established. In considering the question of whether the plaintiff had a genuine commercial interest in taking the assignment there is very little evidence available. It is known that he is a director of Coutts Morgan and I assume from the minutes of the meeting approving the assignment that he may also be a shareholder, although that is not clear from the evidence. It was submitted on his behalf that he has a genuine commercial interest, namely that obtaining a judgment in his favour will enable him to satisfy the debt upon which the bankruptcy notice is based.
In my opinion that is not a genuine commercial interest in the way that the phrase has been used in the judgments. Examples may be given from the facts in the various cases concerned. For instance it was held that there was such an interest where the assignee was already a substantial creditor of the assignor with a right to enforce the debt (Trendtex , Re Timothy's ) or where the assignee was the sole shareholder who was a guarantor of the overdraft of the assignor (Re Daley ) or where the assignee was a debenture holder with an interest in protecting the value of its security (First City Corporation ).
The plaintiff's only apparent interest is in the possibility of his becoming a creditor of the Bank. That is, his interest is in using the debt which might arise from the cause of action for his personal benefit. That no doubt is the interest of any assignee. The using of the debt as a set-off against the judgment debt is merely an example of obtaining some personal benefit….
In Trendtex, Lord Roskill had also said:
… one of the reasons why equity would not permit the assignment of what became known as a bare cause of action, whether legal or equitable, was because it savoured of maintenance.
...
Where the assignee has by the assignment acquired a property right and the cause of action was incidental to that right, the assignment was held effective. Ellis v. Torrington [1920] 1 K.B. 399 is an example of such a case. Scrutton L.J. stated at pages 412/3 that the assignee was not guilty of maintenance or champerty by reason of the assignment he took because he was not buying in order to obtain a cause of action but in order to protect the property which he had bought. But, my Lords, as I read the cases it was not necessary for the assignee always to show a property right to support his assignment. He could take an assignment to support and enlarge that which he had already acquired as, for example, an underwriter by subrogation - see Compania Colombiana de Seguros v. Pacific Steam Navigation Company [1965] 1 Q.B. 101.
I was not taken to any authority to cause me to doubt the correctness in principle of the proposition that the benefit of a promissory estoppel in respect of a personal obligation "is not assignable apart from that obligation and is not assignable with it [where not ancillary or incidental to a claim for a property interest]" (see the analysis in KR Handley, Estoppel by Conduct & Election, supra).
Having said this, it may be observed that the alleged estoppel in the present case (at least in the form premised on the making of the First Sylvester Representation, i.e., that Vesuvius "would lease the Sylvester land on the terms of the Sylvester Proposal") would seem, as pleaded, to be to the effect that Vesuvius is estopped from denying that it was obliged to enter into the lease of the Sylvester Avenue Land (not that there was already in existence a binding agreement for lease of the Sylvester Avenue Land). It may be accepted that this alleged estoppel does not differ greatly from the estoppel identified by Mason CJ and Wilson J, along with Brennan J, in Waltons Stores (an authority on which Mr Zujic places considerable reliance - he going so far as to submit that the facts in the present case are stronger than in Waltons Stores - see further below). To that extent, it might be said that, in the same sense as in Waltons Stores, the alleged estoppel does relate to an interest in land (only that, somewhat unusually perhaps, the estoppel is asserted against the would-be tenant, rather than the prospective landlord). Relevantly, in this regard, the Hon KR Handley AO has elsewhere suggested that the result in Waltons Stores is explicable by reference to orthodox principles of proprietary estoppel (K R Handley, 'The Three High Court Decisions on Estoppel 1988-1990' (2006) 80 Australian Law Journal 724, 724-725). However, Mr Zugic has here disavowed reliance on proprietary estoppel and has expressly proceeded on the footing of a promissory estoppel.
There may also be a question of coherence (albeit one that is not raised by the facts of this case), as to why, if contractual rights and obligations can be assigned, a conventional promissory estoppel working to control the exercise of those rights cannot be assigned with it. These matters might also raise issues as to whether promissory estoppel is properly conceived as a cause of action or is, rather, limited to an operation "negative in substance" (see the debate raised by dicta in DHJPM Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728; [2011] NSWCA 348 (DHJPM) and Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 (Saleh)). Again however, this is not necessary here to explore.
As to Vesuvius' submission to the effect that promissory estoppel is a mere equity, and one which must be made good before an equitable interest can be held to exist, a not dissimilar submission was made in the case of Repatriation Commission v Tsourounakis [2004] FCAFC 332 (albeit, I accept, in the context of proprietary estoppel). In that case, it was contended that there had been, at the time of the proceeding, no attempt by the alleged promisees to resile from the alleged assurances. Accordingly, the promisor had no cause of action that would result in his being recognised as having any equitable claim or interest in respect of the subject property. The Full Court (Spender, Kiefel, as her Honour then was, and Emmett JJ) stated '[t]hat contention is somewhat facile. The question is not whether Mr and Mrs Tsourounakis are threatening to act in an unconscionable manner. The question is whether, if they did, Michael would be entitled in equity to restrain them from doing so' (at [51]). There was, however, little focus on this issue in the course of submissions and it is not necessary here to express a view as to this, since nothing ultimately turns on this in light of my findings as to the alleged representations.
On the authorities relied upon by Vesuvius, the contention that the cause of action in promissory estoppel on which Mr Zugic here relies was not assignable appears to me to be well-founded. If so, and it is necessary for Mr Zugic to establish that he has a genuine commercial interest in the outcome of the proceedings in the sense required in Trendtex and the later authorities, then I would conclude that here Mr Zugic does not have the requisite interest. All that is relied on for that contention is Mr Zugic's membership of the Davidovic family in circumstances where V&M was a family company. That does not seem to me to be sufficient; and is not consistent with the way in which genuine commercial interest was approached in Trendtex.
However, in any event, nothing ultimately turns on the assignability issue in my opinion because, even if the cause of action based on promissory estoppel was validly assigned to Mr Zugic (through the series of assignments that occurred), the claim falls on its merits for the reasons set out below.
[29]
Mr Zugic's submissions
Mr Zugic submits that the meaning of "relocating" to the Sylvester Avenue Land, in the circumstances, meant replacing the "binding Lease" in relation to the Doyle Avenue Land with a binding lease in relation to the Sylvester Avenue Land. He emphasises that, on 30 June 2008, Mr Armitage stated by email to Mr Prince that Vesuvius' solicitor was "aware of the new site and will be processing the lease". By doing so, Mr Armitage was referring to the need to ensure that the solicitor for Vesuvius in Brussels was copied in on discussion on the Lease. Based on the email and the discussions with Mr Armitage, Mr Prince told Mr Davidovic that Mr Armitage had been given approval to go ahead with the "Sylvester Lease".
Mr Zugic points to Mr Prince's affidavit of 9 February 2018, in which Mr Prince deposes to the steps which were necessary following Mr Armitage confirming that it would lease the Sylvester Avenue Land in substitution for the lease of the Doyle Avenue Land. Mr Zugic submits that:
There was not the slightest suggestion in 2008 that a lease over Sylvester was merely possible, and that no agreement would arise until execution of a legal instrument. V&M had a lease in respect of Doyle. It was as good as money in the bank. V&M were being plainly told that a lease was going to happen in respect of Sylvester as approval had been given.
It is said that, in the months following, there was no suggestion by Vesuvius that the lease for the Sylvester Avenue Land would not go ahead; notwithstanding that V&M abandoned work on the Doyle Avenue Land in favour of preparing the Sylvester Avenue Land for Vesuvius to lease.
It is submitted that the facts of the matter, as between V&M and Vesuvius, are an "almost classic example" of promissory estoppel. Reliance is placed on the well-known decision of Waltons Stores. It is submitted that the facts in the present case are stronger than in Waltons Stores, in that, there, Mr Maher did not have a binding pre-existing legal agreement with Waltons; whereas, here, V&M had a binding agreement for lease over the Doyle Avenue Land (which was for 20 years with a starting rent of $560,000 per annum with agreed annual increments).
It is submitted that, once the option was exercised, the contract was worth over $10 million to V&M and that the suggestion that V&M gave it up for "mere negotiation" on another lease which might never eventuate is a ludicrous proposition and one which is contrary to the evidence. (As to the first of those propositions, apart from the fact that it was not in any real sense "money in the bank" at least until the building works were complete, the fact that giving up an existing right before documentation in relation to the other lease premises was executed might in hindsight (or even at the time) have seemed ludicrous.) However, experience in this Court (and no doubt many others) tells one that odd things not uncommonly happen. Here, it is clear that Mr Davidovic was not a qualified lawyer and it seems he paid little attention to what might be called the legal niceties or formalities. V&M's solicitors, on the other hand, were aware of the need to document the transaction.
Mr Zugic points in this regard to Mr Armitage's evidence (see [62] of his affidavit) that in July 2009 he told Mr Prince that Vesuvius was "committed" to the Sylvester Avenue Land. Little can usefully be drawn from that in my opinion. I accept that Mr Armitage did consider that Vesuvius (and he, personally) was committed, "to the bitter end". However, commitment in a moral or ethical sense is not the same as commitment in the sense of legal obligation.
In written submissions, it was submitted for Mr Zugic that, from June 2009 (when Mr Donsante set about looking at other sites including one at Gloucester Boulevard, Port Kembla "without communicating that" to V&M), Vesuvius "engaged in a number of subterfuges to cover its own change or possible change of position", including:
• Going behind the back of V&M to explore other sites including the site at Port Kembla where ultimately (in 2013), Vesuvius relocated;
• Creating false urgencies and milestones for V&M in circumstances where Vesuvius was easily able to obtain extensions of its existing lease at Bulli and in fact did so up until 2013;
• Creating a false narrative about a non-existent tender process;
• Creating a false narrative of threats by Mr Davidovic to Mr Armitage.
In oral submissions, the same issues were raised: the complaint was made that, after the arrival of Mr Donsante, Vesuvius had started looking at alternative sites "behind the back of V&M" (see T 7.49); there had been a false sense of urgency (after months of inaction) (see T 8.5); and there was a "false narrative" created as to a tender process (when there was no such tender process) (see T 8.7).
Pausing here, as I have already noted, Vesuvius complains (correctly) that none of the above is pleaded in the amended statement of claim. For Mr Zugic, the submission was that the above emerges from the evidence, and any attempt to expand the pleaded case by reference to those matters was expressly disavowed (see T 12.14). That a matter may "emerge" from evidence does not of itself permit the expansion of a pleaded case (see Ingot); at least not where there was no acquiescence in any expansion of the pleading. Rather, what would have been necessary would have been an application to amend the pleading. There is no basis on which the "subterfuge" issues can be said to have been pleaded as they would have needed to be; nor has Vesuvius acquiesced in an expansion of the pleaded case to include them. In any event, they are not made out on the evidence.
In essence, what is submitted by Mr Zugic is that in the present case there was more than the creation or encouragement of a belief that Vesuvius would lease the Sylvester Land; rather, there was a representation that this "would" happen. If that involves the proposition that Vesuvius in some way represented or V&M could reasonably have believed that Vesuvius would be bound to take a lease on any terms (agreed by it or otherwise), I cannot accept that the evidence establishes this or that this would have been a reasonable conclusion to be drawn from the evidence.
[30]
Vesuvius' submissions
Vesuvius' position is that this is a case where the parties simply failed to reach agreement for the terms of a possible agreement for lease, and lease, of the Sylvester Avenue Land.
Vesuvius notes that, for a representation to found promissory estoppel, it must be clear and unambiguous (see Legione v Hateley (1983) 152 CLR 406 (Legione v Hateley) at 435-6 per Mason and Deane JJ). Vesuvius argues that the evidence does not establish that either the First or the Second Sylvester Representation was made; and says that any such representation that was made was not clear and unambiguous.
It is noted that part of the First Sylvester Representation (see [30(c)] of the amended statement of claim), is that Vesuvius represented to "the plaintiff" that "the plaintiff" would undertake capital works on the Sylvester Avenue Land in consideration of Vesuvius entering into a lease of the land in lieu of the lease in respect of the Doyle Avenue Land. It is submitted that there is a lack of clarity and apparent ambiguity in the alleged representation. It is said to be nonsensical to suggest that Vesuvius could represent what the plaintiff (V&M) would do (as is encompassed in the pleaded First Sylvester Representation). Further, it is said that there was no lease of the Doyle Avenue Land (only ever an agreement for lease in respect of that land). (Pausing there, the binding agreement for lease would in equity have been treated as a lease.)
Reliance is placed on the observation by Brennan J in Waltons Stores (at 423) that:
Parties who are negotiating a contract may proceed in the expectation that the terms will be agreed and a contract made but, so long as both parties recognize that either party is at liberty to withdraw from the negotiations at any time before the contract is made, it cannot be unconscionable for one party to do so. … It is only if a party induces the other party to believe that he, the former party, is already bound and his freedom to withdraw has gone that it would be unconscionable for him subsequently to assert that he is legally free to withdraw.
It is submitted that V&M clearly recognised that Vesuvius was free to withdraw from the negotiations for an agreement for lease over the Sylvester Avenue Land. Vesuvius pointed, first, to the evidence of Mr Prince (said to be V&M's agent), that his understanding was that the arrangements between V&M and Vesuvius were subject to the parties entering into formal documentation covering exactly what the arrangements would be, as it had been for the Doyle Avenue Land (see at T 151.24-35). Vesuvius also pointed to the statement by V&M's solicitor, Mr Rosier, in his letter of 20 November 2009 that "[o]ur client acknowledges that this may mean that your client seeks to be accommodated elsewhere and if that be the case, it does so with our client's best wishes".
Further, it is submitted that V&M did not assume, and could not have assumed, that a lease would be entered into between V&M and Vesuvius for the Sylvester Avenue Land having regard to the following evidence. First, that in cross-examination Mr Davidovic gave evidence that: after April 2009, no commencement date for the Sylvester Avenue Land lease was agreed by the parties; any approval to operate from the Sylvester Avenue Land needed to be on terms acceptable to Vesuvius; and any premises on the Sylvester Avenue Land needed to be suitable for the carrying on of Vesuvius's business. Second, that Mr Prince gave evidence in cross-examination that: heavy vehicle access to the Princes Highway from the Sylvester Avenue Land site was crucial to Vesuvius; that heavy vehicles includes B-doubles and semitrailers; and that, ultimately, the only approval for heavy vehicle access was limited to 12.5 metre heavy vehicle which did not include B-doubles and semitrailers.
In any event, Vesuvius argues that, for it to be estopped from denying that there was contract or that a contract would come into existence between it and V&M or that a promise will be performed, it is necessary for the content of the contract or promise be known. It is said that where there is no concluded agreement (because the parties have not reached agreement on an essential term) a defendant cannot be estopped from denying the existence of an agreement (referring to Austotel Pty Ltd & Anor v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 (Austotel v Franklins) at 584 per Kirby P, as his Honour then was, and 602 per Priestley JA).
Vesuvius says that, in the present case, no agreement to lease, or lease, in relation to the Sylvester Avenue Land has been alleged and none ever could be because the parties had not agreed on many matters. It is noted that amongst the principal matters on which no agreement had been reached was the Commencement Date with respect to that property. Thus the parties had not agreed on the term of the agreement to lease or lease (citing Bradbook, Croft and Hay, Commercial Tenancy Law (3rd ed, 2008, LexisNexis Butterworths) at 100 [4.2]; Jopling v Jopling (1908) 8 CLR 33 at 43 per Isaacs J; and Whitlock v Brew (1968) 118 CLR 445 at 460-461 per Taylor, Menzies and Owen JJ). Thus, it is submitted that Vesuvius cannot be estopped from denying any agreement to lease, or lease, with respect to the Sylvester Avenue Land.
Further, it is submitted that no promissory estoppel arises (or no equity arises from the estoppel) where the party asserting the equity is unable or unwilling to carry out or perform any conditions that attach to that party's enjoyment of the equity (referring to Beaton v McDivitt (1985) 13 NSWLR 134 per Young J, as his Honour then was, at 157).
It is said that in the present case, before Vesuvius could be said to be bound to enter into a lease of the Sylvester Avenue Land, it was necessary for V&M to carry out its obligations to obtain a development approval and build a factory that were to the defendant's satisfaction. It is submitted that, as is demonstrated by the Planning Approval made for the Sylvester Avenue Land, V&M ultimately did not and could not do so. In that regard it is noted that the Planning Approval did not permit Vesuvius to operate its factory up to 24 hours a day, seven days per week, and that it did not permit Vesuvius to use B-doubles and semi-trailers on the Princes Highway access.
It is further submitted that there is no evidence of any detriment occasioned to or sustained by V&M or Mr Zugic; and that, to the contrary, the evidence is that Vesuvius has paid all of its agreed costs in respect of the Sylvester Avenue Land.
[31]
Relevant principles
At the outset I note that, in equity, a distinction continues to be drawn between "proprietary estoppel" and "promissory estoppel" (see Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12 (Ashton v Pratt) at [138]; Thorner v Major [2009] 3 All ER 945; [2009] 1 WLR 776 (Thorner v Major) at [61]). The question of the proper scope of promissory estoppel (and the potential difficulty of using the generalised label "equitable estoppel") was raised in academic commentary following certain remarks in the Court of Appeal in Saleh. There, Handley AJA (with whom Giles JA and Sackville AJA agreed) said that: a promissory estoppel was "not the equitable equivalent of a contract"; it operated as "a restraint on the enforcement of rights"; and it "must be negative in substance" (at [73]-[74]). Those remarks received subsequent endorsement (see DHJPM at [93] (Handley AJA); Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295 at [26] (Meagher JA, Basten JA and Bergin CJ in Eq agreeing); Van Dyke v Sidhu [2013] NSWCA 198, [38]-[39] (Barrett JA, Tobias AJA and Basten JA agreeing)). In 2015, in Ashton v Pratt, the controversy was noted but not resolved (at [102]-[140]; [263] (Bathurst CJ, McColl and Meagher JJA agreeing).
The authors of Meagher, Gummow & Lehane's Equity: Doctrines & Remedies have suggested that the "controversy" is more apparent than real, contending that the import of the reasoning in cases such as Saleh and DHJPM is merely that promissory estoppel is preclusionary in nature; it creates "no legal relationship or cause of action where none previously could arise" but it may, in certain circumstances, preclude a party from denying that such a relationship has arisen (see J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis) [17-270]-[17-280]). In such a case, the authors note, the parties would be bound to certain legal relations, such as an intended contract, by a court of equity and their obligations are then governed by reference to that postulated relationship.
As to the formulation of the elements common to the various doctrines of equitable estoppel (articulated by Brennan J, as his Honour then was, in Waltons Stores at 428-429), on which Mr Zugic here relies, those are:
… it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
His Honour's elements are not to be applied in every case in a "mechanical fashion" (Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105 (Doueihi) at [166]; and see DHJPM at [47]). They are, however, said to be a "useful check". It has been said that "if the facts of the case did not measure up to those tests, it would be necessary to think thoroughly about why not" (Austotel v Franklins at 615-616 (Priestley JA); referred to approvingly in Doueihi at [166]).
The requirement that the language be "clear" and "unequivocal" in a case of promissory estoppel was made clear in Legione v Hateley at 435-436. In relation to estoppel by representation, it is necessary that the language upon which it be founded be "precise and unambiguous", though this "does not necessarily mean that the language must be such that it cannot possibly be open to different constructions"; rather, "it must be such as will be reasonably understood in a particular sense by the person to whom it was addressed" (Low v Bouverie [1891] 3 Ch 82 (Low v Bouverie) at 106 per Bowen LJ; see similarly at 113 per Kay LJ).
While there is a difference of appellate opinion as to whether there are less stringent certainty requirements for a proprietary estoppel claim (see Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 (Crown Melbourne)), the requirement of certainty for a promissory estoppel claim has not been doubted (see in Crown Melbourne, where the statement of principle in Low v Bouverie was expressly endorsed (at [35]) by the plurality; and Keane J considered that promissory estoppel required a high degree of certainty (in fact, one sufficient to ground an effective contractual variation; see [143]; [147])).
Drawing a conclusion as to the adequacy of the alleged representation or promise requires "careful identification of the nature of the assumption by the plaintiff" (Doueihi at [186]). The alleged representation or promise is to be assessed by reference to the circumstances of each case (Doueihi at [186], citing Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 445; [1990] HCA 39 (Verwayen); see also, Thorner v Major at [56]).
It has been said that the representation or promise is sufficiently clear "if it is reasonable for the representee to have interpreted the representation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely" (Galaxidis v Galaxidis [2004] NSWCA 111 at [93] (Tobias JA)) Reference is also often made to the following passage from the judgment of Hodgson JA in Sullivan v Sullivan [2006] NSWCA 312 at [85] (cited with apparent approval in Evans v Evans at [124], Doueihi at [187] and in Crown Melbourne at [147]-[148]):
Generally, a promise or representation will be sufficiently certain to support an estoppel if it was reasonable for the representee to interpret the representation or promise in a particular way and to act in reliance on that interpretation, thereby suffering detriment if the representor departs from what was represented or promised. Generally, if there is a grey area in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, I see no reason why the Court should not regard the representation or promise as sufficiently certain up to this lower limit.
A distinction has sometimes been drawn between arms-length/commercial cases and domestic or family cases when assessing the adequacy of an assurance or the reasonableness of an expectation or assumption (see, for example, DHJPM at [104]-[105]). In Cobbe v Yeoman's Row Management Ltd [2008] 1 WLR 1752; UKHL 55, Lord Walker made the following observation (at [68]):
In the commercial context, the claimant is typically a business person with access to legal advice and what he or she is expecting to get is a contract. In the domestic or family context, the typical claimant is not a business person and is not receiving legal advice. What he or she wants and expects to get is an interest in immovable property, often for long-term occupation as a home. The focus is not on intangible legal rights but on the tangible property which he or she expects to get. The typical domestic claimant does not stop to reflect (until disappointed expectations lead to litigation) whether some further legal transaction (such as a grant by deed, or the making of a will or codicil) is necessary to complete the promised title. [emphasis added]
[32]
Determination as to issues 2-3
There is no dispute here, as to the relevant leasing arrangements, that there was a valid exercise by Vesuvius of the option for a lease in respect of the Doyle Avenue Land; nor that this gave rise to a binding agreement for lease on the terms set out in the Deed of Options to Lease. Although referred to throughout Mr Zugic's submissions as a binding lease, strictly speaking what V&M had at the time of the exercise of the option was the benefit of a binding agreement for lease which, if enforceable by way of an order for specific performance, would give rise to an equitable lease. The proposition that this was "money in the bank" (or that what V&M had at that time was a contract worth some $10 million) must, however, be qualified (as I have admitted to above) by the fact that the commencement of the lease term was not to occur until completion of the works required under the agreement for lease. Hence, the "value" to V&M of the agreement for lease must in that sense be qualified to take into account the possibility that an actual lease might never have come into existence.
In any event, no factual finding in relation to the exercise of option is required as it is not in dispute that it was validly exercised; nor is there any dispute as to the termination of the agreement for lease in respect of the Doyle Avenue Land. The surrender of termination of that agreement was acknowledged by V&M, through its solicitors (albeit without prejudice to its argument that Vesuvius had waived any claim for breach of the agreement for lease in relation to the failure to complete the works).
Pausing here, it would seemingly have been open to V&M to have taken the stance in the course of the negotiations that, in the absence of a binding agreement for lease being reached as to the Sylvester Avenue Land, Vesuvius would be held to its binding agreement for lease in respect of the Doyle Avenue Land. It would seemingly have been also open to V&M to have insisted upon execution of agreement for lease documents in relation to the substitute Lease before accepting the termination of the Doyle Avenue Land agreement for lease. However, for whatever reasons, it did not do so. Ludicrous (or perhaps foolhardy from a commercial perspective) as it may in hindsight seem, V&M did not seek to hold Vesuvius to the existing lease but agreed to its surrender.
What then as to the arrangement (which, at least in principle, was clearly reached between the parties) that, in effect, the Sylvester Avenue Land would be substituted as the land to be leased by Vesuvius? There is little doubt that what the parties were contemplating was that there would be a lease arrangement in relation to the Sylvester Avenue Land on the similar terms as that which had been put in place in relation to the Doyle Avenue Land, though from an early stage in the discussions it appears clear that the precise terms of that arrangement would differ (whether or not that be documented by an amendment to the then existing agreement for lease or the termination of that agreement and entry into another like agreement. I accept that Mr Davidovic's evidence was that it was his belief that Vesuvius was always "tied in" (see T 55.47).
I consider that it is also clear that, from the time that Mr Armitage confirmed the approval to proceed with the Sylvester Avenue Land as the lease site (in his email of 30 June 2008 to Mr Prince), the parties acted on the basis that it was intended and assumed that Vesuvius would enter into a lease agreement in respect of the Sylvester Avenue Land and, correspondingly, that the parties would not proceed with the Doyle Avenue site. For that reason, it is difficult to conclude otherwise than that it would not have been open to Vesuvius later to complain about the failure of V&M to complete the proposed works in relation to the Doyle Avenue Land by the time proposed in the agreement for lease in relation to that land.
However, I am unable to conclude that there was a clear and unambiguous representation by Vesuvius that it would immediately be bound to an agreement for the lease of the Sylvester Avenue Land in the absence of a concluded and executed new (or substitute) lease agreement; or that it would enter into such a lease absent agreement on formal lease documentation. The conduct of the parties is inconsistent with any such representation by Vesuvius (and inconsistent with V&M understanding and relying upon a representation in those terms). In particular, I refer here to the submission of draft lease documents by the solicitors. Nor am I persuaded that there was any representation by Vesuvius that it would be bound to a lease of the Sylvester Avenue Land on the terms of the Sylvester Proposal absent the final execution of a lease or agreement for lease document.
What was said at the time that Mr Armitage confirmed that Vesuvius would proceed with a lease of the Sylvester Avenue Land was that he would inform the company's solicitors "so we can get the lease sorted out". It was not clear from Mr Armitage's email of 30 June 2008 (in which approval from the overseas board members was conveyed) to Mr Prince whether the proposed substitution, in effect, of the Sylvester Avenue Land for the Doyle Avenue Land under the leasing arrangements was to be achieved by way of a simple variation of lease or by termination of the then existing binding agreement for lease in respect of the Doyle Avenue Land and entry into a new lease. However, what became apparent very soon thereafter was that the proposed lease of the Sylvester Avenue Land would not necessarily be on precisely the same terms as the agreement in relation to the Doyle Avenue Land. In other words, it became clear that this was not proposed to be a simple substitution of one bundle of legal rights in relation to a particular parcel of land for the same bundle of legal rights in relation to another.
The parties, through their legal representatives, then commenced to prepare documents to reflect the new arrangement. A deed of surrender of the Doyle Avenue Land option lease was prepared by Vesuvius' solicitors, as was a draft of the proposed new lease for the Sylvester Avenue Land. Viewed by reference to the categories considered in Masters v Cameron (1954) 91 CLR 353 at 360-362; [1954] HCA 72 (per Dixon CJ, Kitto and McTiernan JJ), as arguably expanded in later authorities (see Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628 (McLelland J, as his Honour then was); approved in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 531, 634-5), in my opinion the position was that the parties had reached agreement in principle as to the identification of the leased premises but that before a binding agreement came into existence it was necessary (and intended) that it be formally documented. That this was necessary is obvious from the ongoing negotiation as to the terms of the leasing arrangements that occurred throughout the period (most relevantly in relation to the time for completion of the relevant works and the detail of the access arrangements).
Had it been necessary (and it seems that there is no allegation to this effect that would require such a finding) I would have found that there was no binding agreement reached in respect of a lease over the Sylvester Avenue Land notwithstanding that the parties were clearly proceeding from around 30 June 2008 on the assumption that there would in due course be a formally documented agreement for lease/lease in respect of that land.
Certainly, there was a representation made by Mr Armitage to Mr Prince (which Mr Armitage no doubt understood would be conveyed by Mr Prince to Mr Davidovic, and hence which can be seen as a representation to V&M itself) that Vesuvius would enter into a lease for the Sylvester Avenue Land and would not proceed further with the existing agreement for lease for the Doyle Avenue Land. However, I consider it implicit in that representation that Vesuvius would do so (and would only do so) on terms to be agreed. The unfortunate fact so far as V&M is concerned is that those terms ultimately were not agreed.
As adverted to above, I can well see the basis for an argument that Vesuvius would have been estopped from later relying on the terms of the binding agreement for lease of the Doyle Avenue Land (having represented that it would proceed with a lease of a different site), if it were, say, to argue that it had some claim for damages under the event of default clauses of that agreement (at least without reasonable notice that this agreement was to be in some way 'revived'). (In the context of promissory estoppel, I note that reasonable notice of an intended departure may mean that there is no relevant detriment, such that it is not unconscionable for a promisor thereafter to resile from the promise - see the Privy Council decision in Ajayi (t/a Colony Carrier Co) v RT Briscoe (Nigeria) Ltd [1964] 3 All ER 556 ;1 WLR 1326 at 1330, where it was said that "… the promisor can resile from his promise on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position". It seems to me that this is what Rosier Partners' letter of 20 November 2009 was seeking to make clear, when stating that the acknowledgment of termination of the deed was "without prejudice". In other words, I understand this to mean that V&M accepting that the deed was at an end was "without prejudice" to any contention that V&M might later make that it was not open to Vesuvius to claim any damages as a result of the fact that the building works provided for under that arrangement had not been completed within the time specified.
In my opinion the evidence makes clear that, whether consciously or otherwise, V&M took the commercial risk that negotiations for the Sylvester Avenue Land lease might not satisfactorily be concluded. In that regard, while I can accept that from a business point of view it was seemingly ill advised for V&M to proceed with the development approval and incur expenses in relation to the Sylvester Avenue Land (and not to insist upon maintenance of the Doyle Avenue Land lease agreement until execution of formal documentation in relation to the replacement property), I do not accept that the situation can be so readily dismissed as ludicrous (i.e., that V&M was giving up "money in the bank" simply to undertake new negotiations). Rather, a perfectly credible explanation for this is that there was simply insufficient attention paid to the legal arrangements (perhaps because there was limited involvement of the solicitors during the course of the matter) and that both parties proceeded in good faith expecting to reach an agreement in relation to the Sylvester Avenue Land which simply never eventuated (it not being necessary or appropriate to attribute fault or blame for this).
As to the matters raised in the course of submissions in relation to the so-called tender process and the complaint as to a false sense of urgency and false narrative, I make the following observations.
First, I do not accept that there was any "false sense of urgency" as to the timing of the commencement of the proposed lease in circumstances where the written communications between the parties (and Mr Prince) make clear that Vesuvius was concerned from the outset to have a specified time frame within which it would be in a position to take occupation of the premises (be that the Doyle Avenue Land or, subsequently, the Sylvester Avenue Land). That is not surprising given that Vesuvius was occupying the Bulli site (where its factory was operating) under a lease arrangement with the now new owner (ARV) and it therefore had no security of tenure beyond the terms of its lease arrangement with ARV. The fact that it was able to obtain one or more extensions to the term of its occupation of the Bulli site does not gainsay that from a commercial perspective there could readily be understood to be a genuine need to have certainty as to when the company would be in a position to relocate to the new premises (a process that was apparently to take a few months to achieve).
Moreover, in circumstances where there was consistent "push back" to the extensions of time that were proposed by Mr Prince during the course of the discussions as to the leasing arrangements and over the course of the project in relation to occupation of the Sylvester Avenue Land, I cannot accept that Vesuvius had in some way manufactured a false sense of urgency when it (not unreasonably in the circumstances) pressed for a fixed completion date for the proposed works.
Whether a three month building time frame (or the associated milestones apparently put forward in late 2009 to early 2010) was a realistic timeframe is a different issue (and by then it is not hard to conclude that there may have been a level of frustration - or what Mr Prince "deal fatigue" - at play, which may have led to such a timeframe being promulgated).
Second, as to the so-called "tender process", both Mr Armitage and Mr Donsante were cross-examined as to what had occurred in this regard. It is apparent from the documentary evidence that there was not a formal tender process of the kind one sees in relation, say, to government tenders. However, it is also clear that what was being undertaken was a review of potential alternative sites and a comparison of the suitability of those sites with that of the Sylvester Avenue Land (as apparent from the memorandum that was prepared). I consider that the reference to this as a "tender process" might in some respects be inapt but that it does not amount to the creation of a "false narrative".
True it is that some of the aspects of the so-called tender process (as recorded in Mr Armitage's "note to self") are not supported by the evidence - in particular, the suggestion that Mr Davidovic had been invited to participate in a tender, as such. However, there is little doubt but that there were discussions at the time during the period both before and after Mr Donsante's arrival as to the terms on which a lease arrangement for the Sylvester Avenue Land could be concluded; and it seems unarguable that by early January 2009 in the discussions with both Mr Prince and with Mr Davidovic, what Vesuvius was identifying were the terms it considered necessary for it to proceed with a lease of the Sylvester Avenue Land. Whether or not Mr Davidovic appreciated it at the time, therefore, and I accept that his case is that he did not, it is apparent that what Vesuvius was doing (after the email from V&M's solicitors in which they conveyed V&M's best wishes for Vesuvius if it chose so to do, if not before) was conducting an informal comparison of alternative sites.
Third, to the extent that it was suggested that the emphasis placed by Vesuvius during the discussions at the end of the project on the need for access to and from the Princes Highway by "B-doubles" (or for 24 hour, 7 day a week access) was something that was manufactured by Vesuvius at the conclusion of the leasing negotiations, again I cannot accept this. I would accept that it may not have been clear at the outset precisely what was contemplated by Vesuvius in terms of heavy vehicle access (something for which it might be excused when one has regard to the difficulty of elucidating precisely what Mr Prince himself understood by the term - see his cross-examination at T 141-143). However what was clear was that from a relatively early stage what Vesuvius wanted to ensure was the ability for heavy vehicles to be able to access the leased premises from the Pacific Highway (see the traffic engineer's report which makes clear that such access was envisaged back in 2007 even before the Doyle Avenue agreement for lease was entered into).
As to the working 24 hours, 7 days a week issue, some weight was sought to be placed for Mr Zugic on statements reportedly made by Mr Armitage at a public meeting at council chambers on 28 March 2010, as being inconsistent with a requirement that there be access to the site 244 hours, 7 days a week (see for example the debate in the course of evidentiary objections at T 23-24). I admitted that evidence subject to weight and relevance but ultimately I place no weight on the fact that something may have been said at a public meeting suggesting that less than 24 hours' access might be required for the site insofar as this is said to establish that there was not a legitimate reason put forward for the decision not to proceed with a lease of the Sylvester Avenue Land. Even if that had not been a "deal-breaker", it is apparent that by early 2009 there was a level of dissatisfaction with the progress that had been achieved in relation to the likely occupation date for the site and I have concluded that this was a genuine reason for Vesuvius to have decided not to proceed with the proposed lease.
I thus do not accept that the evidence establishes (even assuming it to be open to Mr Zugic in the absence of a pleaded allegation to this effect to raise such an issue) that there were false subterfuges carried on by Vesuvius in the way that Mr Zugic has suggested. The highest that the evidence rises in this regard is that there was a decision seemingly made towards the end of the parties' relationship that V&M would not be informed of the decision that had then been made to the effect that the Port Kembla site was now the preferred site (so as to leave the Sylvester Avenue Land as a fall-back if the Port Kembla site fell through). By that stage, however, the costs and expenses in relation to the planning approval process had largely been incurred (and in any event Vesuvius met its agreed share of those costs and expenses).
Finally, I should make clear (as earlier noted) that I make no finding (nor is it necessary to do so) as to the reference in Mr Armitage's "note to self" concerning the making by Mr Davidovic of a threat to him in relation to the matter. It is not appropriate to do so in circumstances where it is not necessary for the determination of the issues in the proceedings.
Turning to the particular representations alleged, as to the First Sylvester Representation, I accept that Vesuvius represented that it would lease the Sylvester Avenue Land, broadly on the terms of the Sylvester Proposal, and that it would not be proceeding with (or, perhaps more relevantly, would not hold V&M to), the lease of the Doyle Avenue Land. I do not accept that Vesuvius represented that it would do so "come what may", or that it would do so in the absence of the parties reaching agreement as to the precise terms of the substitute lease. Nor do I consider that the email communications on which Mr Zugic relies could reasonably have conveyed to someone in V&M's (or Mr Davidovic's) position that this would be the case. The conduct of the parties, through their solicitors, makes clear that it was always understood that whatever the new arrangement was it was to be documented.
The difficulties to which Vesuvius points (as to what would have been the lease terms under such a representation) make abundantly clear that it could not reasonably have been assumed that there would be a binding arrangement until the lease documentation was signed.
As to the Second Sylvester Representation, this was in my opinion no more than a statement in the course of negotiations as to when the lease documents were expected to be concluded and signed (and an acceptance at that stage of a later occupation date than had been contemplated earlier).
I am not persuaded that either of the pleaded representations was sufficiently clear as to give rise to an estoppel nor do I consider that reliance could reasonably have been placed on there being any binding representation as to entry into such an agreement in the absence of final documents.
As to reliance, it is clear that it is for a plaintiff to show that it has acted in reliance upon the relevant representation or assumption. There is no presumption of reliance; reliance is a fact to be found (Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 (Sidhu v Van Dyke) at [58] per French CJ, Kiefel, as her Honour then was, Bell and Keane JJ - a case of proprietary estoppel). There it was made clear that it is not necessary that the relevant assumption be the "sole inducement operating on the mind of the party setting up the estoppel" (Sidhu v Van Dyke at [71] (emphasis added)); rather, it need only be a "contributing cause" (at [71]-[73] per the plurality; [90] per Gageler J (again, emphasis added)). (As to what it is necessary for a plaintiff to prove in this respect, see the discussion in E Co v Q [2018] NSWSC 442. It is not necessary here to explore any divergence in the judicial approaches to this issue (see the authorities there discussed), as I do not accept that the claim based on the making of the relevant representations is here made out.)
As to detriment, it must be established that the plaintiff has suffered or will suffer detriment if there is departure from the relevant representation (or induced assumption) upon which the plaintiff has acted (namely, that detriment will follow if the defendant is permitted to act inconsistently with any representation or expectation it has encouraged or otherwise to deny the truth of any assumption in which the defendant has acquiesced). Although the questions of reliance and detriment are distinct, they are interwoven, and it is clear that "[t]here can be no real detriment if the party asserting the estoppel would have been in the same position in any event" (Sidhu v Van Dyke at [92] per Gageler J; quoting Dixon J, as his Honour then was, in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674; [1937] HCA 58). Since I have found no actionable representation capable of sustaining the pleaded assumptions on which the pleaded detrimental reliance was placed, it is not necessary to consider the argument as to whether V&M was ready, willing and able financially in any event to perform the agreement (including whether, as a matter of law, this is a requirement of such an estoppel claim, noting that Mr Zujic has not pressed any submission to the contrary).
I have thus concluded that the estoppel case is not made good in either of the ways it has been pleaded.
[33]
Issue 4 - Relief
I have noted above the different ways in which the claim for equitable compensation was particularised. In light of the conclusion I have reached the question of compensation does not arise.
Had the issue of compensation arisen (in other words had I been persuaded that the estoppel causes of action had been validly assigned, and that one or both of the estoppels had been made good) there would (as Mr Zugic accepts) be a question as to whether, as a matter of discretion, relief should be granted in Mr Zugic's favour.
Particularly in circumstances where the costs and expenses in relation to the Sylvester Avenue project approvals appear to have been met in accordance with the agreement reached between the parties, it is by no means apparent to me that it was unconscionable for Vesuvius to withdraw from the proposed leasing arrangements at a time when the terms of the proposed lease for the Sylvester Avenue Land had not been finalised and when there had been continuing delay in the project and issues had arisen as to the suitability of the site (whether ultimately they could have been resolved or not is another matter).
I cannot accept that the loss of the Doyle Avenue Land rent for the relevant period is a loss that should be borne by Vesuvius. The appropriate starting point in an estoppel case is that the "prima facie entitlement" to relief is framed on the basis of the assumed (or expected) state of affairs (see Verwayen at 442, 445-446 per Deane J; Giumelli v Giumelli (1999) 196 CLR 101 (Giumelli) at [42]-[50]; Donis v Donis (2007) 19 VR 577; [2007] VSCA 89 (Donis v Donis) at [19] per Nettle JA, as his Honour then was, (Maxwell ACJ and Ashley JA agreeing); Delaforce v Simpson-Cook (2010)78 NSWLR 483; [2010] NSWCA 84 (Delaforce) at [63]-[65]; and Sidhu v Van Dyke at [82]-[86] per French CJ, Kiefel, Bell and Keane JJ) (though I acknowledge that some of these authorities were cases of proprietary estoppel). A not wholly unresolved point is whether the concept of the "minimum equity" has been discarded in the context of promissory estoppel (as well as in the context of proprietary estoppel). Be that as it may, in Sidhu v Van Dyke, the High Court explicitly framed the question of remedy (there, as noted, a case of proprietary estoppel) by reference to the "requirements of good conscience" (at [83]). That is not, of course, an appeal to idiosyncratic notions of fairness. The concept of good conscience is given content incrementally, by close attention to the facts and reasoning of the cases. The current holistic approach to relief for an equitable estoppel is in my view well encapsulated in the following passage from the judgment of Allsop P (Giles JA agreeing), as his Honour then was, in Delaforce at 485:
Equity will look at all the relevant circumstances that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character.
What is made clear by cases such as Giumelli and Sidhu v Van Dyke is not only that any prima facie entitlement is to be framed by reference to the assumed or expected state of affairs but also that, in assessing the relief to be granted, proportionality of the remedy to the prejudice or detriment is a relevant consideration (and as recognised in Delaforce at [4], this consideration is sometimes of considerable importance). In Rodda v Ian Rodda Pty Ltd [2015] SASC 95 (see also Rodda v Ian Rodda Pty Ltd (No 2) [2015] SASC 128, again a proprietary estoppel case) , Nicholson J said at [305]:
Whilst it is not the case that the court should search for the "minimum equity" to do justice in the circumstances and it is not a case of assessing or measuring or weighing the detriment minutely in order to convert it into some equivalent of cash or kind, there must be a sufficient proportionality of any interest or remedy ultimately granted when compared with the prejudice or detriment suffered by the plaintiffs and the overall justice of the case.
In the present case, had the claim of promissory estoppel been made good, on the basis of a representation of one or other the kinds alleged (both of which assume that there were final agreed terms on which the Sylvester Avenue Land lease could have proceeded or at least that the essential terms of the lease were agreed or could be implied even if others were still subject to agreement), to "make good" the relevant expectation would be difficult in the present case (as entry into the leasehold arrangements was predicated on completion of building works in relation to the site that have not taken place).
In those circumstances, I consider that the appropriate relief would, at its highest, have been to make good the costs thrown away in relation to the development application process that was undertaken in relation to the Sylvester Avenue Land (bearing in mind that Vesuvius has already bourne part of those costs), and I would refer the matter to a referee to determine those costs. I would not have ordered compensation by reference to the Doyle Avenue Land lease, which V&M of its own choice agreed should be surrendered (albeit in the expectation that a lease arrangement would or could be concluded with Vesuvius), with the concomitant risk that an arrangement in relation to the Sylvester Avenue Land might never be concluded.
As it is, however, this issue does not arise.
[34]
Conclusion
For the reasons above, the plaintiffs' claim should be dismissed. I see no reason why costs should not follow the event.
[35]
Orders
Accordingly, I make the following order:
1. Dismiss the plaintiff's claim with costs.
[36]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 21 February 2020
Mr Armitage also readily accepted that, in saying that Vesuvius would consider moving to the Sylvester Avenue Land instead of the Doyle Avenue Land on 16 April 2008, he was saying that one would replace the other (T 81.2).
Mr Armitage agreed that, by his email to Mr Prince of 30 June 2008, he was conveying that a decision had been made by Vesuvius to substitute the Sylvester Avenue Land for the Doyle Avenue Land and said that the issue of the lease "was a matter of legal nuts and bolts" (T 81.38) (evidence on which Mr Zugic here places no little weight).
Mr Armitage's evidence was that he prepared the "note to self" (see above at [73]) over about a month commencing in March 2010 (T 84.48) and said that:
Q. Was there any particular significance in that date? I mean, in the time of March of 2010, that made you start compiling, "Note to myself"?
A. Well, by that time, the whole lease for Sylvester Avenue had gone pear shaped and it was bleeding obvious to me that it was going to be - we'd be all sat here one day, so I wanted to make sure that my notes were as accurate and current as they could be.
He said he prepared the note by access to several notebooks and to the emails on Vesuvius' server.
Mr Armitage said, more than once, that he (or "we") was (or were) committed to the Sylvester Avenue Land as at 5 January 2009 in his meeting with Mr Prince (T 92) and said, with evident feeling (which appeared to me to be genuine), that "I was committed to, to Sylvester to the bitter end".
Mr Armitage thought it was a "bit unfair" to say that, from the moment that Mr Swinbanks saw the Sylvester Avenue Land, he did not like it (T 92) but accepted that it was not to Mr Swinbanks' liking. He said that Mr Donsante's opinion about it was not really a major consideration (because Mr Donsante was the financial controller) but "I don't remember him bitching about it" (T 93); though he accepted that Mr Donsante did not like the site.
Mr Armitage's recollection was that Mr Donsante used to drive past the Port Kembla site every day on his way to work and that every day would say "we should move to this site" (T 94.40). Again, Mr Armitage was adamant that he (Mr Armitage) was committed to the Sylvester Avenue Land and he said he did not inspect the site on 12 October 2008 (when Mr Donsante and Mr Swinbanks inspected the site) to show his "lack of interest in the Port Kembla site" (T 95.12).
As to the ARV position, he said (T 93):
Q. It's fair to say, isn't it, that the relationship between ARV and Vesuvius was very good?
A. They were good landlords.
Q. When Vesuvius wanted an extension, it didn't really have too much difficulty in negotiating extensions, did it?
A. It wasn't as black and white as that because ARV planned to develop that site, so as soon as they could get the permission to develop the site, we were off. They couldn't maintain both on the same site, so whilst they didn't have permission to do it, getting the extension to the lease wasn't a huge drama. But there was always going to be that point in time where they get the plans and we wouldn't be allowed to operate them.
Mr Armitage left Vesuvius in late 2011, and when he left, the company was still located at Bulli, so he accepted that there must have been another extension of the Bulli Lease after 2 February 2011 but he did not recall it (T 94.30). He said that the last time they sat down with ARV, they (ARV's representatives) said basically "[e]nough this is the last time" (T 94.36).
I found Mr Armitage to be a genuine witness. His evidence was consistent with the contemporaneous documentary record. He readily made concessions as to matters put to him (including as to his expectation that V&M would be incurring costs in relation to the property (see T 106-107), though pointing out that Vesuvius paid for various costs); and he was restrained in his answers.
I accept Mr Armitage's evidence that, until October 2009, it was his personal intention to "go ahead" with the Sylvester Avenue Land; and his denial of the proposition put to him that, whatever V&M had suggested at the 18 November 2009 meeting in terms of completion, it was "just going to be rejected" (T 117.26). Mr Armitage said at one point that he was under a lot of pressure from overseas to "get this all sorted out by this point [20-23 November 2009]" (T 121.35).
Mr Armitage was cross-examined at some length as to the tender process (T 122ff). He clearly regarded it as a "tender process" but described it as instructing Mr Swinbanks to seek out alternative proposals for sites. (He said Mr Swinbanks, Mr Donsante and ultimately he, himself, were on the tender evaluation panel.) Mr Armitage said that Mr Swinbanks "went out and got some tenders and came back and gave us a document with the pros and cons of four sites, at which point I was then involved to help evaluate it" (T 123). He did not profess to have written the letters in relation to the tender process and he said he did not try to influence the process. Clearly, his understanding was that what happened in Mr Swinbanks' analysis of the sites amounted to a tender process; he was not suggesting some other more formal tender process.
As noted, I considered Mr Armitage to be a believable witness and I make no adverse credit findings against him. Indeed, his frank acceptance that the statement made to Mr Davidovic on 29 March 2009 (that the Sylvester site was still under "active consideration") was "entirely false" (since he accepted that at that time the only way that V&M "could get back into the game was if for some reason the Port Kembla site fell over"), was to his credit as a witness (whatever one might think about the commercial ethics of such a misrepresentation of the situation at the time) (T 129). Mr Armitage did not shy away from admitting that the stance that had been adopted at that time was, in effect, to keep the Sylvester site as a fall-back position.
Mr Armitage's evidence in the witness box was that the Sylvester Avenue Land site was still a consideration "until April when Mr Davidovic gave me a telephone call" (T 129.18). I understood, by that evidence, that Mr Armitage meant that as at 29 March 2009, the Sylvester site was still a consideration in his mind but only as a "fall-back position". As to the reference to the telephone call, Mr Armitage was quite emphatic in cross-examination as to the making by Mr Davidovic of what he evidently perceived to be a plain (and unacceptable) threat to him; and he was quite believable when he said in the witness box that "[t]hat's when he was completely written out of the equation" and that "[w]e would never go to Sylvester under any circumstances after he made that threat" (T 130). That said, as I make clear in due course, I make no finding adverse to Mr Davidovic in that regard (not least because he was not cross-examined as to this issue). I simply note that I accept that, whatever was in fact said in the relevant telephone conversation, Mr Armitage perceived it as a threat and, for Mr Armitage, it clearly spelt the end of any prospect of Vesuvius proceeding with a lease of the Sylvester Avenue Land site. Ultimately, nothing turns on why Vesuvius chose not to proceed with the proposed lease.
Cross-examined about the tender process Mr Donsante said that there was a tender process. By this, he seems to have understood it involved someone looking at other sites (T 172):
Q. Was there a tender process that you were personally involved in?
A. As in, what do you mean personally involved in? Was I, did I go out looking for other sites? No. Was I coordinating the tendering? No. Was I involved in discussion that there, that there, there, there should be other sites to be looked at as plan B? Yes.
Q. Did you make the recommendation as to which site should be accepted?
A. No.
Q. Who did?
A. Again, it was part of a tender. People went out, Warehouse King, whoever it was that I approached at the time to seek a suitable blocks of land that could be developed to, to relocate Vesuvius to.
Q. If there was a tender process, there must have been tenderers?
A. I believe so.
Q. Who were the tenderers?
A. Thinking back, I, I think Steve came up with - there was three or four sites that were evaluated, I believe.
Q. That's not a tender process, is it?
A. Again, what - I'm not quite sure what you mean. What do you want it - me to answer? I mean-
Q. Well, you say-
A. -a tender for me can be - it could be specific, or could be general, so what's the question? I don't understand what the question is.
Asked to assume it was a tender process by which tenderers put in submissions, he said (T 173-174):
A. Yes, there was. There were - I mean, I think of the four, of the four properties I've mentioned, they're the ones that actually submitted some documentations to Steve Swinbanks who was the person assessing the sites for suitability.
Q. But do you have knowledge of people having submitted tenders in relation to the relocation by Vesuvius?
A. Yes.
Q. Those people did not include V & M Davidovic?
A. Again, I can't speculate what Steve's done but what I - my understanding when he did provide his analysis and recommendations in March of 2010, they certainly were in there, in his matrix
Pressed further on the tender process there was the following evidence (T 175):
Q. Who was the recommendation of Mr Swinbanks made to? You said his recommendation, who did he make that recommendation to?
A. To Paul.
Q. Did you see it?
A. Yes.
Q. Was there a discussion about it?
A. Look, I, I can't speculate, but I daresay there would be, because these things aren't just discussed in isolation. There's a process and the process would have been with the management team and then it would have been escalated to the executive team for final approval. I mean, there's an authority matrix that, that needs to signed off on these projects and when we talk in the, in the number of years that that would, that was being signed up and also the cost of the project, there, there, it would have been escalated up. But his recommendation would have carried quite a significant, quite a bit of weight, yes.
Q. Was his recommendation Gloucester Avenue, Port Kembla?
A. Yes.
Q. This was the property that you had inspected in October of 2009?
A. No, I did inspect it. All I did was float an idea, and from that, Steve made his own enquiries and looked at the submissions and, and the likes. My involvement was to float an idea, and only because I knew of it, having lived in Port Kembla.
Tested again on this, there was the following exchange (T 176):
Q. I suggest to you that, firstly, no person was invited to make submissions to Vesuvius for relocation of their premises. No person was invited to make any kind of submission to Vesuvius as to relocating to premises.
A. I'm not quite sure what you mean because part of, of the matrix showed that a number of people did submit details. Otherwise, how could Steve have provided the analysis?
Q. Well, I suggest that there was no such analysis.
A. That's your suggestion.
Q. What I suggest is that the decision was simply made to Gloucester Avenue Boulevard without any analysis of any other site?
A. Well, you have a poor understanding of due process then, because it doesn't ‑ it's not based on just somebody's whim or thought bubble. It went through a process and the process was an evaluation by the engineer, who provided a recommendation. That recommendation would have then been floated with the management team and then it would have been escalated to get to the executive team. From that, it would then - then a directive would have been provided and that direct then would have been followed. In a corporate environment, as we have, there's documentations. There's processes that we follow. We just don't make whims based on thought bubbles.
As to the position in relation to the eventual move, Mr Donsante said (T 176):
Q. So it remained at Bulli all the time that you were there?
A. Yes.
Q. It got extensions of its lease from ARV, that's Anglican Retirement Villages?
A. Yes.
Q. There was no difficulty in getting those?
A. You're relying on a third party's goodwill. Now, obviously, the Anglican Retirement Village, I know I negotiated the first extension and they were anxious about extending it because they had their own commercial projects for that site. They extended it based on the advice that we believed was correct, as provided by Shaun. As I mentioned earlier, we were led to believe that the DAs and all those approvals should be completed by October and then roughly a ten-month to 12-month process of building and getting certifications, et cetera. I had negotiated the lease to be extended to August - February 2011. Therefore, the next time that there was an extension they required more evidence because they had other plans for the site. So when you were in business and you were relying on the goodwill of other businesses, it becomes very difficult.
Pressed as to why, if a tender had been accepted in 2010, there was not a move until 2013, he said:
A. I mean, just because Steve provided his recommendations to that - the Port Kembla site offered far - they're obviously - if I recall, the - sorry, if I recall the recommendations, it offered facilities that were superior to the Sylvester. That process of recommendation, you still had to go through the management process of it being accepted and that does take time. If I remember correctly, Paul, even back in October, was still very, very keen to keep - to move to Sylvester Avenue because that was the only one we had on the table and the process had been started to actually move to - to get DAs approval and things like that
It was clear from Mr Donsante's evidence that the fact that "there was no definitive time of, of the move" had created "all sorts of angst within Vesuvius (T 177.41). His recollection was that the fact that there was no "plan B" created concerns within the management team (T 177.48). His understanding was that Mr Davidovic knew that there was a tender process going on (Mr Davidovic would dispute this) and that even Mr Prince knew back in the end of October that Mr Swinbanks was now looking at alternative sites and they were all being assessed "including his" [Mr Davidovic's site] (T 178).